Filing for bankruptcy can be a practical solution to overwhelming debt. However, you might be concerned about who will know that I’ve declared bankruptcy. It’s natural to worry about your family, friends, or employer finding out about your financial situation and how it could affect your reputation or job security. Before you begin the bankruptcy process, it’s important to understand who will be informed about your declaration.
As Licensed Insolvency Trustees, we know from experience that privacy is a concern many of your clients raise when discussing bankruptcy. This is understandable, as most people prefer to keep their financial troubles safe from prying eyes.
In this guide, we lay out the facts about bankruptcy and confidentiality to help alleviate your anxiety. That way, you can focus on getting out of debt and achieving financial freedom.
Are bankruptcies kept private or public in Canada?
Bankruptcies are public information in Canada. The federal government maintains a database of bankruptcy records, both for individuals and corporations. These records originate from Office of the Superintendent of Bankruptcy (OSB), which is the agency that processes and approves bankruptcy applications from across the country. Therefore, if you’ve filed for bankruptcy (or a consumer proposal), details of your case will appear in this directory, which is available through the OSB’s website.
However, just because bankruptcy records are publicly available doesn’t mean they’re easy to get a hold of. Anyone who wishes to do a bankruptcy search through the OSB’s website must register an account and pay an $8 fee per search. If a person doesn’t know what criteria to enter, they could spend quite a bit of money trying to find what they’re after. Furthermore, bankruptcy records provide only limited information about your case.
Given the cost and trouble of retrieval, the average person won’t be motivated enough to seek out information about your bankruptcy, so a public records search isn’t something to lose sleep over. It’s unlikely that your family, friends, or co-workers will learn about your bankruptcy unless you tell them about it.
Who will know that you’ve filed for bankruptcy?
Some people believe their insolvency will be freely broadcast to the world – but this is a myth. Unless you’re a celebrity or other prominent individual, only a handful of people will know that you’ve filed for bankruptcy. As per the Bankruptcy and Insolvency Act (BIA), only the following individuals and organizations need to be informed about your bankruptcy:
- Your trustee. Your Licensed Insolvency Trustee (LIT) is in charge of administering your bankruptcy, so naturally, they’ll have first-hand knowledge of your situation. LITs are bound by a Code of Ethics that prohibits them from sharing confidential client information with third parties unless it’s necessary by law or you’ve given your consent for them to do so.
- Office of the Superintendent of Bankruptcy (OSB). When you file for personal bankruptcy, the OSB is the government agency that approves your application.
- Your creditors. Once your bankruptcy begins, your trustee will notify your creditors through a direct communication so they can file a claim. Collection agencies in charge of recovering debts you owe will also be notified.
- Canada revenue agency (CRA). In the year you declare bankruptcy, your trustee will file a pre-bankruptcy and post-bankruptcy tax return on your behalf. As a result, the CRA will be aware of your bankruptcy filing.
There are also some other individuals and organizations that can indirectly learn about your bankruptcy:
- Credit bureaus. Credit bureaus learn of your bankruptcy courtesy of the OSB. Each month, the OSB submits details about bankruptcy filings to credit reporting agencies like Equifax and TransUnion. In turn, these agencies record them on individuals’ credit reports. A bankruptcy remark stays on your credit report for seven years, while a consumer proposal remains for three.
- Potential lenders. Suppose your bankruptcy still appears on your credit report when you apply for a loan. In that case, potential lenders will discover it once they conduct a credit check on you.
- Potential employers. Employers typically don’t care whether if you’ve filed for bankruptcy. However, you could face challenges if you’re applying for a role requiring a strict security clearance or a high degree of financial responsibility (financial advisor, bank manager, etc.). At the minimum, you’ll have to disclose your bankruptcy. Alternatively, the employer may conduct a bankruptcy search or credit check, in which case, they’ll discover your bankruptcy record.
- Potential landlords. If you’re applying to be a tenant, the landlord or property owner may find out about bankruptcy after reviewing your credit report.
Will your employer know about your bankruptcy?
In most cases, your employer won’t discover that you’ve declared bankruptcy. Your trustee will inform your employer of your insolvency only in the following circumstances:
- You owe money to them. If your employer has loaned you money, they have a right to submit a claim in your bankruptcy, just like your other unsecured creditors.
- Your paycheque is being garnished. Once you file for bankruptcy, your trustee will notify your employer to stop the wage garnishment.
Will your bankruptcy be listed in newspapers?
This is one of the most common misconceptions about the bankruptcy process. As discussed previously, your trustee will notify your creditors through a direct communication rather than placing an ad in the local paper. Therefore, unless you’re a well-known person, it’s unlikely that a newspaper will publish a story about your bankruptcy—it’s simply not a newsworthy event.
The only exception is if the value of your non-exempt assets (those you must surrender to your trustee for the benefit of your creditors) exceeds $15,000. In this scenario, your trustee is required to notify your creditors through a newspaper ad or online. This is done to ensure everyone to whom you owe money has the opportunity to submit a claim on your bankruptcy estate.
However, from our experience, few people filing for bankruptcy own assets worth over $15,000, so it’s not something you need to worry about. If you own substantial assets, it may be in your best interest to file a consumer proposal instead. Under a consumer proposal, you get to keep everything you own—and your proposal will never get published in the local paper.
The bottom line on who will know that I’ve declared bankruptcy in Canada
Unless you’re a celebrity, uber-wealthy businessperson, or other notable individual, your bankruptcy will remain private. In most cases, only your trustee and creditors will know you’ve filed for bankruptcy. Yes, bankruptcy records are technically available for anyone to see. But it’s doubtful that someone will be inclined to spend the time and money tracking down this information.
Personal bankruptcy aims to give a fresh start if you’re struggling with debt. It’s not meant to embarrass or shame you. So don’t fear people close to you discovering your plight. Your friends, relatives, co-workers, and most others will never know about your bankruptcy unless you choose to tell them about it.
With that in mind, we encourage you to learn how bankruptcy works to determine if it’s the right debt relief option for you. If you have questions or concerns, book a free, no-obligation consultation with a Licensed Insolvency Trustee at David Sklar & Associates. For over twenty years, we’ve helped individuals across Ontario eliminate their debt problems. We can help you, too!
