Wage Garnishment in Ontario & How To Stop It

Understanding Wage Garnishment in Ontario and Ways to Halt It

Facing challenges in maintaining your household’s financial equilibrium due to wage garnishment in Ontario? Are the constant deductions from your hard-earned salary causing distress? This article will guide you through understanding wage garnishment and how to put an end to it.

A Glimpse at Wage Garnishment

In Ontario, if one fails to meet the repayment terms of a loan, the lender has the legal authority to directly extract funds from the debtor’s paycheck, a process known as wage garnishment. Lenders typically resort to this measure if the borrower defaults on their loan repayments or ignores constant reminders to make payments.

The experience of wage garnishment can be extremely unsettling. Imagine working diligently only to have a chunk of your earnings directly transferred to your lender’s bank account. Thus, wage garnishment can significantly strain your budget and add to your stress, especially in Ontario, where living costs are continually rising.

Halting Wage Garnishment in Ontario

Wage garnishment can undoubtedly put immense financial pressure on your household. However, the right debt relief program can help you stop wage garnishment, regardless of your location in Ontario.

At Bankruptcy Canada, we empathize with the distress that wage garnishment can cause. We have successfully assisted countless Ontario residents in stopping court-ordered wage garnishments and achieving financial liberation.

Our team of Licensed Insolvency Trustees can evaluate your circumstances and recommend the best course of action to prevent creditors from seizing your earnings. Additionally, they can assist in restructuring your debt and provide prudent advice to restore your financial health. If you’re ready to explore your options, get in touch with us for a free, confidential consultation.

The Process of Wage Garnishment in Ontario

Lenders can legally seize your wages in Ontario if you fail to repay your debt. A wage garnishment order mandates your employer to directly transfer a portion of your salary to your creditor. The process continues until the creditor recovers the entire outstanding amount.

Who Can Implement Wage Garnishment in Ontario?

Several commercial lenders in Ontario have the legal authority to implement wage garnishment, including:

  • Credit card companies
  • Banks
  • Private lenders
  • Government agencies
  • Collection agencies
  • Payday loan lenders
  • Canada Revenue Agency (CRA)

The Procedure of Claiming Wage Garnishment

To initiate wage garnishment, your creditor needs to file a Statement of Claim and bring the motion to court. If successful, they obtain a judgment against you and receive a wage garnishment order. As the debtor, you have 21 days to dispute the debt or notify the lender of an error on your account. If you fail to respond with a defense, the court will grant the Garnishment Order to your creditor.

However, there are exceptions to this general rule. For instance, if you owe money to the CRA and either cannot or refuse to pay, the government agency can lawfully seize your wages without court permission. They simply need to request your employer to withhold money from your paycheck and remit it to CRA, which they do by sending your employer a legal requirement to pay (RTP) letter.

Similarly, if you’ve given prior consent to a credit union to garnish your wages, they don’t need to obtain a Garnishment Order from the court. They only need to demonstrate that you’ve provided an assignment of your wages.

The Extent of Wage Garnishment in Ontario

In Ontario, a commercial creditor can garnish up to 20% of your gross income. However, the court considers your budget, income, expenses, and other financial obligations before determining the amount that the creditor can seize.

Exemptions from Wage Garnishment in Ontario

Certain income sources in Ontario are exempt from wage garnishment orders:

  • Canada Pension Plan, Old Age Security, Guaranteed Income Supplement, and Employment income
  • Union membership dues
  • Basic financial assistance (such as welfare payments)
  • Child support payments

However, unlike other commercial creditors, the CRA has the right to seize certain government benefits, like CPP and OAS payments. In such cases, they issue a set-off order, and any payments the federal government owes you are used to settle your CRA debt.

Strategies to Halt Wage Garnishment in Ontario

If you wish to stop wage garnishment, you have four options:

  • Settle your debt
  • Negotiate with your creditor
  • File a consumer proposal
  • File for bankruptcy

Settling Your Debt

The most straightforward way to halt wage garnishment is by repaying the outstanding amount to your creditor. You can quickly obtain the required funds by securing another loan and using it to settle your balance. This will prompt your creditor to cancel the wage garnishment.

However, this is not a permanent solution as it merely shifts the debt from one lender to another. You now have a new loan – and a new creditor who can also sue you and garnish your wages.

Negotiating with Your Creditors

Some lenders may be open to negotiating a new payment plan, reducing interest charges, or waiving late fees. However, if your wages are already being garnished, it’s likely too late to negotiate. Your lender may have lost faith in your ability to repay your debt. Even if you manage to negotiate an agreement, the terms aren’t legally binding, and your creditor can still garnish your wages if they wish to.

Filing a Consumer Proposal

A consumer proposal is a federal insolvency program designed for borrowers struggling with debt payments. Under the guidance of a Licensed Insolvency Trustee, you can negotiate a new repayment plan with your creditors. You may be able to reduce up to 80% of your unsecured debt, leaving you with a more manageable balance to repay.

Moreover, filing a consumer proposal offers certain legal protections, including stopping wage garnishments. Once you initiate the program, creditors can no longer garnish your wages.

Filing for Bankruptcy

Bankruptcy is another federal insolvency program. It allows you to eliminate up to 100% of your unsecured debt, giving you a fresh start to rebuild your finances. Like a consumer proposal, filing for bankruptcy also legally stops wage garnishments.

However, these benefits come with a cost: you’ll have to surrender a significant portion of your assets to your creditors.

Our Recommendation for Stopping Wage Garnishment

We recommend filing a consumer proposal to stop wage garnishment in Ontario. It’s also an excellent way to discharge a substantial part of your debt and start fresh with a new, manageable payment schedule. If you’re unsure about how a consumer proposal works, contact us. We can guide you through the process.

By qualifying and filing a consumer proposal, you can:

  • Halt wage garnishments
  • End collection calls
  • Retain your assets
  • Pay off all your debt at a fraction of the total in five years or less

While bankruptcy is also an option, a consumer proposal can provide the debt relief you need to get back on track financially, allowing you to avoid the more severe consequences of bankruptcy.

Ready to put an end to the wage garnishment that’s been causing you distress? Then contact us today for a free, no-obligation consultation. A Licensed Insolvency Trustee can review your situation and advise whether filing a consumer proposal or bankruptcy is the best option for you.

Halt Wage Garnishment with a Consumer Proposal

Consider consolidating your debt with a Consumer Proposal. Our team of Licensed Insolvency Trustees will assist you every step of the way.

Benefits of a Consumer Proposal

A Consumer Proposal is a debt relief program federally regulated by the Canadian government to assist citizens in avoiding bankruptcy. Learn more. Collection calls and wage garnishment will halt immediately. You will repay less than the total owed, often 70-80% less. Payments are based on your affordability, spread over five years, and are interest-free and penalty-free. Bankruptcy Canada’s federally regulated fees are included in your monthly payments, meaning no additional charges to worry about.

Did you know about the Canadian debt relief program federally regulated by the Government to help citizens avoid bankruptcy? This program can only be administered by a Licensed Insolvency Trustee (LIT).

If you’re struggling with monthly payments and relentless creditor calls, we can help.

You are not alone in this.

It’s going to be okay.
Schedule your free consultation today. We’ll handle the rest.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.