Wage Garnishments: What Type of Income Can be Garnished?
What Income Can Be Garnished?
What is a wage garnishment?
Before looking into the type of income that can be garnished and the maximum amount, let’s first identify exactly what wage garnishment is.
To put it simply, a wage garnishment is an order that’s given by the court that allows a creditor that’s owed money to intercept a certain percentage of an employee’s earnings on every single paycheque until they receive all of the money that they are owed.
The most common reasons why wages are garnished are due to money that’s owed on student loans, taxes and child support.
It’s important to realize that there are different garnishment rules depending on the type of debt that you have – and depending on the province that you’re in there may be various legal limits on the maximum amount to be owed.
In order to garnishee the wages from you, the creditor (or creditors) in question have to file a lawsuit against you, obtain a judgement from the court and complete an application to access the money that’s owed.
Although it will typically be paid directly to the court (instead of the creditor) the exception is if the Canada Revenue Agency (CRA) garnishee your wages.
In this case, they will not require a court order. A similar situation will be faced when a debtor owes money to a credit union.
Signing an assignment of wages agreement at the start of the process, if they find themselves in debt the union will not need to obtain a court order.
At what stage are wages garnished?
You might be wondering exactly when your wages will be garnished.
And unfortunately, there is no concrete answer.
It’s purely done on a case by case basis – meaning that some creditors might try to garnish your wages before others.
Also, creditors don’t always garnish wages even if the debtors that owe them money stop making their payments.
Typically, however, it will take a significant amount of time before your creditor will take action.
That’s not to say, however, that you shouldn’t be aware of how to stop wage garnishment in its tracks and that you shouldn’t ensure that you have a handle on your finances from the get-go.
When they file for wage garnishment, you or your employer/bank will receive a notice from the court stating the request.
The process will then begin from 5 to 30 days afterwards.
What type of income can be garnished?
One of the first questions that you might have surrounding this process, is what type of income can be garnished.
And although there are a lot of confusing and contradicting answers out there, it’s vital to find accurate information.
Benefit overpayments, tax arrears and child/spousal support orders can be withheld under a creditor garnishment order along with various forms of wages.
However, the majority of forms of income can not.
When wages are garnished, it could include any money that you’ve earned from your employer, whether you’re a salaried worker, you work for hours at a time or you’re paid per unit you manufacture.
Here are a few other examples of types of income and whether they can be garnished or not:
As the garnishing of retirement income is not mentioned within the Canada Pension Plan Act, it’s fair to say that there is no legislation allowing a creditor to garnish the money that you receive from it.
Similarly, a typical creditor will not be able to obtain the Guaranteed Income Supplement or similar income from your Old Age Security (OAS).
That’s not to say that this income is 100% protected from creditors altogether, however.
There are particular exceptions where it can be affected.
- When the pension is placed within an account that you owe money too (banks can seize the money and take it as payment);
- When the CRA garnish your wages (as aforementioned they don’t need a court order for this);
- If you’re overpaid on social assistance or income security;
- If you owe money in spousal/child support arrears.
This will depend on the province that you’re within.
For example, in Ontario and under the Ontario Disability Support Program (ODSP) income support that you receive can not be garnished.
Whereas if you receive the money directly from a disability plan provided by your employer can be garnished as it’s seen to be instead of wages.
If you receive a refund for tax that you’ve paid, the typical creditor will not be able to garnish this money from you.
However, specific agencies run by the government, such as Student Loans or the CRA can.
Despite typical lenders not being able to legally garnish these wages, they can instead request for your bank account to be frozen.
They will then be able to obtain a judicial order, allowing them to seize the funds (if they are within your account).
This is one of the main types that can be garnished.
Because it’s considered to be a wage (as you receive it once you are made redundant) it can legally be seized by your creditors if need be.
How much can be garnished from wage garnishment?
The amount of money that’s garnished will depend on the province you’re within and can be increased or decreased by the judge.
However, typically a wage garnishment order can seize up to 50% of your wages.
When looking at provinces in particular, in Ontario as employees are protected by the Ontario Wages Act creditors can typically only garnish up to 20% of your wages.
However, as the CRA isn’t bound by this act, they can take up to 50% of your wages.
Similarly, in the case that you owe money due to child or spousal support, you can expect for up to 50% of your wages to be garnished.
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If you’re looking to find out more information about wage garnishments, the type of income that can be garnished, how to stop wage garnishments or have any other queries surrounding the topic, don’t hesitate to get in contact with one of our licensed and local trustees today.