You may be wondering if your current or future employer will discover a bankruptcy filing and whether that impacts your ability to obtain work or keep your job. We answer several common questions about bankruptcy and employment issues.
Short answer: Your current employer doesn’t need to know that you declared bankruptcy, except in very special cases. There may be situations, however, when filing bankruptcy may affect your application to take on a new job.
Will My Current Employer Find out I’ve Filed for Bankruptcy?
As part of the usual bankruptcy process, your employer is not told that you’ve filed a bankruptcy. If they want to, they could do an insolvency search, but they’d have to have a specific reason to do so.
The only time your trustee will notify your employer that you have filed a bankruptcy or consumer proposal is if you are facing a wage garnishment and want it stopped. In that case, your Trustee would notify your employer’s payroll department to put a stop to the garnishment deductions taken from your paycheque.
Can I Lose My Job If I File Bankruptcy?
It is illegal in Canada for an employer to fire someone simply because they filed bankruptcy.
Certain professions, however, have professional conduct standards that require someone to disclose if they are bankrupt. Often these are professions that involve management of money and trust accounts such as an insurance/investment broker, lawyer or accountant. In some cases, their professional designation may be affected. In others, the type of work they can do is limited until after the bankruptcy is discharged.
We explain later in this post how a consumer proposal can remedy the employment challenges faced by a bankruptcy filing.
In general, if the debts you owe are personal in nature and not the result of fraudulent or irresponsible business activity, an insolvency filing shouldn’t impact you professionally, but it’s still important to check.
If I File for Bankruptcy, Will I Be Able to Get a Job?
In most cases, your ability to obtain employment should not be impacted by an insolvency filing, whether that’s a consumer proposal or bankruptcy. While in general you are not required to disclose that you have filed bankruptcy or a consumer proposal, some employers may ask if you are currently bankrupt as part of the application process. They may also choose to conduct an insolvency search or credit check as part of the hiring process. This is more common if you are applying for a position that involves significant financial trust.
Can I Still Be Bonded If I Declare Bankruptcy?
If you are an undischarged bankrupt, it might also be hard for you to get bonded. If you handle money for clients as a part of your employment, your job might require what is known as a fidelity bond. Fidelity bonds protect your employer from a loss for their clients as a result of an employee’s behaviour. Being an undischarged bankrupt can make it difficult to be bonded if this is a job requirement. If you are unable to be bonded, an employer may choose not to hire you for these types of positions.
As an undischarged bankrupt, you can also be prevented from holding certain roles such as a director of an incorporated company, a credit union, a co-operative, or a condo corporation.
What Happens to My Wages in Bankruptcy?
You keep your wages in a bankruptcy. Your Trustee does not seize or control your income directly. However, you are required to submit a monthly income and expense report to your Trustee. This information is used to calculate if you earned enough to go over the government set income limit in a bankruptcy. If you do go over this limit, you will be required to make additional surplus income payments.
Consider a Consumer Proposal
Many concerns regarding the impact of a bankruptcy on employment do not apply in the case of a consumer proposal. A consumer proposal is a repayment arrangement made with your creditors, to repay a portion of what you owe.
In fact, professional designation holders often file a consumer proposal as an alternative to bankruptcy. Since someone who has entered into a repayment arrangement through a consumer proposal is not bankrupt, they are generally excluded from professional guidelines. As such, a proposal can often solve some of the situations that arise in terms of your employment and looking for debt relief solutions. However, any professional should first check any regulations with their professional designation body or society.
Unlike in a bankruptcy, a consumer proposal filing can also allow you to hold director or executor roles.
Every situation is unique, which is why it is important to discuss your personal debt relief needs with a Licensed Insolvency Trustee. Your trustee will carefully review your financial situation and provide you with the best course of action without unduly affecting your employment.
- Effects of Filing Bankruptcy or Consumer Proposal as an Accountant in Canada
- Employment Concerns: A Toronto Case Study
- Can You Switch Between Bankruptcy and Consumer Proposal?
- What Happens To My Professional Designation If I File Bankruptcy or Consumer Proposal?
- Why Surplus Income Is an Important Part Of Your Debt Recovery