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Steve Bucci, the Debt AdviserCan bad credit hurt a job hunt?

Dear Debt Adviser,
I am a 39-year-old single woman trying to land a new job, but I have severe debt. I have over $50,000 in credit card and school loan debt and I haven't made any payments in over two years. I tried debt counseling, but because I have so much debt, I can't even make the minimum payment they suggested. I want to file bankruptcy, but don't have the money necessary to start that process. I'm worried that my bad credit will prevent me from landing a job. What should I do to start paying my debts and help avoid losing out on a great job?
-- Susan

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Dear Susan,
Next year, God willing, you will add being 40 to your list of concerns. I remember when I turned 40. It was not a pretty sight. But I can tell you that, with a plan and some persistence, you can change your life and your finances to get you on the road to that great job. 

Let's start with the plan, a spending plan (otherwise known as a budget), that is. If you don't already know (as in on paper using a calculator or on a spreadsheet) how you are spending your money, then begin there. You can only plug money leaks if you know where to look for the leak. So do a detailed spending plan. Account for all expenses and all your income. Ignore the debts for this phase or you'll become so distracted, you'll likely never complete the exercise. 

Look for places to increase cash flow, such as changing your withholding for taxes and reduce or cut out nonessential spending. You must balance your spending to your income and most importantly, you have to save some money. If you don't start to save, you will never be financially secure. 

If you have trouble making a budget, go see an accredited credit counseling service and ask for some budgeting assistance. Whether you repay your debts or declare bankruptcy, having a workable budget going forward is really the most important thing you can do for yourself. With a budget in hand you can start making adjustments to free up cash for debt repayment or that bankruptcy lawyer. Be aware that most student loans survive a bankruptcy. 

You are right to be concerned about your debt keeping you from a new job. Now more than ever, employers are using credit reports when comparing candidates. When you apply for a job, ask if they do background or credit checks as part of the hiring process. If they do, be upfront during the interview and have a story ready to explain what happened, how you are handling it and why it isn't an issue they need to worry about.

You said you want to file bankruptcy. If that's the case, and you aren't interested in repaying those creditors that are not student loans, then I suggest you see a lawyer to see if you qualify for a Chapter 7 or a Chapter 13 bankruptcy filing. A big hurdle for Chapter 7, which can liquidate many but not all debts, is income level. Ideally you want to be just below the median income for your state. If the prospect of a new job equates to the prospect of higher income, then you might be better off filing before you get the new job.

There may be help available for your student loans. Contact your lender, explain your situation and ask if there are any programs for which you qualify. Expect to be asked what you have been doing for the last two years that kept you from making a payment, and have an answer ready. You have to give the creditor a reason to trust you going forward. Again, this call might be better made before you get that new job and higher income. 

One last note: You should be aware that would-be employers are not the only ones who might use your credit report to make decisions that affect you. Many insurance companies and landlords may review your credit file, and a low credit score can keep you from getting insurance or keep you out of the house or apartment you want if a relocation is involved.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of Credit Repair Kit for Dummies. Visit MMI for additional debt advice or to ask a question of the Debt Adviser go to the "Ask the Experts" page to ask a debt question.'s corrections policy -- Posted: Aug. 10, 2006
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