If you’re facing looming debts in Alberta then you may be wondering what practical options you have available to you.
Some people might consider a debt consolidation loan while others may be looking at claiming bankruptcy.
There are a number of different solutions to help you cope with outstanding debts, but if you’re still employed and are having difficulty coping with repayments then your creditors may push to have your wages garnished.
What is wage garnishment?
Wage garnishment essentially allows your creditor or creditors to take money directly from your paycheque before you are even paid.
Creditors will typically only resort to wage garnishment if you’re unable to make payments for a certain amount of time.
Alternatively, you may be forced into wage garnishment if you’re unable to reach an arrangement on other repayment options, such as a debt consolidation loan.
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Wage garnishment typically happens when you’re unable to service your own debts.
For instance, if your creditor notices that you’re not making payments to your debts, then they might turn to the courts to begin garnishing your wages.
If a court grants them access to do so, the process will begin and they’ll be given the approval to seize certain assets from you such as a car or house.
If there are no assets that they can seize to repay your debts, your creditor might approach your employer with a writ of seizure and start garnishing your wages.
The wage garnishment will continue until your debt is paid off in full or you’re able to contact the creditors to reach a different agreement.
What are the laws around wage garnishment?
While it can sound aggressive, there are some laws surrounding wage garnishment to ensure that you’re not being taken advantage of.
Exemption limits
First, there are limits to ensure that a creditor doesn’t take everything from your paycheque.
The first $800 of your monthly salary will go to you and a creditor cannot take this from you.
For the remaining amount, you’ll likely be garnished up to 50% of your monthly salary.
This is calculated after the initial $800.
For example, if you earn $2,000 each month, the first $800 will go to you and the remaining $1,200 will be garnished at 50%, meaning you’ll be paying creditors $600 each month.
Income above $2,400 can be garnished in its entirety.
Dependent laws
The above limits can be increased by $200 for every dependent in the home.
If you have one child that depends on your income, then the first $1,000 will be exempt from garnishment instead of just $800 and you’ll only be garnished for 50% on all earnings below $2,600.
Provincial exceptions
Provincial exemption limits may not apply to everyone.
For example, if you owe money to the Canada Revenue Agency, these limits will not apply.
Self-employed individuals could potentially have up to 100% of their income garnished.
However, most creditors will take a reasonable amount from your income to ensure that it doesn’t completely ruin your financial situation.
This is to ensure that you don’t switch your self-employment so the creditor can continue taking money from you to pay off your debts.
Creditors may also be granted the right to speak to your clients or anyone that owes you money in order to request your garnishment from them instead.
Unemployment
Lastly, if you’re unemployed, your creditor may start garnishing funds straight from your bank account instead of your wages.
Wage garnishment FAQ for employees
How much will be taken from my salary?
There is no upper limit to how much your wages can be garnished.
The only guarantee is that you’ll keep the first $800 of your monthly paycheque.
From there, you’ll likely be garnished 50% up to a salary of $2,400.
Anything above that will likely be garnished at 100%.
What are my rights as an employee?
While wage garnishment can seem like an aggressive way to claim debt payments, you do have a couple of rights to help you reduce some of the stress you might be experiencing.
Creditors can’t garnish your wages unless they have a court order.
The exception to this is if the creditor is a credit union or are the CRA.
Court orders aren’t legally required if your wages are being garnished for student loans, back taxes and child support.
In Alberta, the first $800 of a paycheque is yours and cannot be garnished.
Some pensions, such as the Canada Pension Fund, are completely protected from garnishment.
Your collect also cannot pursue a non-judgement debt where the last payment or acknowledgement of debt is more than six years old.
If you’re interested in learning more about what collectors can and can’t do, we’d suggest taking a look at the official Government of Alberta website.
If you’d prefer to speak to someone and ask questions, then we highly recommend that you contact our specialists at Bankruptcy Canada for a detailed explanation that can help you sort out your debt problems.
Here are some of the things that will restrict collectors:
- Collectors can only contact you between 10 pm and 7 am Alberta time. Attempting to contact you outside of these times can be considered harassment.
- Collectors can’t frequently contact you, your friends, family members or place of employment or else it can be considered a form of harassment.
- You can’t be contacted at your workplace unless you have specifically asked them to do so.
- Collectors cannot threaten you or use intimidating and coercive language to get you to pay.
- Unless they have permissions from you, collectors cannot discuss your debt with anyone but you, the guarantor of the debt, or someone that you have identified in writing as a representative.
- Collectors cannot discuss your debt with a minor.
- Collectors can’t cancel or modify your repayment agreement after you have complied with the terms of the arrangement and your financial situation hasn’t changed. However, if you misrepresent your financial circumstances, the agreement can be cancelled or altered.
- Collectors can’t make more than three unsolicited contacts within seven days. This doesn’t include traditional mail, contacting third parties or mistaken contacts with a third party.
In addition, employers are not allowed to punish you for wage garnishment.
They can’t reduce your hours, retaliate against you or even fire you.
How do I stop my wages from being garnished as an employee?
There are a number of things that you can do to stop your wages from being garnished.
For starters, you’ll need to seek professional financial advice from a Licensed Insolvency Trustee.
These consultations are free and are offered by Bankruptcy Canada to help you deal with garnishments.
You can also contact your creditor directly in order to renegotiate a payment plan.
Some extreme examples of stopping your wages from being garnished include quitting your job, filing a consumer proposal or taking out a loan.
While these are valid ways to stop wage garnishment, we should suggest first contacting your creditor to negotiate a payment plan.
What debts can wage garnishment clear?
Creditors can garnish your wages to pay off debts that include unpaid bills, student loans, back taxes, child support payments, defaulted loans, alimony, family support and credit card debt.
In order to garnish your wages, creditors have to successfully sue you in court to start the process.
However, credit unions and the CRA do not have to go through this process.
Child support, daily support and alimony payments come with wage withholding orders, meaning your ex-spouse doesn’t need to sue you in order to garnish your wages.
Wage garnishment FAQ for employers
What should I do if I’ve received an official notice to garnish an employee’s wages?
You are legally obligated to follow with the demands in the notice.
If your employee owes tax debt, you may be held responsible if you do not garnish the amounts requested.
It’s best you comply with the court order or assignment to avoid issues in the future.
What if my employee asks me to stop garnishing their wages?
You’re obligated to continue garnishing your employee’s wages in full until they have paid off their debts or re-negotiated the garnishment with creditors.
You may give assistance to your employee in the meantime, such as directing them through the negotiation process.
Contact us for more information
At Bankruptcy Canada, we understand how daunting wage garnishment can be for both employees and employers.
So if you’d like to learn more about wage garnishment or are having trouble paying off your debts, consider getting in touch with us today and we’ll set you up with a free consultation to help solve your debt problems.
Having your wages garnished can be frustrating, but with the right help, you’ll be able to overcome your financial struggles and find a solution that suits you and your creditors.
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