Will Bankruptcy Affect My Employment?
Bankruptcy & Your Employment
When filing for bankruptcy, you may worry that it will have knock-on effects on your employment.
Bosses, you fear, might view it as a slur on your record and deny you job opportunities.
In general, filing for bankruptcy should not affect your employment situation at all.
In many cases, there is no need to notify your boss or employer.
You can continue to work in your present job, earn your regular paycheque, and carry on with your day to day role as though nothing has happened.
There are, however, exceptions, which we will discuss below.
Will Your Current Employer Discover You’ve Filed For Bankruptcy?
For some people, filing for bankruptcy is necessary to help them get out of unsustainable debts.
Even so, it comes with a certain degree of stigma. Ideally, you would prefer to keep the matter confidential.
In most cases, your employer doesn’t need to know you filed for bankruptcy.
Your trustee manages your creditors on your behalf, and it doesn’t affect your work materially.
Sometimes, though, creditors have already set up a wage garnishment agreement with payroll at your company.
Bankruptcy gives your trustee the legal right to stop this, but they will need to inform your employer of your situation to do so.
Can You Protect All Your Wages After Bankruptcy?
In general, you keep your wages after bankruptcy.
However, the law requires you to submit income information to your trustee.
They will then use this data to calculate whether you exceed surplus income thresholds based on your household size.
If you do, you will need to pay a fee equivalent to 50 percent of the money you earn above the government’s limit.
You will continue paying this fee monthly under the terms set in the bankruptcy agreement.
Can You Still Get A Job If You File For Bankruptcy?
Many people who file for bankruptcy want to know whether they can get a fresh start – perhaps by taking on a new job.
The good news is that filing doesn’t usually affect your ability to take on new positions, either at your existing company or a new one.
In general, hiring managers do not require you to disclose your financial history.
However, they may conduct a credit check or insolvency search to find out more about you as a candidate.
Companies offering roles that involve a high degree of financial trust will often conduct background research on the criminal and financial history of applicants.
Most, though, won’t bother.
Are There Circumstances When You Can Lose Your Job By Filing For Bankruptcy?
Canadian law forbids employers from firing people due to bankruptcy.
However, bankruptcy can affect employment opportunities in a small subset of professions – especially those involving finance and accounting.
Insurance brokers, lawyers, investment brokers, and accountants, for instance, must declare if they file for bankruptcy.
Individuals in these roles are responsible for managing the money of others.
Bankruptcy is an indication that they may not be in the best position for doing so.
In some professions, you may find that the type of work you can do changes after filing.
Regular employment opportunities, however, usually resume once the courts discharge the bankruptcy.
Can You Still Get Bonded After Bankruptcy?
Many professionals rely on being able to get bonded so that they can handle their clients’ money.
Bankruptcy, however, can sometimes make it difficult to obtain a fidelity bond – a kind of insurance product that protects employers from the behaviour of their employees.
Lenders may not provide bonds to companies that have bankrupt employees on their books because of the high risk they represent.
In turn, companies may be less willing to hire you for positions involving financial responsibility.
Should You Apply For A Consumer Proposal Instead?
Filing for bankruptcy is an excellent option for many people who find themselves in challenging financial circumstances.
It is not, however, ideal for a small subset of people in professionals who take on substantial financial responsibility.
Accountants, brokers, insurance professionals and lawyers, therefore, may want to file for a consumer proposal instead – a legal mechanism that allows you to negotiate a reduction in your debts without declaring bankruptcy.
Here, a licensed bankruptcy trustee gathers information on your current financial status and works out how much you can realistically afford to repay, taking into account your basic expenses.
They then use this data to ask creditors to reduce the amount you owe.
Creditors will usually agree to the terms set out by the trustee. It is better for them to get something in a consumer proposal than nothing in a bankruptcy.
A consumer proposal can also work out well for you. Instead of paying unsustainable fees on loans, you can reduce your payments by up to 80 percent.
Once your creditors agree to a consumer proposal, it is binding, meaning that they cannot change the terms in the future.
Plus, if you work in a position of financial responsibility, you can secure your employment.
Most professional guidelines exclude consumer proposals from consideration, making it a viable debt relief solution for many professionals.
You should, however, still consult with professional bodies. Policies differ from one to the next and are liable to change over time.
Consumer proposals are an excellent option for people with high incomes.
Usually, you can clear your debts rapidly, with no ramifications on your work or employment opportunities.
Directors and executors can benefit by filing for bankruptcy too.
Under the rules, you are not allowed to hold director or executor roles until the court discharges your bankruptcy.
There are no such restrictions with a consumer proposal.
If you are considering whether to file for bankruptcy, you should consult with licensed bankruptcy experts.
They can provide advice and guidance on which option you should choose and the costs and benefits of each.
They review your case and tell you whether it is likely to affect your employment situation.
In the vast majority of cases, it won’t.