How to Stop Wage Garnishment in Canada
A creditor can garnish wages to collect a debt in most parts of Canada. The only exception to the standard creditor is in New Brunswick, where creditors are not able to garnish wages. A wage garnishment is a very common method that can be employed by anyone who is lawfully owed money. However, a garnishee can be stopped.
How to stop a creditor from garnishing wages
It makes no difference if your creditor is threatening to garnish your wages, has set a date to make a court application or served a garnishment order on your employer. You still have options.
The ways you can put a stop to a garnishee are:
- Quit your job so there is no income to garnish.
- Negotiate repayment terms with your creditor and have them agree to remove the garnishee.
- Obtain a loan to pay off the garnisheeing creditor in full.
- File with orderly payment of debts (where available).
- File a consumer proposal.
- File personal bankruptcy.
However, timing is key, the sooner the court protection is in place, the sooner you will be able to ensure the garnishee won’t continue.
What is a Wage Garnishment?
A wage garnishment is a legal proceeding that allows a creditor to seize money directly from your pay cheque, before you get paid.
Ryan has a small family of four. His wife stays home with the kids, and Ryan works in a manufacturing facility. He has worked at the same job for the last 5 years and brings home $2175 after tax every two weeks. Unfortunately, Ryan has a few credit cards that are delinquent. In fact he hasn’t made a payment on any of these credit cards in the last 6 months. Today at work, Ryan’s boss called him into the office to warn him that they had received a Garnishment Order from one of these credit card companies. What this means is that instead of receiving $2175, this pay cheque will only receive $1,522.50 and the rest will be sent straight to the credit card company. This is 30% less than normal, and this will continue until Ryan’s credit card is paid in full.
While a creditor won’t start a garnishee the moment you miss a payment, after a period of non-payment and after trying to talk to you on the phone to work out some type of arrangement that is acceptable to both you and the creditor, most creditors will turn to the court for assistance and look to start garnishing wages.
Can a collection agency garnish my wages in Canada?
Yes, collection agencies can enforce collection through a wage garnishment.
What does a creditor have to do to garnish my wages?
The specific rules relating to the timeline and method of garnishment are based on provincial legislation and vary slightly across the country. But in most cases, to be eligible to garnish monies your creditor must:
- File a lawsuit (unless you owe CRA; they do not need to go to court),
- Successfully obtain a judgement from court, and
- Make a separate application to court for a garnishment order.
Serving a garnishing order
When a garnishment order has been obtained by your creditor, it must be served on your employer or on the party they are trying to seize funds from.
A garnishment is not limited just to your employer – it can be served on your bank in an effort to seize money in a bank account. If you are self-employed it can be served on those who owe you money in an effort to seize your receivables. Regardless of the party, once they receive the garnishment order they are legally bound to follow it, unless the provincial legislation provides otherwise.
Garnishing of employment insurance, social assistance and pension funds
In most provinces there are provisions that prohibit the garnishing of funds received from employment insurance, social assistance and other government pensions like CPP and OAS.
The maximum amount that can be garnished
If you are employed, the amount of money that can be garnished has limits, and these limits also vary from province to province.
In some provinces the rules are very simple, like British Columbia, which allows a creditor to garnish a maximum of 30% of your take home wage.
For other provinces the rules are dramatically more complicated. In Alberta, for instance, you keep the first $800 of your monthly net income, then creditors can garnish 50% of your monthly net income between $800 and $2400, and 100% of any net income above $2400. Then these exemption limits are increased by $200 for each dependent you support.
How likely is it that a creditor will go for a wage garnishment?
It is a very common practice for a creditor to garnish wages. It is used as it is very effective and allows the creditor to intercept money before it gets to the debtor, and in most cases the debtor hasn’t been very cooperative up to that point so it can often guarantee some type of payment. But unfortunately it is also devastating, if you are struggling to stay current with your mortgage, put food on the table and simply keep the lights on, and now you have less money in your pocket than you are used to.
What should I do?
If you are worried about a garnishment from a creditor, contact a Licensed Insolvency Trustee. He or she will advise you on dealing with wage garnishments, and give you the advice you need to make the right choices.