How to Stop Wage Garnishment in Canada
A creditor can garnish wages to collect a debt in most parts of Canada. 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 with the help of a Licensed Insolvency Trustee.
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 on the condition that they 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.
Wage Garnishment in Canada
A wage garnishment is a collection action taken subsequent to a successful 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 to the Court of Sherrif’s office and thereafter, tothe 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 demanding payment in writing and 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.
However, creditors have to follow a certain procedure for a wage garnishment in Canada. They have to obtain a judgment, as recognition from the court that the debtor owes them funds after which they may be granted a summons, depending on the situation, to look for assets for seizure. If it is found that the debtor doesn’t possess any physical assets (or all the assets are protected by exemption legislation) and/or the debtor’s assets are not enough to cover the amount owed, the creditor will then typically serve an official notice to the debtor’s employer for garnishing their wages.
Can a Collection Agency Garnish my Wages in Canada?
Yes, collection agencies can enforce collection through wage garnishment in Canada.
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 an order for wage garnishment in Canada 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. 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.
What Is Exempt from Wage Garnishment in Canada
Wage garnishment can be understood as garnishment of your salary. Under Canadian law, certain non-salary items on your paycheque are unaffected by garnishment. Some of these are found in your paycheque deductions. Such items include:
- Canada Pension Plan and Quebec Pension Plan contributions
- Employment Insurance deductions
- Income Tax deductions
- Union membership dues
Items in the list above will not be affected by wage garnishment. In addition, amounts paid to you as reimbursement of costs incurred in the course of your employment (a good example: reimbursement of costs of work boots or gloves) are not subject to garnishment.
Percent or portion of salary that cannot be garnished
The laws of Canada’s provinces and territories contain legislated exemptions to wage garnishment, which typically limit the garnished amount to between 20% and 50% or your salary. Provincial/territorial laws regarding wage garnishment can be complex: a lawyer or a Licensed Insolvency Trustee can advise you on current rules in your area.
How Much Wages Can Be Garnished
If you are employed, the maximum 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.
In Saskatchewan, the legislation only requires that the debtor be left with $1,500.00 per month, plus $300.00 per month for every dependent in their care. Employment income above these amounts can be garnisheed in its entirety.
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.
Who can Garnish My Wages in Canada?
Generally speaking, a credit card company, collection agency, payday loan lenders, or any creditor who you owe money to can seek a court order to garnish your wages. In addition, the Canada Revenue Agency (CRA) and the court can also garnish your wages.
Am I Subject to Wage Garnishment in Canada Even If I’m Self-Employed?
Yes. A creditor can seek a wage garnishment even if you’re self-employed – this applies to all business owners and independent contractors. However, a wage garnishment for the self-employed differs from that for the employed in two distinct ways.
First and foremost, since there is no employer to garnish wages from, it can be served on your clients or to anyone who owes you money in an effort to seize your receivables. However, it may not be as easy for a creditor to collect from a client as a garnishee order is only valid for a limited time.
Most importantly, since the income earned by the self-employed does not come under “wages”, the 30 percent threshold that applies to wages doesn’t apply to it. However, the bad news is that by law, a creditor can garnish you for 100% of your earnings if you’re self-employed. That said, typically it has been observed that instead of seeking a full, one-time repayment on the debt, creditors garnish a part of your earnings, which would make it less likely for you to quit or opt for work elsewhere – ultimately making it easier and more likely that they will collect the entire debt.
How Does Wage Garnishment Work If I’m Unemployed?
A creditor cannot seek wage garnishment order for the unemployed since there are no “wages” to be garnished, as previously explained. Termination or severance packages may be subject to wage garnishment as they’re earned due to employment.
Is a Court Order Always Required for Wage Garnishments in Canada?
Most typically a court order is required for a wage garnishment, with the exception of some scenarios. For instance, if the Canada Revenue Agency (CRA) needs to seek a wage garnishment for tax arrears or back taxes, it can do by serving a Requirement to Pay under the Income Tax Act or other relevant legislation upon your employer without a court order. In addition, if the debtor has obtained a loan from the credit union after signing an agreement called ‘assignment of wages’, then in the event of unpaid debts, the union can apply for a wage garnishment without seeking a court order. It is because the signed agreement is proof that the borrower has agreed for the debt to be deducted from the wages, in effect eliminating the need for a court order.
Do Employers Have to Comply With Wage Garnishment?
Employers must comply with an order for wage garnishment in Canada and duly follow the process as stated in the official notice. In addition, by law, they cannot fire, suspend, or penalize any employee for wage garnishment.
The only event in which an employer can stop withholding the pay for wage garnishment is if they’ve been notified formally by the Trustee that a consumer proposal or bankruptcy have been filed and that a stay of proceedings is in effect.
How Likely Is It That a Creditor Will Go For a Wage Garnishment in Canada?
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 in Canada, and give you the advice you need to make the right choices.