Do Bankruptcies Show Up on Background Checks in California?

• Depending on what you are applying for, bankruptcies do show up on background checks
• California imposes limits on how credit data and criminal history can be used in hiring decisions, but there are exceptions
• The experienced team at OakTree Law can help you understand your rights

When you apply for a new job or loan, or sign a lease, you’ll likely have to provide access to a lot of your personal data via a background check. While these checks are generally used to verify your identity, they also reveal vital details about your past, including:

• Criminal history
• Work history
• Education
• Evictions & foreclosures
• Credit history

While what comes up on a background check can feel very revealing, this tool helps employers, lenders, and landlords assess whether you’re a responsible individual. In the case of applying for a job, this is especially important if the company requires you to work with finances or handle money. But if you’ve run into financial problems in the past, your biggest question is probably Do bankruptcies show up on background checks?

The simple answer is yes. But while bankruptcy and your job search may be intertwined, several states have passed laws that prohibit or restrict the use of credit reports in hiring decisions. In California, access to background reports depends on the type of screening and applicable state laws. It’s essential to understand what background checks reveal and how the state approaches their use to ensure your rights are protected.

Types of Background Checks

Generally, background checks fall into three categories:

Employment: These checks are used to gauge reliability and work behavior. Your potential employers may contact past employers to enquire about your performance and work ethic.

Credit: A credit check will reveal your debt repayment history and your access to credit so landlords and lenders can assess your risk. These background checks do show bankruptcies. 

Criminal: This report reveals if you’ve been convicted of violent crimes or fraud. Employers and others check this to determine if you may pose a future threat. While debt does show up on a background check for credit, it is not considered criminal activity and won’t be on this type of check.

What Does a Background Check Show in California?

A California background report can include identity verification, employment history, education, driving records, and criminal convictions not sealed by SB731 (more on that below). Access to consumer credit reports by employers is limited, but these are available to landlords and lenders.

How Far Back Do Background Checks Go?

California enforces a 7-year limit on most pre-employment background checks. However, in certain positions and industries, an employer can access details that span longer periods. If you suspect the 7-year limit has been violated in your circumstances, consulting with an experienced bankruptcy attorney can provide clarity.

Do Bankruptcies Show Up on Background Checks?

Yes, within certain parameters, bankruptcies do show up on background credit checks. However, they will not appear on employment or criminal background checks.

Do Bankruptcies Show Up on Background Checks Forever?

No. While credit background checks do show bankruptcies, they eventually fall off your report. Under the Fair Credit Reporting Act (FCRA), a Chapter 7 bankruptcy can appear up to 10 years after discharge, while a Chapter 13 discharge appears for up to 7 years. Note that California’s 7-year limit yields to the federal 10-year rule for Chapter 7.

Do Bankruptcies Show Up on Background Checks for Every Job?

No. California state law only allows credit report access for jobs with significant financial duties. However, when that’s applicable, the report pulled by your potential employer will include full credit data, and remember, these types of background checks do show bankruptcies.

Does Debt Show Up on a Background Check?

If you’re applying for a loan or to rent a property, you’ll likely submit to a credit check. On a full report, late payments, collections, and public records such as bankruptcy filings will appear, as will existing debt.

What About Tenants — Does Debt Show Up on a Background Check for Renters?

Rental background checks are meant to assess your ability to pay your rent. For that reason, landlords run full credit checks, in which existing debt, payment history, and bankruptcy filings appear.

California Laws That Impact Background Checks

As noted, California is one of the states that has moved to limit access to background reports. This is beneficial to those who have made mistakes in the past but are now looking to get back on their feet. Protections help to avoid a vicious cycle of discrimination, where valued workers could be further impaired from getting ahead, even when they have the talent and experience to excel in a position.

If knowing that convictions and bankruptcies do show up on background checks is of concern to you, remember that there are restrictions on access in California:

1. SB 731

Also known as the California Clean Slate Act, this law allows for the automatic sealing of certain criminal records. After a waiting period, only law enforcement and the court system can access many of your past violations. While it doesn’t apply to serious or violent crimes, SB731 can make it easier to secure jobs or housing.

2. The Fair Chance Act

Also called “Ban the Box,” the California Fair Chance Act (FCA) limits when employers can ask about or consider your criminal history. Generally, if an employer has five or more employees, they can’t ask about convictions before making a job offer. Note, however, that your criminal history can be accessed after an offer is made, but there are restrictions on how the information can be used against you.

3. Local Fair Chance Ordinances

In some cases, local ordinances, like the Los Angeles County Fair Chance Ordinance (FCO), add additional protections and enforcement mechanisms to the state’s FCA. Working with an attorney familiar with Los Angeles protections ensures your rights aren’t overlooked.

4. Labor Code §1024.5

This is the portion of the California labor code that impacts you if you’re worried about your bankruptcy showing up on a background check. It states that credit reports, in which your bankruptcy would appear, are only allowed for specific positions.

Since Bankruptcies Do Show Up on Background Checks, What Can You Do?

If you’re looking for a job after bankruptcy, you have options. When applying for a position in finance or banking, honesty is the best policy. Offer an explanation and be forthcoming. Truth be told, most employers are far more concerned about your work history and that you haven’t committed any violent crimes.

Yes, credit background checks do show bankruptcies, and debt does show up, but chances are, if you explain the hardship that led to your difficulties, such as medical debt or divorce, most employers will be sympathetic. Filing for bankruptcy simply shows you recognized the need for help and are in the process of responsibly restructuring your finances. If you are qualified for the job, you shouldn’t be penalized.

Need Individualized Advice? Contact OakTree Law

If you’re still wondering whether bankruptcies do show up on background checks in your unique circumstances, or if you need help getting out of debt and securing employment, reach out to OakTree Law. We’ll help you understand your legal protections and restore your financial future. Contact us for your FREE consultation today.