Hiring and training a new employee is expensive, making it so very important to choose the right applicant for the job. When conducting a background check on a qualified applicant, one item to pay special attention to is whether they have any bankruptcies on their record, as that’s a major red flag. Here’s what bankruptcy can indicate about an applicant that may affect their performance as an employee.

Subpar Decision-Making Skills

Although people can suffer hard times that lead to bankruptcy, it’s more often because they weren’t managing their spending properly. If a person has so much debt that bankruptcy is their only realistic option, it’s natural to wonder how they accumulated all that debt.

In particular, a bankruptcy often indicates that the person looks at decisions primarily in the short term and doesn’t plan for the future well. Depending on the position you’re hiring for, that could be a serious problem. If an employee is going to make decisions for your company, you need someone who can see the big picture.

Higher Potential for Employee Theft and Fraud

Employee theft and fraud can be huge problems for businesses. You obviously don’t want employees stealing money from your business, and it’s just much of an issue if an employee takes customer information to steal from them.

It certainly wouldn’t be fair to say that a bankruptcy indicates that an employee will steal, but this is also a situation where you need to play the odds. Money troubles can drive people to do things they would normally never consider. An employee who is struggling because they’re recovering from a bankruptcy or because they're in debt is among the most likely type of people to steal from an employer.

General Irresponsibility

When a person is irresponsible in one area of their life, it’s usually safe to assume that they can be irresponsible in other areas, as well. It’s rare to see someone who spends too much money and doesn’t stick to a budget but is completely responsible in every other area.

A bankruptcy can indicate that an applicant is more prone to general irresponsible behavior. This may manifest itself as an employee taking too many days off or showing up late to work, to name a couple common issues.

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Seeing a bankruptcy in a great applicant’s background check doesn’t mean you need to discount them. But it is a potential warning sign of future issues, and certainly a topic to bring up in the interview.