Filing Bankruptcy Or a Consumer Proposal and Your Job

Understanding the Impact of Bankruptcy Or a Consumer Proposal on Your Job

In the realm of personal finance, the discussion around bankruptcy or a consumer proposal often brings up a slew of questions, particularly relating to current and future employment. Understandably, the process can be daunting, and the concern for job security often adds to the stress. This article seeks to address the question: How does filing bankruptcy or a consumer proposal affect your job?

First Things First: Who Gets Notified?

When it comes to filing bankruptcy or a consumer proposal in Canada, there are specific entities that need to be informed. These typically include:

  • Your creditors – They must be informed to cease collection activities.
  • The Federal Government – As the legal authority overseeing the process.
  • Your Licensed Insolvency Trustee (LIT) – The professional handling your case.

In most cases, your employer is not notified and wouldn’t have any reason to be aware of your financial decision. However, certain situations may require your employer to be informed, such as if your wages were being garnished by a creditor.

Job Security and Bankruptcy: Can You Be Fired?

The concern about losing a job due to bankruptcy or a consumer proposal is valid but largely unfounded. In Canada, it’s illegal for an employer to terminate your employment solely because you’ve declared bankruptcy or filed a consumer proposal. Nonetheless, individuals in certain professions might encounter specific challenges due to professional conduct standards.

Some professions that may require disclosure of a bankruptcy filing include:

  • Accountants.
  • Lawyers.
  • Real Estate Agents.
  • Insurance brokers.
  • Investment advisors.

In such cases, it’s advisable to communicate proactively with your professional association if you’re contemplating bankruptcy.

Who Can Discover About Your Bankruptcy or Consumer Proposal?

It’s important to note that the Federal Government keeps a record of all insolvency filings in Canada. Although this record is technically public, it’s not readily accessible to the average person. An individual would need to conduct an insolvency search and pay to view the results— a process that isn’t commonly undertaken.

In addition, future lenders might discover your insolvency filing during a credit check. Credit bureaus such as Equifax and TransUnion can obtain these records and display them in your credit history for a specific period.

The Bonding Factor

There are jobs that require employees to be “bonded.” This is a type of insurance that protects the employer in case the employee commits fraudulent activity. If you’re in the midst of a bankruptcy or a consumer proposal, it may be challenging to qualify for bonding. However, it’s usually possible to get bonded once you’ve completed the insolvency process and have received your Certificate of Discharge or Certificate of Full Performance of Proposal.

Directing a Corporation During Bankruptcy: Is it Possible?

In provinces like British Columbia, the BC Companies Act stipulates that a company director cannot be in bankruptcy status. However, if you’ve filed a consumer proposal as opposed to bankruptcy, you can maintain your role as a director.

The Future of Your Employment

Post-bankruptcy, you may decide to make a career change. Certain employers might conduct pre-employment screening, which includes a review of your financial history. While this can pose an issue if you’re applying for a position that involves managing money or financial transactions, honesty is the best approach. Disclosing your past financial difficulties can demonstrate your integrity and earn an employer’s trust. For most jobs, however, such disclosure would not be necessary.

Seeking Guidance

Dealing with overwhelming debt can be a significant stressor, affecting various aspects of your life. At times like these, it can be beneficial to seek professional guidance. Many firms offer a free initial assessment where they can evaluate your financial situation and suggest possible solutions. Remember, the purpose of filing for bankruptcy or a consumer proposal is to give you a fresh financial start.

Will Your Current Employer Discover Your Bankruptcy Filing?

Under normal bankruptcy proceedings, your employer is not informed about your bankruptcy or consumer proposal filing. They can, however, perform an insolvency search if they have a specific reason to do so. The only time your trustee would inform your employer is if you’re undergoing a wage garnishment and wish to stop it.

Can Bankruptcy Lead to Job Loss?

As mentioned earlier, it’s illegal in Canada for an employer to fire an employee solely due to bankruptcy. However, certain professions such as insurance brokers, lawyers, and accountants may require disclosure of bankruptcy status due to their professional conduct standards, which might affect their professional designation.

Can You Secure Employment After Filing for Bankruptcy?

In general, filing for bankruptcy or consumer proposal should not impact your ability to secure employment. However, some employers may perform an insolvency search or credit check as part of their hiring process, especially for roles involving significant financial trust.

Can You Get Bonded After Declaring Bankruptcy?

If you’re an undischarged bankrupt, it might be challenging to get bonded. Certain roles, such as those involving handling clients’ money, might require a fidelity bond. Being an undischarged bankrupt could make it difficult to be bonded, which might affect your chances of being hired for such positions.

What Happens to Your Wages During Bankruptcy?

In a bankruptcy, you retain your wages. Your trustee does not directly seize or control your income. However, you are required to submit a monthly income and expense report to your Trustee, which is used to calculate if you’ve exceeded the government-set income limit. If you have, you will be required to make additional surplus income payments.

Considering a Consumer Proposal

A consumer proposal might be a preferable alternative to bankruptcy for individuals concerned about the impact on their employment. A consumer proposal is an arrangement to repay a portion of your debt to your creditors.

Unlike bankruptcy, filing a consumer proposal allows you to hold director or executor roles.

Every financial situation is unique. Therefore, it is important to engage with a Licensed Insolvency Trustee to review your financial situation and suggest the best course of action that minimally impacts your employment.

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