How to Deal with Your Debt as a Job Seeker

By guest blogger Kristin Turner, Managing Attorney at Upsolve, a national legal aid nonprofit. She is a graduate of Harvard Law School.

Most people are in debt from things like credit cards, medical bills, car payments, and mortgages. Although debt is an expected part of our everyday lives, too much debt can create problems for people seeking jobs.

Let’s take a look at how having a lot of debt can impact your job search.

Employers may find out about your debt during the background check.

When you’re applying for a job, your potential employer might ask to run a background check and learn more about your debt levels.

Even though your finances are very personal, your debt and credit could be important to your employer and it’s accessible to them via background checks. Having a lot of debt might be viewed as a risk to them when they consider hiring you. Why would that be?

Maybe a position involves finances or accounting and your debt calls into question your ability to do the job well. Maybe they’ll have to garnish your wages. On the other hand, they might not say anything at all! It’s very possible that your debt won’t matter to them. Either way, it’s something you should be ready to talk about.

When you do sit down to talk about your credit history, there’s no need to be worried or ashamed. Being able to speak candidly about your debt and your plan to get out of debt will likely end up making a good impression on your employer.

How to take steps towards managing your debt

There are a few different types of debt relief. Many people base their decisions on the amount of debt they’re in and whether they think they can climb out of it.

Below are a few options that people usually consider when trying to get out of debt. Keep in mind that it will be important to learn about the pros and cons of each in order to make the best decision for yourself.

Typical Debt Relief Options

If you think you can pay it off. . .

• If you’re not overwhelmed by debt, the solution could be as simple as budgeting. For some, consistent income and financial management is enough to climb out of debt over time. This is a great option you’re not in a lot of debt. National nonprofits like Greenpath provide free financial counseling.

If you think you can pay some or most of it off. . .

• Debt consolidation loans or companies. For many people, all they need is to be able to focus on one bill. A debt consolidation loan is a loan that covers all of the debts you owe so that you so that you combine what you owe into one monthly payment.

In some instances, people use a debt consolidation company. The debt consolidation company promises to negotiate with your creditors to lower your payments.

• Debt Settlement. In this case, you offer to pay a percentage of your debt instead of paying it in full. Your creditors accept a lump sum payment to satisfy the debt. The creditor agrees to cancel the debt for an amount that is less than the total amount owed on the account.

Some people get nervous at the idea of having to make a deal with the people that they owe. Not to worry, there are nonprofit organizations like Daisy Debt that help people negotiate with their creditors.

If you can’t pay it off and need to erase your debts. . .

• Bankruptcy, a last resort. Chapter 7 is a chapter of personal bankruptcy that allows you to erase most, if not all, of your debts. The tradeoff is that a court-appointed trustee can sell valuable property to pay your debts.

With that said, most Chapter 7 cases filed in the United States are no-asset Chapter 7 cases. In a no-asset case, the filer usually doesn’t own expensive property. You can end up keeping most of your day-to-day property, while erasing most types of debt. Student loans are the most common type of debt that most people cannot erase in bankruptcy.

Luckily, even though bankruptcy may sound scary, there are legal aid nonprofits and other resources that can help you get through the bankruptcy process for free with the help of an attorney.

When looking for a new job, there’s a chance that an employer will see your credit report. If your debt comes up during your job search, it’s best to just tell your story. Be upfront and open about how a job can help you achieve your financial goals. Knowing what options exist for you to manage your debt is an important first-step to getting hired and making sure you thrive in your new position.