Unveiling What Income Can be Garnisheed
Wage garnishments can cause a significant financial strain. This is a common concern among individuals finding themselves in a debt situation. Understanding the ins and outs of wage garnishments, specifically, what income can be garnisheed, is crucial. This article aims to shed light on the important facets of wage garnishments and what income can be seized under a garnishment order.
Understanding Wage Garnishments
Wage garnishment is a legal process where a portion of a person’s earnings is withheld by his/her employer for the repayment of a debt. This is usually the last resort of a creditor after exhausting all other methods of debt collection.
Common Questions Regarding Wage Garnishments
When faced with a garnishment order, a few questions frequently arise:
- Which income sources can my creditors garnish?
- What percentage of my income can they garnish?
- How can I stop the garnishment?
In the following sections, we will delve into these questions and provide comprehensive answers.
Types of Income Subject to Garnishment
Generally, all forms of wages can be subject to a garnishment order. However, most other forms of income cannot be seized, except under specific circumstances related to child and spousal support orders, or by the Canada Revenue Agency (CRA) for tax arrears and benefit overpayments.
Understanding Garnishable Wages
For garnishment purposes, wages can encompass any payment you receive from an employer for working. This includes hourly wages, salary, or piecework compensation. Let’s look at some specific examples:
Severance pay: Yes, severance pay or termination pay can be garnisheed as it is considered wages, arising as a result of your employment.
Ontario Works benefits: Basic financial assistance under the Ontario Works Act is not subject to garnishment. An exception is support orders under the Family Responsibility and Support Arrears Enforcement Act.
Disability pension: If your disability income is from a company disability plan, it can be garnisheed as it replaces lost wages. However, income support under the Ontario Disability Support Program (ODSP) Act is not subject to garnishment, except for support orders.
Retirement income: Typically, a creditor cannot garnishee your retirement pension or Old Age Security (OAS) with certain exceptions that we’ll discuss later.
Tax refund: Only a government agency like the CRA, Family Responsibility Office, Student Loans etc. can garnish your tax refund directly. Non-government or private lenders do not have the legal ability to garnish your tax refund.
How Much of Your Wages Can Be Garnisheed?
The Ontario Wages Act dictates that a judgement creditor can garnishee up to 20% of your net wages (wages after statutory deductions for taxes, CPP, and Employment Insurance). However, a support order for child support or spousal support can garnishee up to 50% of your wages. The CRA is not bound by the provincial Wages Act, and therefore can theoretically seize up to 100% of your wages.
Basic Income and Wage Garnishments
In 2017, the Ontario government launched a pilot project to test basic income. This project offers participants a set amount of money each month. However, it remains unclear whether this income can be garnisheed.
How to Stop Wage Garnishments
To halt a wage garnishment, one can consider paying off the debt in full or negotiating with the creditor. However, if these are not viable options, seeking assistance from a Licensed Insolvency Trustee is recommended. They can provide advice and propose solutions such as filing for personal bankruptcy or a consumer proposal.
The Role of Licensed Insolvency Trustees
Licensed Insolvency Trustees are federally regulated professionals who provide advice and services to individuals and businesses with financial difficulties. They can explain your options and guide you through the process of stopping wage garnishments.
Final Thoughts
Understanding wage garnishments, especially what income can be garnisheed, is crucial for anyone facing financial difficulties. If you are under a garnishment order or fear one may be imminent, it’s advisable to consult with a Licensed Insolvency Trustee. They can help you navigate the complex world of wage garnishments and assist in finding the best solution to your financial struggles.
