The Rebecca Martyn Bankruptcy Windsor Blog

As a result of the bankruptcies of some high profile companies in Windsor and Essex County, there has been a lot of discussion in local newspapers about outstanding employee wages in a bankruptcy. As a Windsor trustee, I have read letters to the editor and personal blogs about this matter.

A typical situation is this: Employee A has been working for company X for several years. He is paid every 2 weeks. 2 days before pay day he goes to work as usual and there is a note on the door that company X has filed for bankruptcy and the company is closed. A representative from the trustee firm handling the bankruptcy notifies him that his wages owing will not be paid in 2 days and gives him some paperwork to complete. Employee A wants to know why. He worked an honest 2 weeks work and he expects to be paid for the work he did. Employee A is told is that the trustee is going to sell the assets and distribute the money. He is also told that Company X owes the bank money and they have a lien on all of the equipment. Company X also owes the government money for source deductions (the income tax, CPP and EI deducted from the employees).

Under the current legislation that governs bankruptcy, known as the Bankruptcy and Insolvency Act, the scheme of distribution of money (up to employee wages) is as follows when the assets of Company X are sold.

Canada Revenue Agency for the employee portion of source deductions;
The bank which holds a lien on the equipment;
Fees and expenses of the trustee and legal costs;
The levy payable to the Superintendent of Bankruptcy each time a dividend is pay to unsecured creditors;
Wages to the extent of $2,000 per employee earned in the previous 6 months.

To simplify the matter, employee A will only be entitled to up to $2,000 providing there is enough money to pay CRA for source deductions, the bank, the trustee and the lawyer. Unfortunately, a lot of the time there isn’t any money left over after the bank is paid.

There is new legislation currently in Parliament to move up the priority of employee wages, but this has not yet passed.

Losing your job under conditions like this is stressful when you have your own bills to pay. Call us at 310-PLAN to discuss your situation.

Bankruptcies are a matter of public record, however the information is not generally published anywhere.  The exceptions are that certain types of bankruptcies with substantial assets are published in a local newspaper.  In Windsor, most Trustees (we are not among them) send a copy of the bankruptcy papers to “Windsor Credit Bureau” to have published in monthly brochure that is available to any company who subscribes to it. 

If you think you know which trustee they filed with, simply call the trustee to confirm.  You can also call the local office of the Superintendent of Bankruptcy.  Their phone number can be found at in the blue pages of the phone book of online at http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/br01003e.html.  You can also search online at https://strategis.ic.gc.ca/sc_mrksv/bankruptcy/bankruptcySearch/engdoc/.