There Is No Debtor Prison
Is There a Debtor Prison in Canada?
It’s essential to get on top of the facts about being in debt.
Often, rumor and myth cause us more stress than the reality of our circumstances.
It’s normal to get worried about money troubles, but the truth is, listening to everything you’re likely to hear isn’t the best use of your time – and it can cause you a lot of sleepless nights you don’t need to be having.
Sometimes at BankruptcyCanada, we help people who’ve almost worried themselves sick about going to jail over their debt.
There is no debtor prison – period.
This article is designed to walk you through the reality of your situation – but it’s crucial you know you’re just never going to prison because your finances have gotten on top of you.
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Enforcement of a Judgment
We’re going to try and bust the debtor prison myth here by taking a look at some of the court judgements, attachments and orders than can impact you when you’re in debt.
When you’re unable to repay a debt, creditors do have the right to take measures.
They might garnish your earnings or get an execution order to seize your property or possessions.
Creditors may choose to garnish your wages in an effort to recover a debt.
That’s when they obtain a court order which compels your employer to withhold a percentage of your earnings.
The money initially gets paid to a trust account run by the court.
If your creditors are queuing up, the court will either handle them one after the other or divide the monies deducted each time between them.
You’ll receive notice from the court every time a creditor applies to garnish your earnings – and you’ll also get time to assess the situation and respond.
If this happens to you, it’s possible to plead for a reduction of the percentage.
It’s also possible to apply for cancellation of the garnishment where you can prove you’re addressing the debt in some other productive way.
When you’re affected by wage garnishment, it’s vital to talk with a local licensed insolvency trustee and figure out your best move.
One of the primary concerns we hear from debtors about garnishments is about their employment status.
While it’s important to address your issues quickly, provincial regulations in Canada offer protection in terms of dismissal from employment because of garnishment.
You might also qualify as an exempt person – getting advice is by far the wisest option here.
Bank Account Garnishment
Bank account garnishments often get used if a debtor has money in the bank but no other means to pay.
The most notable difference between a wage and bank account garnishment is that you can lose 100% of your bank balance this way.
Again, a court order is required to instigate a bank account garnishment.
Don’t listen to debt collector ‘advice’ – talk with a licensed insolvency trustee
The one thing you must not do if you’re subject to attempts to recoup debts is listening to ‘advice’ from debt collection agencies.
A lot of the time, they’ll claim your social security payments or old-age pension may be subject to garnishment – but, this isn’t the case at all, and what you’ll be hearing amounts to scare tactics.
Such income is exempt from garnishment under law.
There are also strict limits on seized wage percentage – even before you apply for a reduction.
We can’t stress strongly enough here that a licensed insolvency trustee is your best source of advice if you find yourself in this or any similar situation.
Demand on Third Party
The federal government may issue such a demand because of debts like employment insurance benefits overpayments and tax arrears.
The demand is a bit like a garnishment – except the federal government don’t need to go to court to get one – and it can take a more significant proportion of your earnings too.
Family Court Garnishments
The family court is another institution that can take a larger share of your earnings than a standard creditor.
It’s imperative to address a family court garnishment quickly because you can find yourself losing up to half of your gross income over a period to recover a debt.
You’ll need to file an appeal with the courts and get a hearing if this happens – where the judge will decide whether or not to reduce the garnishment percentage.
Creditors who successfully obtain a judgement have rights to recoup debts by seizing your property and selling it.
That’s known legally as the execution of a debtor’s property – and creditors can take stuff so long as you haven’t got a mortgage on it, or there are no liens attached.
There are some exemptions regarding execution orders.
You Won’t Go To Jail Over Your Debts…..
…but you should get immediate advice – whether or not you’re subject to an execution order or garnishment.
Talking to a licensed insolvency trustee can prevent the need for creditors to take drastic action.
Often, all that’s required is a payment plan, and you can stay in control of your finances and negate the need for courts to have contact with your employer too.
Call our friendly team today on (877) 879-4770 (24/7) and together, we’ll take your debt situation back.
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