How Can a Creditor Garnish My Wages?

Does Bankruptcy Stop A Garnishment?

Understanding the financial intricacies of wage garnishment and bankruptcy can be a daunting task. In this guide, we will unravel these complex issues and provide you with the necessary information to navigate these financial waters.

What is Wage Garnishment?

Wage garnishment is a legal procedure through which a portion of a debtor’s earnings is withheld by an employer for the payment of a debt. This usually happens when you default on your debts, and your creditor obtains a court order.

How Does Wage Garnishment Work?

Before a creditor can start taking money out of your paycheque, they must first seek a judgment from the court. This involves the creditor arguing their case, and if successful, the court will issue a judgment for the creditor.

Notice of Proceedings

The debtor is provided with a notice of this proceeding and given an opportunity to present their case. Perhaps, the debtor might contend that the debt claimed is less than what is being reported.

Determining the Amount Owing

Once the court has established the amount owing, a judgment is issued. The creditor can then use this judgment to garnish your wages, or in some cases, your bank account. A creditor may even register a caveat on your property if applicable.

Exceptions to the Rule

While most creditors need a court order to garnish your wages, some exceptions exist. For instance, the Canada Revenue Agency (CRA) can garnish wages without going through the court process that other unsecured creditors, like credit card companies, must follow.

Another exception is when an individual has given a creditor an assignment of wages, which allows the creditor to garnish wages directly.

How Much Can Be Garnished?

The law protects a portion of your income from being garnished. In Manitoba, for example, the Garnishment Act stipulates that 70% of wages are exempt from seizure under a garnishing order issued by the court. This implies that only about 30% of your wages can be garnished.

However, additional provisions may apply depending on whether you have any dependents. There are also special considerations with respect to maintenance and support orders.

The Impact of Bankruptcy on Wage Garnishment

Declaring bankruptcy can have a significant impact on wage garnishment. When you file for bankruptcy, a stay of proceedings comes into effect. This prevents creditors from initiating or continuing their collection efforts, effectively stopping wage garnishments.

Exceptions in Bankruptcy

Even in bankruptcy, there are exceptions. In certain cases, like for child support, the stay of proceedings may only temporarily stop the garnishment.

Garnishment by the CRA

Interestingly, bankruptcy can also stop garnishments imposed by the CRA. However, it’s crucial to consult with a financial advisor or attorney to fully understand the implications of declaring bankruptcy.

Conclusion

Understanding how a creditor can garnish your wages and whether bankruptcy can stop a garnishment is crucial in managing your finances. If you find yourself in a situation where your wages are being garnished, it might be time to seek professional advice.

Facing bankruptcy is not an easy process, and it requires a clear-headed approach and professional guidance. It’s important to remember that while bankruptcy can provide a fresh start, it also comes with long-term consequences that should be carefully considered.

Remember, knowledge is power. Understanding your financial rights and obligations can help you make more informed decisions.

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