Your Path to Debt Freedom
What is a Wage Garnishment?
A wage garnishment is a legal proceeding in which a creditor can legally deduct payments off your wages to pay back taxes, child support, or other debts.
According to the Ontario Wages Act, the most that can be garnished from your wages is 50%.
Who Can File a Wage Garnishment and How Does It Work?
A wage garnishment can be obtained by any creditor that has unpaid debts owing to them, including collection agencies, Canada Revenue Agency, the Court, credit card companies, payday loan lenders, or any other potential creditors.
Generally, the creditor must bring a motion to court to obtain a judgment and a Garnishment Order. However, certain creditors such as CRA do not need such an order.
In Ontario, there are 3 different ways to stop wage garnishments aside from repaying the loan itself.
1. Make a Deal Directly with Your Creditors
If at all possible, making a direct deal with your creditors for repayment is the best option. This can potentially help stay the other courses of action by the creditor and give you a chance to renegotiate a reasonable repayment structure for you and your creditor.
You should remember that if your creditor is already seeking wage garnishment, they could be looking for a repayment schedule that pays off the entire debt owing plus interest.
2. Consumer Proposal
A consumer proposal may be a better option as it allows you to compromise your debts and is a proactive solution. A consumer proposal allows you to offer a percentage of your debts as settlement of your balance owing with your creditors and is usually for an amount less than is owing.
Another benefit of a consumer proposal is that it allows you to customize the terms and payments based on your situation. It is more advantageous than filing bankruptcy because it does not have the same long-term repercussions, such as a shorter path to credit rebuilding and it allows you to keep your assets.
Consumer proposals typically work on a monthly payment structure that cannot exceed a 5-year commitment. After you’ve made your final payment, your debts will have been eliminated.
3. Declare Bankruptcy
Along with giving you a fresh financial start, declaring bankruptcy will stop wage garnishment orders against you.
It is important to know that bankruptcy cannot eliminate all debts, such as student loans, support payments, and court fines, among others.
While you may stand to benefit from declaring bankruptcy, you should be sure to weigh the pros and cons first, such as how it will affect your credit score and which assets you stand to lose.
Bankruptcy is usually the last resort for debtors who have exhausted all other options available to them.
Discussing your options with a Licensed Insolvency Trustee can help you determine which option is best suited to your situation.
Wage Garnishment Options Summary
If you are being subjected to wage garnishment, your first course of action would be to try to reach an agreement directly with your creditor. In most cases, once a wage garnishment has started, negotiating with them may not yield results.
The next best option is to proceed with filing a consumer proposal, which will allow for renegotiation of your debt repayment. This can help you reduce your total debt owing and leave you with one manageable payment a month on behalf of all creditors, making it easier to manage paying down your debt.
Finally, you can file a personal bankruptcy, which will automatically stop any wage garnishment against you.
If you are under pressure regarding a wage garnishment, please contact us at Spergel for stopping wage garnishment now or for advice and support.