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.
In a typical bankruptcy, the LIT doesn’t need to notify your employer. However, there may be situations when filing bankruptcy may affect your application to take on a new job. Below we answered some of the most common questions around bankruptcy and employment issues.
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.
The only time an LIT will notify your employer that you have filed a bankruptcy or consumer proposal is in cases where there may be a garnishee in place or where the LIT needs payroll information to determine surplus income or prepare tax returns. In most cases where the LIT requires information from the employer, we request the debtor to obtain it for us so we don’t have to contact the employer directly for it.
Can I Lose My Job if I File for Bankruptcy?
It is illegal in Canada for an employer to fire someone because they filed for bankruptcy.
Certain professional associations have professional conduct standards that require an individual to disclose if they are bankrupt. Often these are professions that involve the handling of money and/or trust accounts. Examples are insurance/investment broker, real estate agent, lawyer or accountant.
Professionals 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 a bankrupt, they are generally excluded from these professional guidelines. However, any professional should first check any regulations with their professional association or society before filing.
In general, if the debts you owe are personal in nature and not the result of fraudulent or poor business practices, an insolvency filing shouldn’t impact you professionally. However, if you are considering an insolvency filing, it’s still important to satisfy yourself of the disclosure requirements to your professional association.
If I File for Bankruptcy, Will I be Able to Get a Job?
You are not required to disclose that you have filed for bankruptcy or a consumer proposal when applying for a job. Potential 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 hiring process. This is more common if you are applying for a position that involves significant financial trust. If you think that an employer is going to ask or perform a background check, it is always better to be up front about it.
Some positions require employees to be bonded by the firm’s insurance company to protect against employee theft and dishonesty. Bonding provides the firm with compensation in the case of a loss. It’s a protective measure for the employer. In reality, a bankruptcy on your credit report is not necessarily a bad thing. It shows that you have dealt with your debt. If you are undischarged, then you only have one obligation and that is to your LIT. Unfortunately, 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 precluded from holding certain roles such as a director of a company, a society or other similar type position until such time as you are discharged from bankruptcy.
Consider filing a Proposal
Many concerns regarding the impact of a bankruptcy on employment do not apply in the case of a proposal. A proposal is a repayment arrangement made with your creditors, to repay a portion of what you owe. While a proposal is still a legal process administered under Insolvency legislation that can only be filed through an LIT, you’re not a bankrupt when you’re in a proposal. As such, a proposal can often solve some of the situations that arise in terms of your employment and looking for debt relief solutions.
A Licensed Insolvency Trustee will carefully review your financial situation and provide you with the best course of action without unduly affecting your employment.
Boale, Wood & Company Ltd. has helped thousands of individuals and families overcome debt for more than 14 years.
Call us. It’s not too late. (604) 605-3335