Are you behind in payments to your creditors? Are they starting to threaten wage garnishment? Or, worse, have you already received a notice of garnishment? There is no need to panic just yet.
Garnished wages can have a detrimental effect on Canadian families who are already struggling. But there is hope. In this article, we’ll cover everything you need to know about wage garnishments and how to stop them.
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What Is Wage Garnishment?
Wage garnishment (otherwise known as an assignment of wages) is a legal process in Canada that allows creditors to collect money from debtors. While this may be a good resource for creditors, it can absolutely wreak havoc on a consumer and make their financial situation multiples worse than it previously was.
It can be a difficult and stressful situation for those who are facing it, but there are steps you can take to stop a wage garnishment. Let’s take a look at how to stop a wage garnishment in Canada and what options are available for those who are struggling with debt.
How to Stop a Creditor From Garnishing Wages
No matter if a creditor has a garnishment in place, served a garnishment order, has made a court application to garnish your wages, or is simply threatening a garnishment. There are many options available to consumers. Outside of quitting your job, the ways you can stop an assignment of wages is below.
The ways you can stop wage garnishments are:
- Negotiate repayment terms with the creditor on the condition that they remove the garnishment.
- Obtain a loan to pay off the garnishing creditor in full.
- File a consumer proposal
- File a personal bankruptcy
Both a consumer proposal and bankruptcy are filed through a Licensed Insolvency Trustee
Only through a consumer proposal or bankruptcy can an immediate stop to a garnishment occur on unpaid debts. This is because both have an automatic stay of proceedings which is legal protection against your creditors. This protection is put in place as soon as your consumer proposal or personal bankruptcy documents are filed.
How Does Wage Garnishment Work In Canada? A creditors remedy when you owe money
A wage garnishment is typically used when the consumer has failed to make payments on a debt or loan. The creditor can obtain a court order that requires the consumer’s employer to withhold a certain amount of money from their paycheck and send it directly to the creditor.
This process ensures that the creditor will receive payment for the debt, even if the consumer does not have enough money in their bank account.
The process of obtaining a garnishment varies slightly for each province. However, the process will generally follow this sequence of events:
- The consumer defaults on their obligations as it relates to an amount owing.
- The creditor will begin collection activities; they will reach out to set up a payment plan.
- If they are unsuccessful they will commence legal action.
- If they are successful, they will be awarded a judgment. This judgment can then be used to obtain a garnishment order if not obtained at the time of the judgment.
- This garnishment order is then served upon an employer to garnish the wages of one of their employees.
Is a Court Order Always Required for Wage Garnishments in Canada?
The only creditor exempt from the requirement of obtaining a court order to garnish wages is the Canada Revenue Agency. If you owe money to CRA they have the ability to garnish wages even without an order.
They normally won’t pursue a garnishment until after they have attempted to contact you several times and they will typically provide advance notice about the fact they are looking to pursue a wage garnishment, prior to doing so.
CRA is able to garnish amounts of pay you receive on employment insurance (EI) and other government benefits. They have powers that other creditors do not.
If you are being threatened with a garnishment by the Canada Revenue Agency it is important to contact a Licensed Insolvency Trustee as soon as possible to understand your debt relief options including but not limited to a consumer proposal and personal bankruptcy.
Other Frequently Asked Questions About Wage Garnishment
Can a Collection Agency Garnish My Wages in Canada?
Yes, a collection agency can garnish wages in Canada. However, they have to follow the same process as other creditors. As such, a collection agency that threatens a wage garnishment order can occur immediately is often bluffing in hopes that you will pay.
What Does a Creditor Have to Do To Garnish my Wages?
As described earlier in this article, a creditor must obtain a court order and then serve this court order on an employer for them to begin withholding wages from their employee and remitting it to the creditor.
How Likely Is It That a Creditor Will Go For a Wage Garnishment in Canada?
Wage garnishments are a very common method used by creditors to recover funds from consumers who have outstanding debt. They are usually reserved for when a creditor believes that they traditional collection activities will no longer be successful in recovering funds.
How Much Of Your Wages Can Be Garnished By The Court-Imposed Collection or Creditor?
Each province in Canada has legislation that provides exemptions to wage garnishment. For example, in Nova Scotia unless the Court orders otherwise, only 15% of a judgment debtor’s gross wages can be garnished.
Do Employers Have to Comply With Wage Garnishment?
Yes, when served with a court order, employers do have an obligation to comply with a wage garnishment order.
Am I Subject to Wage Garnishment in Canada Even If I’m Self-Employed?
Yes, a creditor can obtain a court order that could be served on your clients that indicate that funds owing to you instead be paid directly to the creditor. This is uncommon.
Usually, creditors of a self-employed individual will look at seizing funds out of bank accounts.
My Lender Says They Can Garnish My Wages Without A Court Order. Is This True?
Many lenders, mainly payday loan lenders or other high-interest lenders, will include in their agreements a ‘voluntary wage assignment’ section whereby you agree to allow them to garnish your wages without a court order.
Employers are not required to enforce these and some provinces, such as Nova Scotia, consider these to be of no effect legally. This means they are not legally binding without them following the proper steps and pursuing legal action against you.
Can I stop a child support garnishment order?
No. Garnishments that are in place to collect child support payments can not be stopped even if you file a bankruptcy or consumer proposal.
What Income Is Exempt From Garnishment In Canada?
If you’ve been served a garnishment order from a non-government entity, the following income is generally, but not always, exempt from that order:
- Canada Pension Plan (CPP)
- Old Age Security (OAS)
- Guaranteed Income Support (GIS)
- Employment Insurance (EI) payments
If it is the Canada Revenue Agency (CRA) that is garnishing your wages, they have the ability to offset your tax refunds and some government benefits to collect their money. The best way to understand if your income is at risk from a CRA garnishment is to talk to a Licensed Insolvency Trustee about your specific situation.
Who Can Garnish Your Wages In Canada?
Any person, government, or corporate entity you owe money to in Canada can go to court to obtain a wage garnishment order against you.
Are Wage Garnishments Pre Tax?
Yes. Garnishments are generally removed from your wages before you pay income taxes but after Canada Pension Plan (CPP) and Employment Insurance (EI) are paid. The Order will specify exactly how wages are taken and in what order.
Are Wage Garnishments Public Record?
A non-government entity must get a court order for wage garnishment to begin. This court proceeding is a public record and can be found online.
Even though the Canada Revenue Agency (CRA) doesn’t need a court order to garnish your wages, they may obtain a certification of your debt from the courts, which is also a public record.
Can Wage Garnishment Be Stopped?
If one of your creditors threatens you with a wage garnishment, you can try to work with them before a garnishment order is put in place. You can either offer to pay your debt in full or offer to make payments on the debt. Since you’ve already missed payments on this debt, it’s unlikely they will accept a new payment arrangement.
Once a wage garnishment order has been approved, it’s even less likely that your creditors will come to a payment agreement with you. In most cases, after a garnishment order has been granted, your only hope to stop the wage garnishment will be to work with a Licensed Insolvency Trustee to file a consumer proposal or bankruptcy.
Can Wage Garnishment Affect a Tax Refund?
If your wages are being garnished by the Canada Revenue Agency (CRA), or another government entity, they may use a process called “offsetting” to recoup their debt. This means that any government entity can offset that debt by confiscating your tax refunds or government benefits that you collect.
Does Wage Garnishment Show On Credit Report?
The acts leading up to your wages being garnished (the failure to pay) and the court judgment against you are all reported to the credit bureaus. Depending on your province, this could remain on your credit report for up to ten years.
Does Wage Garnishment Affect Credit Scores?
Again, it’s not so much the wage garnishment that will negatively affect your credit score but all of the acts, including the garnishment order, leading up to your wages being garnished.
How Is Wage Garnishment Calculated?
Wage garnishment calculations are different based on your province. For example, as of this writing, if you live in Nova Scotia, up to 15% of your gross wages could be garnished, unless a judge orders otherwise. A take-home amount of between $330-$450 is exempted from the garnishment amount.
These wage garnishment calculations are revised periodically. It’s best to meet with a Licensed Insolvency Trustee before a garnishing takes effect to determine how much your wages will be affected.
How Many Creditors can Garnish Wages At One Time?
Again, wage garnishing rules and calculations are based on your province. In most cases, though, it’s the amount of your wages that can be garnished, not the number of creditors who can garnish your wages.
To use Nova Scotia as our example again, if one creditor has already garnished 15% of your gross wages, no more of your wages can be garnished. If, on the other hand, one creditor has garnished 5% of your wages, any number of creditors can garnish the remaining 10%.
The percentage of your wages that can be garnished is regulated, not the number of creditors.
How To Stop Wage Garnishment Immediately?
The only way to put an immediate stop to wage garnishment is to meet with a Licensed Insolvency Trustee and have them file one of the following insolvency proceedings on your behalf:
- Consumer Proposal
- Division 1 Proposal
Once one of these proceedings has been filed, creditors can no longer garnish your wages or even contact you to discuss your debt.
Let Powell Associates Help You Put an End to a Wage Garnishment
Powell Associates Ltd. – Licensed Insolvency Trustee
Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress, including wage garnishment.
By contacting Powell Associates Ltd;
- You won’t be stuck in an assembly line process.
- You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
- We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
- We help Canadians with overwhelming debt get fresh financial starts.
Once you file a consumer proposal or personal bankruptcy, all wage garnishments will immediately stop. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free, no-obligation consultation.
We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.