Bankruptcy is a scary word. We know it. But we also know that part of the problem is that there are a lot of misconceptions and untruths about bankruptcy in Canada. To vanquish the monsters in the closet, we have pulled together some of the most common bankruptcy myths we hear every day. Over the next few weeks we will demystify bankruptcy by putting some facts in place of misinformation.
Today we look at one of the most popular myths that cause concern for many considering bankruptcy: who will know I filed bankruptcy?
Myth: Everyone will know I filed bankruptcy. Your trustee tells everyone including your employer – they’ll even put an ad in the newspaper saying you went bankrupt!
Truth: Unless you are a media celebrity or major corporation, the likelihood that anyone will find out you filed for bankruptcy is very remote. Although a bankruptcy and consumer proposal are a matter of public record, in 99.9% of cases the only people that will know you declared bankruptcy are you, your trustee and the people you owe money to.
It’s also against the bankruptcy rules for a trustee to disclose confidential information regarding a bankruptcy unless there are required to do so by law, or unless you have consented to the disclosure.
Who does the trustee notify?
Notifying your creditors & bankruptcy records
After you declare personal bankruptcy, the trustee notifies your creditors and the Office of Superintendent of Bankruptcy (OSB) that you have filed a bankruptcy or proposal. A note is put on your credit report by the creditors and the OSB. Lenders have access to your credit report and will be able to see the note indicating that you have declared bankruptcy. A bankruptcy will stay on your credit for 6 years after your discharge and a proposal will remain for 3 years after you have completed the proposal payments. But only your creditors are likely to look at this information.
While anyone can search the OSB’s bankruptcy registry to see if someone has gone bankrupt, there is a minimum $8 fee per search. It’s unlikely someone will want to spend that money just out of curiosity. Even if they do, the OSB bankruptcy search record only provides limited information. Usually the only people that look at the bankruptcy records are trustees because when you file we have to conduct a bankruptcy search to see if you’ve filed before.
Some records are kept and filed with the bankruptcy court which could be searched too, but again, considering the cost and time involved with searching court archives from storage, someone would have to be really motivated to want to find a copy of the records this way as it’s not easy to do.
Does the trustee tell my employer?
No, but we can if you want us to. If your wages are being garnisheed then obviously you’d probably want us to tell your employer so that we can stop the garnishment. The legal protection of a bankruptcy or proposal goes into effect immediately on the day you file with the trustee.
Does a trustee have to put an ad in my local newspaper?
No. Only if the assets to be seized and sold by the trustee will bring a value of more than $15,000 to your estate (after any secured debt owing on those assets) will the trustee be required to inform your creditors by placing an ad in the local paper for a limited time. Most people that have assets with an equity value above $15,000 are not filing bankruptcy. It’s more common when businesses file bankruptcy rather than individuals. An ad is not placed in a newspaper when you file a consumer proposal.
So as you can see, declaring bankruptcy is something to be discussed between yourself, your trustee, your creditors and those whom you wish to inform. Your confidentiality is important to us – any disclosure we are required to make by law will be discussed with you.
The best person to dispel bankruptcy myths is a licensed bankruptcy trustee. If you have any questions about who will know you filed bankruptcy or any other bankruptcy matters contact a local Bankruptcy Canada Trustee in your area. Your consultation is always free, and confidential.
Read about other common bankruptcy myths:
Myth #2: Will I Lose Everything If I Declare Bankruptcy?
Myth #3: A Bankruptcy Trustee Only Does Bankruptcies
Myth #4: All My Debts Are Discharged In A Bankruptcy
Myth #5: I’ll Never Get Credit After Bankruptcy