Bankruptcy may become known for legal or professional reasons
A major fear for many of those filing bankruptcy is that family, friends and employers will learn of their financial problems. The truth is they have little reason to worry. Although bankruptcies are public record, they rarely become known to close associates or family members.
However, there are times when information about the bankruptcy will be sought by individuals or organizations that need it for legal or professional reasons.
While the case is active, anyone who has co-signed a loan with the debtor will be contacted by the U.S. Bankruptcy Court as a potential creditor. Once concluded, the bankruptcy will become known to those who have reasons to check the individual's credit history. That includes any lender to whom the debtor applies for a new loan or credit card.
Debtors who are job-hunting will find that some potential employers are starting to include a check of the applicant's credit history along with references, past workplaces and educational institutions. However, employers are prohibited from discriminating against individuals who have filed bankruptcy.
For those seeking work that requires security clearance, questions arise regarding an individual's financial history as part of a personal background check.
However, knowing that individuals have been involved in a bankruptcy doesn't necessarily exclude them from high security work. If the financial circumstances surrounding the bankruptcy were beyond the debtors' control, such as a job loss or mounting medical bills, it will likely not be held against them. When the prospective boss determines that the bankruptcy stemmed from irresponsible money management, it could be reason for denying clearance.
According to Bankruptcy Law Network, there also are cases in which it is important to notify family members of a planned or pending bankruptcy, including instances when an aging parent transfers or "deeds" a property to the individual. This is true when a home has been deeded to an aging couple's children, but with the understanding that the parents will be able to live there for the remainder of their lives.
"Obviously, with this asset transferred to you, it may affect your bankruptcy case and just as importantly, affect the property that your family member transferred to you," writes North Carolina bankruptcy attorney Adrian Lapas on the website. "If one of the adult children files bankruptcy, this 'remainder' interest in real estate becomes an asset of the estate and could be sold to pay creditors."
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