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.
It’s bad enough struggling with debt, the last thing you need to worry about is your income and your job, if you file bankruptcy or consumer proposal, after all you don’t want to trade one financial problem for another. I’m Doug Hoyes, a Licensed Insolvency Trustee with Hoyes Michalos. Today I’m going to answer the top five questions about how bankruptcy affects your job. The most common question I hear is, ‘will my employer find out I’ve filed bankruptcy?’ The short answer is no, except in very unusual circumstances, the only time we contact your employer is if you ask us to contact your payroll department to stop a wage garnishment. A related question to that is, ‘can I lose my job if I declare bankruptcy?’ Well, first of all it’s illegal for someone to fire you simply because you filed bankruptcy. Certain professions like lawyers, insurance agents, real estate agents and investment brokers for example, can have special conduct standards, where filing bankruptcy can impact your license or professional designation. In many cases, professionals can file a consumer proposal as an alternative, since a proposal is often seen as being less severe in the eyes of their profession. We have a lot of information on our website about the impact of different insolvency options for various professions in Canada. If this is a concern for you visit hoyes.com and search ‘professional designation’ as a starting point. And I always recommend that before you decide to file bankruptcy, you contact your employer and your professional association to determine if bankruptcy will impact your job. A similar concern is whether bankruptcy will affect any future employment prospects. Again, in most cases, no, some employers may ask to run a credit check and your filing will appear in your credit report. If you filed a consumer proposal instead of a bankruptcy, be prepared to explain the difference to your new employer if this is an issue. If necessary, can you be bonded? Well, an employment bond is insurance for your employer against financial loss. If you handle money for clients as 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 more difficult to be bonded if this is a job requirement. It’s possible that a security clearance could be impacted by a bankruptcy. However, this is very unusual, most cases your employer is happy that you’ve dealt with your debts. Any effect of filing bankruptcy on your job often does not apply if you file a consumer proposal instead. On a job application you can truthfully answer that you have not gone bankrupt, and as I mentioned some professions look more favourably on a consumer proposal over bankruptcy because you’ve made an attempt to pay back some of what you owe. The last question involves a common money and wage concern. What happens to your wages in a bankruptcy? You keep your wages in a bankruptcy, Your Trustee does not seize or control your income itself. 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’ll be required to make additional surplus income payments. Bankruptcy is meant as a fresh start, the laws were not written to impact your ability to earn an income. In the vast majority of cases, no one will know you filed, and you’ll be in complete control of your wages. In fact, I would argue more so because your pay check is no longer being consumed by interest and high debt payments.
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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
- What Happens To My Professional Designation If I File Bankruptcy or Consumer Proposal?
- Effects of Filing Bankruptcy or Consumer Proposal as a Certified Financial Planner in Canada
- Can I Be A Director, Executor or Be Bonded If I File A Consumer Proposal?
- What Happens if I File a Bankruptcy or Consumer Proposal as a Human Resources Professional?