Filing for bankruptcy is not something most people want to advertise. The good news is, very few people actually need to know you declared bankruptcy or even talked to a bankruptcy trustee about your debt problems.
Is bankruptcy private?
Your initial debt consultation with a trustee in bankruptcy is between you and the trustee. It's a private, one-on-one, in person meeting designed to review your debt relief options. It’s not unusual for clients to bring someone for support – a spouse or a friend – but aside from that, the discussion is private. Your trustee will likely take notes about your assets, debts and income to better understand your situation and to have information at hand for follow-up meetings, however, the discussion about what to do is between you and your trustee.
Doug Hoyes & Ted Michalos talk about who will know you filed bankruptcy:
What records become public?
Once you choose to file for bankruptcy (or a consumer proposal), there are documents that must be prepared and filed with the government and this information does become part of the public record. However, the amount of information that is readily available to the general public is very limited and not easily accessible.
If someone wants to see whether you filed insolvency, they must do a bankruptcy search through the Bankruptcy and Insolvency Records of the Office of the Superintendent of Bankruptcy. To obtain any confirmation that you have filed, and see any records, there are several steps they must take:
- Individuals who want to search Canada’s bankruptcy records must first register an account with Industry Canada.
- They can then search by name or bankruptcy number.
- Before anyone can see the results of their search (even names) they must pay a fee (currently $8 for each search).
- Once they pay, they will only see summary information about your total assets, total debts and limited personal information (such as your address & birth date); just enough to confirm that they have the right individual.
As you can see, someone has to be pretty motivated to find out whether you filed a bankruptcy or consumer proposal. In most cases, the only people likely to do a search are a bankruptcy trustee (to see if you have filed bankruptcy before) or possibly a creditor (to confirm that you have filed).
Who is notified that I filed bankruptcy in Canada?
As we’ve seen, few people will do an impromptu search of bankruptcy records. However, there are people who will automatically be notified once you do file:
- As mentioned, your documents will be electronically filed with the government of Canada.
- Your creditors will also be notified so that they can make a claim in your bankruptcy or vote in your proposal.
- If your debt has been forwarded to collections, a notice will also be sent to the collection agency. This is for your benefit as it will also stop further collection calls.
- The government will forward a notice to the credit bureaus indicating that you have filed a bankruptcy (or proposal) and the date of filing.
Contrary to the popular myth, in most cases, a notice does not appear in the newspaper signifying that you filed insolvency. This can be the case for business bankruptcies or if the value of your assets (excluding secured assets) will exceed $15,000, but this does not happen in most individual bankruptcies. A consumer proposal is never reported in the newspaper.
Will my employer be notified of my bankruptcy?
Your employer is not notified that you have filed bankruptcy as part of the normal process. They can do a search however, but they would have to have some inclination to want to do so. Sometimes new employers may want to conduct a search, especially if you are dealing with trust money or are in some other bondable occupation, but generally, your employer will never know.
The only time your employer is notified is if you have a wage garnishment that you want stopped. If that is the case, your trustee will notify your employer’s payroll department in order to stop the deductions being taken from your pay.
Bankruptcy was designed to be a fresh start for the honest, but unfortunate debtor. Widely publicizing the fact that you filed bankruptcy would serve no purpose and would in fact be counter-intuitive to the goal of the Bankruptcy & Insolvency Act.
If you are considering bankruptcy, you should consider the upsides and financial consequences, but not really worry about whether or not your bankruptcy will be discovered by your friends and family, since this doesn’t happen unless you choose to talk about your situation.