Having your wages reduced due to a wage garnishment is one of the worst things that can happen, especially when you’re already having a hard time making ends meet. It can significantly impact your financial stability and make it even more challenging to meet your basic needs. Understanding who can garnish your wages, how wage garnishment works, how much they can take, and how to stop it from happening can help you get out of a difficult situation.
What is Wage Garnishment?
A wage garnishment’s purpose is to allow a creditor to recover the money a borrower owes. The debtor’s employer deducts money directly from their paycheque, which the creditors use to pay down the debt. Generally, it’s used as a last resort by the creditor when they have exhausted all other options to collect payment.
Who can garnish your wages?
Any creditor can garnish your wages. The list of common creditors includes:
- The Canada Revenue Agency (CRA) for unpaid taxes.
- Credit card companies.
- Credit Unions.
- Payday loan companies.
- A debt collection agency.
- Your former spouse for child support or alimony.
There are several reasons for wage garnishment. First, your debts have been unpaid for at least three months or more. Secondly, the money you owe isn’t secured by an asset your creditor can seize and sell. Finally, the creditor has made multiple attempts to collect but has been unable to. This can result from you not having the money to pay the debt or not cooperating with the creditor.
How wage garnishment works
So, what are Canada’s garnishment rules? Understanding these laws can empower you to avoid having your wages garnished or help you stop wage garnishment. Knowing your legal rights and laws can give you a sense of control and reduce your vulnerability in this situation.
Before a creditor takes steps to garnish wages, they typically:
- Attempt to call you to make payment arrangements.
- Send a demand letter for payment.
- Attempt to set up a repayment plan with you.
If they fail to recover the money you owe, they may proceed to garnish your wages. Provincial laws govern the process of wage garnishment, which are:
- They must file a lawsuit.
- The court must award a judgment against you to the creditor.
- The court grants a garnishing order.
This is the standard process but exceptions apply. One exception is the CRA. If you owe taxes, they can garnish your wages without following the usual process.
Another exception is if you have signed an “Assignment of Wages” with a credit union. The “Assignment of Wages” allows the credit union to garnish wages without a court order. The reason is that when you sign the agreement, you consent to allow the credit union to garnish your wages if you don’t pay the debts you have with them.
How much can they take?
The amount of employee wages the creditor can garnish depends on the type of creditor and where you live. Garnishment laws differ between provinces and territories. Knowing the laws about wage garnishment in your province or territory is essential. Each sets its own rules, so they may differ from one another.
Creditors can generally garnish between 30%-50% of your wages. There are typically exemptions that apply to leave you with a minimum amount for yourself. Additional exemptions may apply to dependent adults such as spouses, common-law partners, or children.
- CRA can garnish a maximum for 50% of your earnings, and 100% of other earning income through contractual work.
- Collection agencies and creditors have to get a court order to garnish wages. Garnishment limits depend on province, but are typically 20%-30% up to a max of 50%.
- Banks, Loan lenders, and other commercial creditors can garnish up to 20% but a maximum of 50% of child support payments, depending on court orders.
- For Payday lenders, you will often sign an agreement when requesting a loan which permits the lender to allow them to deduct a specified amount of your wages to be remitted to them. You should always read through the papers and be aware of such agreements before you sign.
Wage garnishment laws affect self-employed people differently. Since a self-employed person may not have a payroll department or regular wages to deduct, the creditor may garnish the money in their bank account instead.
How to stop wage garnishment
If your creditors are contacting you because of missed payments, it’s crucial not to ignore them. Taking a proactive approach, such as making payment arrangements, can be a powerful tool in preventing garnishment. This can help you avoid a judgment against you that will lead to having your wages garnished, making you feel more in control and less helpless in this situation.
If that’s not an option because you’ve received a garnishment notice, you can stop the process. However, you need a legal order to stop this from happening. You can get one in Canada by filing a Consumer Proposal or filing for Bankruptcy. Contact a Licensed Insolvency Trustee to review your situation and find the best solution for you.
Once you file for either a Consumer Proposal or Bankruptcy, a stay of proceedings is issued immediately, and all Collection calls and wage garnishment should stop – Creditors can no longer garnish your wages.
How We Can Help
If your wages are being garnished and you need relief, we can help. At Allan Marshall and Associates, we’ve been helping people solve their debt problems for over 40 years. Book a free consultation with us online or by calling 1-888-371-8900. You’ll be pleased with how quickly we can help with wage garnishment and deal with your debts.
