Shielding Your Wages in Canada: A Comprehensive Guide
With the increasing cost of living, getting a portion of your paycheque garnished by creditors can be a daunting experience. This guide is designed to help you understand wage garnishment in Canada, and the steps you can take to protect your income.
Understanding Wage Garnishment in Canada
Wage garnishment, commonly known as a garnishee order, is a legal process in which a portion of an individual’s earnings is withheld by an employer for the payment of a debt. This typically happens after other attempts to collect the debt, such as demand letters, phone calls, or the intervention of a collection agency, have failed.
How Garnishment Works
If you owe a debt and aren’t making payments, your creditors can apply to the court for a Garnishee Order. If granted, your employer or bank has to legally divert a portion of your wages or savings directly to your creditor.
In certain cases, banks have a right to “offset” your debts. If you owe money on your credit card and have a checking account with the same bank, the bank can garnish funds from your account to repay the credit card debt without notifying you. Credit unions and the Canada Revenue Agency (CRA) also have the power to initiate wage garnishment without a court order.
Garnishment Limits
The amount that can be garnished from your wages varies from province to province in Canada, generally ranging between 20% to 50% of your take-home pay.
For instance, in British Columbia, creditors can garnish up to 30% of your net income, while in Ontario, 50% of your take-home pay can be garnished. In Alberta, the rules are slightly more complicated. You get to keep the first $800 of your net income, then 50% can be garnished from $800-$2400, and anything above that can be 100% garnished.
The CRA, regardless of your province, doesn’t need to adhere to these provincial exemptions.
Halting Wage Garnishment
Though wage garnishment can be overwhelming, there exist legal remedies to prevent it.
Communication with Creditors
The simplest way to avoid wage garnishment is to communicate with your creditors. If you are proactive about paying off your debt, even in small installments, creditors are less likely to resort to wage garnishment.
Full Payment
Once wage garnishment has started, the easiest way to stop it is to pay off the debt in full. Of course, this is easier said than done, especially if your financial situation is dire.
Consumer Proposals and Bankruptcy
Filing a consumer proposal or declaring bankruptcy are viable options to stop wage garnishments, but these should be considered as last resorts due to their long-term effects on your credit score. Both options result in a “Stay of Proceedings,” which is protection from creditors that stops them from contacting you, sending demand letters, applying for a judgment, or garnishing your wages or bank account.
However, it is important to note that wage garnishment for child support payments cannot be stopped even with these measures.
Special Considerations
Child Support
If you are behind on child support payments, wage garnishment can be initiated by your ex-spouse through the provincial Maintenance Enforcement Program. This garnishment cannot be stopped by filing a consumer proposal or bankruptcy.
Exceptions
Certain types of income are exempt from garnishment in Canada. These include:
- Employment Insurance.
- Pensions.
- Social Assistance.
- Income Tax Deductions.
- Union Dues.
- Job-related reimbursements.
Seeking Professional Help
If you are struggling with debt and facing the threat of wage garnishment, it is highly recommended to seek professional help. Companies like ours offer free, confidential consultations to help you understand your situation and explore various debt relief strategies.
Final Thoughts
Wage garnishment can be a stressful and complicated process. However, remember that you are not alone. With the right information and assistance, you can navigate through this challenging time and regain control of your finances.
Remember, the primary step to protect your wages in Canada is to communicate proactively with your creditors and make a concerted effort to pay off your debts. However, if you’re already facing wage garnishment, understand your rights, seek professional help, and explore all possible options to halt the process.
