A Guide to Stopping Wage Garnishments
Wage garnishment, a prevalent collection method in Canada, can be a significant financial burden. However, with the aid of a Licensed Insolvency Trustee, you can successfully halt wage garnishment.
Strategies to Halt Wage Garnishment in Canada
Regardless of where you are in the wage garnishment process, whether it’s a mere threat, a pending court date, or an active garnishment order, there are several ways to halt the process.
The following methods can be employed to halt wage garnishment:
- Leaving your job so that there’s no income to garnish.
- Discussing repayment terms with your creditor, contingent upon them agreeing to lift the garnishment.
- Acquiring a loan to entirely pay off the garnishing creditor.
- Filing for an orderly payment of debts (if available).
- Submitting a consumer proposal.
- Filing personal bankruptcy.
Both personal bankruptcy and a consumer proposal can instantly halt wage garnishment if it’s about to commence or if it’s already in effect. These approaches employ an immediate stay of proceedings, a legal protection initiated the moment the proposal or bankruptcy documents are filed with the government. The stay of proceedings can instantly halt garnishment. However, early action is crucial; the quicker the court protection is put in place, the sooner the garnishment can be halted.
Insights into Wage Garnishment in Canada
In Canada, wage garnishment is a collection action taken after a successful legal proceeding, allowing a creditor to seize money directly from your paycheque before you receive it.
Here’s an illustrative example:
John, a family man with a wife and two children, works in a manufacturing facility. He has been with the same company for five years and brings home $2200 after tax every two weeks. Unfortunately, John has several overdue credit cards, and he hasn’t made a payment on any of these in the past six months. Today, his boss called him into the office and informed him that they had received a Garnishment Order from one of these credit card companies. This means that instead of receiving $2200, John’s paycheque will now be reduced to $1540, with the rest sent to the Court of Sheriff’s office and then to the credit card company. This is a 30% reduction, and this will continue until John’s credit card debt is fully paid.
A creditor won’t initiate garnishment as soon as you miss a payment. However, after a period of non-payment, most creditors, having failed to negotiate a mutually acceptable arrangement, will turn to the court for assistance and start garnishing wages.
For a wage garnishment to take place in Canada, creditors must follow a specific procedure. They must obtain a judgment from the court, recognizing that the debtor owes them funds. Depending on the situation, they may then be granted a summons to look for assets for seizure. If the debtor doesn’t possess any physical assets (or if they are protected by exemption legislation) and/or the debtor’s assets are insufficient to cover the amount owed, the creditor will then typically serve an official notice to the debtor’s employer to garnish their wages.
Can Collection Agencies Garnish Wages in Canada?
Yes, collection agencies can enforce collection through wage garnishment in Canada. To learn more about the powers of collection agencies, check out our article on what else collection agencies can do.
What Steps Must a Creditor Take 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.
How is a Garnishing Order Served?
Once your creditor has obtained an order for wage garnishment in Canada, 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 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.
Can Employment Insurance, Social Assistance, and Pension Funds be Garnished?
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 essentially involves garnishing your salary. However, Canadian law protects certain non-salary items on your paycheque from garnishment. These items, which often appear in your paycheque deductions, include:
- Canada Pension Plan and Quebec Pension Plan contributions;
- Employment Insurance deductions;
- Income Tax deductions;
- Union membership dues.
These items will not be affected by wage garnishment. In addition, amounts paid to you as reimbursement for costs incurred in the course of your employment (for instance, the cost of work boots or gloves) are not subject to garnishment.
The portion of salary that cannot be garnished
The laws of Canada’s provinces and territories contain legislated exemptions to wage garnishment. These laws typically limit the garnished amount to between 20% and 50% or your salary. Wage garnishment laws can be complex and vary by area, so it is advisable to consult a lawyer or a Licensed Insolvency Trustee for guidance on current rules in your area.
How Much of My Wages Can Be Garnished?
The maximum amount of wages that can be garnished varies from province to province.
For example, in British Columbia, a creditor can garnish up to 30% of your take-home wage. In Saskatchewan, the law only requires that the debtor be left with $1,500.00 per month, plus $300.00 per month for every dependent in their care. Any employment income above these amounts can be garnished in its entirety.
In Alberta, the rules are a bit more complicated. Here, 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. These exemption limits are increased by $200 for each dependent you support.
However, it’s important to note that these provincial limits don’t apply to everyone.
For instance, if you owe money to the Canada Revenue Agency, they are not subject to these provincial limits. Similarly, in many provinces, these limits don’t apply to those who are self-employed or owe child support/alimony under a court order.
If you are facing the threat of wage garnishment, it’s crucial to consult with a Licensed Insolvency Trustee to determine what is at risk.
Who Can Garnish My Wages in Canada?
Generally, a credit card company, collection agency, payday loan lenders, or any other entity to whom you owe money can seek a court order to garnish your wages. Additionally, the Canada Revenue Agency (CRA) and the court itself can also garnish your wages.
Can I Be Subject to Wage Garnishment in Canada if I’m Self-Employed?
Yes, a creditor can seek wage garnishment even if you’re self-employed. This applies to all business owners and independent contractors. However, wage garnishment for the self-employed differs from that for the employed in two key aspects.
First, since there’s no employer to garnish wages from, the garnishment order can be served on your clients or anyone who owes you money 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.
Second, the income earned by the self-employed does not fall under the category of “wages”. Therefore, the 30 percent threshold that applies to wages doesn’t apply to self-employed income. Unfortunately, this means a creditor can legally garnish 100% of your earnings if you’re self-employed. However, in practice, creditors often garnish a portion of your earnings rather than seeking full, one-time repayment on the debt. This makes it less likely that you would quit or seek employment elsewhere, ultimately making it easier for the creditor to collect the entire debt.
How Does Wage Garnishment Work If I’m Unemployed?
If you’re unemployed, a creditor cannot seek a wage garnishment order as there are no “wages” to be garnished. However, termination or severance packages may be subject to wage garnishment since they’re earned due to employment.
Is a Court Order Always Required for Wage Garnishments in Canada?
In most cases, a court order is required for wage garnishment. However, there are exceptions. For instance, the Canada Revenue Agency (CRA) can serve a Requirement to Pay under the Income Tax Act or other relevant legislation upon your employer without a court order if it needs to seek wage garnishment for tax arrears or back taxes. Additionally, if a debtor has taken a loan from a credit union and signed an agreement called ‘assignment of wages’, the union can apply for a wage garnishment without a court order in the event of unpaid debts. The signed agreement serves as proof that the borrower has agreed for the debt to be deducted from their wages, eliminating the need for a court order.
Are Employers Obliged to Comply With Wage Garnishment?
Employers are legally bound to comply with a wage garnishment order in Canada and must follow the process as stated in the official notice. Moreover, by law, they cannot fire, suspend, or penalize any employee subject to wage garnishment.
The only time an employer can stop withholding pay for wage garnishment is when they receive formal notification from the Trustee that a consumer proposal or bankruptcy has been filed, and a stay of proceedings is in effect.
How Common is Wage Garnishment in Canada?
Wage garnishment is a common practice among creditors in Canada. It’s an effective method that allows creditors to intercept money before it reaches the debtor. Although it guarantees some form of payment, it can be devastating for individuals who are already struggling to meet their basic needs.
What Should I Do?
If the threat of wage garnishment is causing you stress, reach out to a Licensed Insolvency Trustee. They can provide valuable advice on how to handle wage garnishments in Canada and can help you make informed decisions.
For a free, no-obligation consultation, use our listing of recommended Licensed Insolvency Trustees to find a trustee near you.
