Overview
Bankruptcy is a legal process for resolving debts that cannot be paid. It is filed in federal bankruptcy court, the record is public, and it appears both in court records and on credit files.
It occupies unusual ground in screening. It is a financial record rather than a criminal one, it is filed in federal court rather than a county courthouse, and it carries a specific federal employment protection that no other financial record has.
The Chapters
Bankruptcy types are known by the chapter of federal law that governs them.
| Chapter 7 | Liquidation. Non-exempt assets are sold and qualifying debts are discharged. The most common type filed by individuals, and it concludes relatively quickly. |
| Chapter 13 | Reorganization for individuals with regular income. Debts are repaid in part or in full under a court approved plan running several years, after which remaining qualifying debts are discharged. |
| Chapter 11 | Reorganization, used mainly by businesses and by individuals with substantial debts. The filer continues operating while restructuring. |
| Chapter 12 | Reorganization for family farmers and fishermen. |
A discharge is the court order releasing the filer from personal liability for the debts covered. It is the point at which the process achieved what it was for, and a discharged case is a completed one rather than an unresolved matter.
What a Record Contains
| Chapter | Which type was filed. |
| Case number and court | Which bankruptcy court holds the case. |
| Filing date | When the case began. |
| Status | Whether the case is open, discharged, or dismissed. |
| Disposition date | When it concluded. |
A dismissal and a discharge are different endings. A discharge means the process completed and debts were released. A dismissal means the case ended without that, and the debts remain.
Where the Record Is Found
Bankruptcy cases are filed in federal bankruptcy courts, which operate as units of the federal district courts. The records are searchable through the same federal public access system described on our Federal Criminal Search page, and a national index means a bankruptcy search can be run nationwide rather than court by court.
Bankruptcies also appear on credit files, so a credit report will show one. The court record is the authoritative source, and it carries case detail that a credit file entry does not.
The two sources also age differently. The credit bureaus remove a Chapter 7 entry roughly 10 years after filing and a Chapter 13 entry roughly 7 years after filing. Those are bureau practices rather than legal limits, and they apply to credit files only. A court record search is unaffected by them, so a bankruptcy can be absent from a credit report and still appear in court records, up to the reporting limits described above.
How Far Back It Goes
Federal law restricts reporting of bankruptcies more than 10 years from the date of the order for relief or the date of adjudication. That period applies to every chapter.
A Chapter 13 does not automatically drop off after 7 years. The credit bureaus voluntarily remove Chapter 13 entries from credit files earlier than Chapter 7 entries, and that practice is often described as a rule. It is not. The legal limit is 10 years for every chapter, and a screening company drawing on court records can report one for the full period.
Some states set shorter reporting limits than federal law does, and where a state limit is stricter it governs. Our State Laws Overview carries a bankruptcy reporting section for each state.
Federal Employment Protection
Federal bankruptcy law prohibits employment discrimination because a person filed for bankruptcy. How far that protection reaches depends on who the employer is, and the difference is written into the statute.
The provision covering government employers prohibits denying employment to, terminating, or discriminating against someone because of a bankruptcy. The provision covering private employers omits the language about denying employment, and prohibits only terminating or discriminating with respect to employment.
| Government employer | May not refuse to hire, and may not fire, because of a bankruptcy. |
| Private employer | May not fire because of a bankruptcy. May generally refuse to hire. |
The distinction is hard to believe, and 3 federal appeals courts have reached the same conclusion on it, reasoning that Congress included the hiring language in one provision and left it out of the other deliberately. A small number of courts have disagreed, so the position is not uniform everywhere.
The protection against being fired over a bankruptcy is solid for everyone. State law and state credit restrictions may also apply to how the information is used.
What It Does Not Cover
- Criminal records, established through a county criminal search.
- Current financial position. A record shows a filing and its outcome.
- Civil judgments and collections, covered on our Civil Records and Credit Reports pages.
- The circumstances behind the filing.
Where It Fits Under the FCRA
A bankruptcy record reported by a screening company for employment purposes is part of a consumer report. Written disclosure and authorization are required before it is requested, accuracy obligations attach to what is reported, and the individual has the right to dispute anything incorrect. Our FCRA Overview covers those requirements in full.
Because a bankruptcy is a public court record, the additional obligations governing public record information apply, including reporting the current status of the case rather than a stale one.
In states that restrict employment credit checks, those restrictions may also govern the use of bankruptcy information. Our State Laws Overview covers how the states differ.
Where a bankruptcy contributes to a decision not to hire, the required notice steps apply. See The Adverse Action Process.