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Operating as a sole proprietor vs contract employee or employee

The BIA states that “I must disclose that I am an undischarged bankrupt when I carry on a business and accept deposit for work to be done in that business”. In relation to this statement, please confirm the following:

a) While I am an undischarged bankrupt operating as a sole proprietor under my own name, do I need to inform potential clients that I am an undischarged bankrupt (e.g. in the RFP or Expression of Interest Letter?

b) I already have some contract work at the local college whereby I will be getting paid as a part-time faculty member through their payroll department. Do I need to inform the college?

c) I am currently looking for work as an employee (versus contract employee versus sole proprietor). Assuming I found work as a corporate trainer or manager of customer service, do I advise my new employer that I am an undischarged bankrupt?

2 Responses to “Operating as a sole proprietor vs contract employee or employee”

A licensed trustee said...

Based on the nature of your questions and the fact that you have taken the time to research the Bankruptcy and Insolvency Act directly I am going to assume that you are a reasonably sophisticated user.

That being said, if you are seeking legal advice I suggest you contact a lawyer that specializes in insolvency work. The purpose of this blog is to provide general responses to visitors inquiries. We do not offer legal opinions (since we’re accountants, not lawyers).

In general terms, employers are not informed if someone has filed bankruptcy unless there is a specific reason to do so. An example of one such reason – the bankrupt’s wages are being garnisheed by a creditor.

In the case of a new employer, unless asked on your employment application or during the interview process, I do not beleive you are under any obligation to disclose the fact that you are an undisharged bankrupt to a new employer (or any employer for that matter).

If you read your quote from the Bankruptcy and Insolvency Act more carefully you will notice that a person carry-on business while an undischarged bankrupt is required to disclose that fact to any customers that provide “deposits”. If in the normal course of business a person does not collect or require deposits from their customers no disclosure is required.

I trust this is of some assistance – for more specific answers you should contact a local professional directly.

Ozii said...

Also it is an Criminal offence to borrow the money in excess of $500,- while undischarged bankrupt, without disclosing that you are in the state in bankruptcy. “borrow” includes taking “deposit”