By definition, wage garnishment is used by creditors to recover the money they are owed – either partially or completely.
Typically, creditors will need to take you to court to obtain legal authorization, called a garnishment order.
However, if you have filed a voluntary wage assignment form, you have already agreed that this creditor can garnish your wages to repay a loan if you can’t meet payment terms or deadlines.
Voluntary wage assignments are primarily used by money lenders.
It is a form you are likely to encounter with Credit Unions, for instance, and other money lending companies.
You may, however, wonder if the form you’ve signed has an enforceable legal value.
For anyone who is wondering how to stop a voluntary wage assignment, Bankruptcy Canada trustees provide a clear answer to help you protect your wages.
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When do you get to sign a voluntary wage assignment?
Most people sign a voluntary wage assignment form when they are applying for a loan or being accepted for their loan application.
As a rule of thumb, you are most likely to sign this specific form for unsecured loans, which means loans with no collateral.
The voluntary wage assignment form is designed to allow the creditors to deduct an amount from the borrower’s wages in the event where the loan isn’t paid off on time.
In essence, the form means that the creditor doesn’t need to take you to court to garnish your wages.
It’s important to consider that, in theory, a voluntary wage assignment makes creditors less likely to be patient about payment delays, as they have an option to recover the money you owe.
So how do you stop it from happening?
What you need to know about voluntary wage assignment
While the process bypasses the need to take debtors to court, a signed voluntary wage assignment doesn’t mean that every creditor can help themselves to your wages with a garnishment order from the court.
Only a Credit Union or the Canada Revenue Agency can use the voluntary wage assignment to recoup their losses.
As per Ontario Wages Act 1990, no other creditor except for Credit Unions can use the assignment of wages to secure payment of your debts.
Indeed, the process is not enforceable for any other creditor, even if you have previously signed a voluntary wage assignment.
However, if you consent your employer to garnishing your wages to pay off creditors, they can enforce wage assignments without the Garnishment Order from the court.
Credit Union vs payday loans
You may have a voluntary wage assignment with a payday loan company.
However, while the assignment is signed, it isn’t enforceable as payday loan companies are not Credit Union.
You can write to your employee to ask them to refuse to garnish your wages, which would cancel the wage assignment form for payday loan companies.
In many provinces, a voluntary wage assignment form is legally binding.
But payday loan companies are aggressive creditors that can take you to court to obtain a garnishment order.
A trustee can help stop both wage garnishment and voluntary wage assignment with federally regulated debt relief plans.
Very few clients know that a voluntary wage assignment is not always enforceable.
If you are worried about having your wages garnished, get in touch with a trustee to find ways of stopping the process.
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