Bankruptcy, Insolvency and Unpaid Wages

Navigating the complexities of bankruptcy, insolvency and unpaid wages can be a daunting task. This article aims to provide clarity on this topic and guide you through the process.

The Basics of Bankruptcy & Insolvency

Bankruptcy and insolvency are legal terms referring to the state of an individual or company unable to meet financial obligations. While these terms are often used interchangeably, they have different implications.

  • Bankruptcy is a legal process in which, when a debtor cannot pay back their debts, they can declare bankruptcy, allowing them to discharge their legal obligation to pay off the debts.
  • Insolvency, on the other hand, is a financial state where a company or individual can’t pay their due debts. It’s a prerequisite for bankruptcy, but it doesn’t always lead to it.

Unpaid Wages – An Employee’s Predicament

When a company becomes insolvent or declares bankruptcy, it often owes money to several parties, including its employees. Unpaid wages, in this case, become a significant concern for the workers of the bankrupt or insolvent company.

Federal Laws Governing Bankruptcy and Insolvency

Several federal laws govern the proceedings of bankruptcy and insolvency. These laws aim to protect all parties involved, including employees owed wages.

  • Bankruptcy and Insolvency Act (BIA): This is the primary legislation dealing with bankruptcy and insolvency in Canada. It provides mechanisms for debtors to restructure their affairs and gives creditors a means of obtaining payment of their claims. Read More
  • Companies’ Creditor Arrangement Act (CCAA): This act provides a legislative framework for the orderly restructuring of businesses with debts in excess of $5 million to avoid bankruptcy. Read More
  • Wage Earner Protection Program Act (WEPPA): This act provides for payment of outstanding eligible wages to individuals whose employer is bankrupt or subject to a receivership under the BIA or the CCAA. Read More

How to Recover Unpaid Wages

If your employer has declared bankruptcy or is insolvent and owes you wages, there are steps you can take to recover your money.

  1. File a “proof of claim”: This is the first step in the process. The “proof of claim” form is used to establish your claim against the insolvent company. You may need to file this form with the company’s trustee in bankruptcy or the receiver.
  2. Contact a lawyer or Service Canada: For further assistance and information on bankruptcy and insolvency laws. Service Canada
  3. File a claim under the Employment Standards Act, 2000 (ESA): In some cases, you may file a claim under the ESA, but the action an employment standards officer can take will be limited.

When your employer is bankrupt or in receivership

When an employer declares bankruptcy or is in receivership, their assets are handled by a court-appointed trustee or receiver. In such cases, employees should contact their company’s trustee or receiver or Service Canada for guidance.

The Role of Unions

If you are a unionized worker, your union can provide assistance in recovering unpaid wages. Unions often have resources and legal expertise to help their members navigate through bankruptcy and insolvency proceedings.

Companies’ Creditors Arrangement Act (CCAA) Proceedings

If a company owes more than $5 million and is trying to avoid bankruptcy, it may undergo restructuring under the CCAA. In such cases, a court-appointed monitor supervises the company’s restructuring, and you should contact them for information on recovering your unpaid wages. Public Registry

Wage Earner Protection Program (WEPP)

The WEPP is a federal program that provides financial support to employees who have lost their jobs and are owed wages because their employer is bankrupt or subject to receivership. All inquiries regarding the WEPP, including how much you could receive and eligibility requirements, should be made to Service Canada. WEPP webpage


The world of bankruptcy, insolvency, and unpaid wages can be complex and overwhelming. However, armed with the right information and resources, you can navigate through this process. Remember that there are several protections in place for employees, and don’t hesitate to seek professional help when needed.

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