The Fair Credit Reporting Act of 1971 regulates the use of consumer credit reports as a part of background checks on applicants. Hiring is a permissible purpose to do a credit check under the law, but you must keep the results confidential and must not put the results of the check in the person's personnel file.
If the credit report shows that the person declared bankruptcy, then you also have to comply with provisions of the federal Bankruptcy Act. Under the Bankruptcy Act, you may not discriminate against an applicant solely because a credit check reveals that an applicant has sought protection under the Bankruptcy Act, been insolvent before seeking protection under the Act, and not paid a debt that is dischargeable under the Act. In other words, bankruptcy is not a valid reason to deny employment.
Disclosures you must make. You must:
If you do deny employment because of something on the credit report (and remember, it must be something other than bankruptcy), you must:
The Federal Trade Commission is very specific regarding the format of the
consumer credit rights notice that must be provided to an employee or applicant
if adverse action is contemplated. Fortunately, federal law requires credit
reporting agencies to provide a copy of this notice with each credit report. You
can use this notice to fulfill your own notification responsibilities.