AB 22 Will Help California Bankruptcy Debtors Get Future Jobs

Credit Score and BankruptcyOne of the most common questions I am asked by consumer bankruptcy clients is “will my bankruptcy affect my ability to get a job in the future?” As with most questions concerning credit, however, the best I can usually muster in response, is a rather lame “maybe” in response. I can, of course, offer a few concrete statements about bankruptcy and credit. The fact of filing a Chapter 7 bankruptcy can remain in one’s credit report for up to ten years.  A Chapter 13 will be there for seven. But when it comes to questions, like “will I be able to qualify for a mortgage in three years?” no one can answer that question with any authority.  “It will depend, I say,” on how well you do re-establishing your credit after your bankruptcy and upon the current lending climate at that time.

Now, however, we can say that as of January 1, 2012, when California’s new AB 22 goes into effect, that most employers hiring for most positions will no longer be able to use a job seeker’s credit history—and most importantly, his prior bankruptcy filing—against him in making a hiring decision.  AB 22 will prohibit most California employers from even pulling a credit report when considering a job candidate. This means an employer will not learn of a California job seeker’s Chapter 7 bankruptcy from three years ago, or even one’s ongoing Chapter 13 bankruptcy as these may be reported in the applicant’s credit report.

The new law does contain exceptions for certain types of jobs where employers may still use an applicant’s credit report in making hiring decisions. These exceptions include managerial positions, jobs with the California Department of Justice, law enforcement positions, positions where the employee will have access to the employer’s trade secrets and other protected confidential information, or access to money and other assets, or to other people’s bank, credit card information, birth dates, or Social Security numbers. Similarly, if the employee will be issued an employer credit card with her name on it, will transfer money or sign contracts on behalf of the employer, such positions will also be exempt.

However, employers will not get an exemption from the law for employees who are merely required to push their retail employer’s store credit card, such as cashiers at most department stores.  Importantly, the new law also requires that employers notify job applicants in writing if the employer does access the applicant’s credit report under one of the above employer exemptions.

Seeking the protection of bankruptcy law is certainly a right for any legal resident of this country who needs such protection. Filing bankruptcy should never be a scarlet letter emblazoned upon anyone’s chest, and it should never be the reason why one is denied employment in the future. I am a firm believer that credit reporting, and particularly, FICO scores, are over relied upon in American society. The Fair Credit Reporting Act is relatively toothless and too easy on the three credit reporting agencies, and the precise data and algorithms that go into generating FICO scores are claimed as trade secret, and not even the U.S. government knows quite how the latter are generated. Of course, that’s only because we as a society allow it to be this way.

AB 22 is a step in the right direction to help our economy get back on track.  Too many honest, hardworking people have been denied employment not because they are not qualified for a California job, but because their prior bankruptcy, foreclosure, or other factors leading to poor credit have been used as a proxy by employers for determining a job candidate’s true value as a potential employee.

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