Wage Garnishment in Canada
If you are being threatened or are currently undergoing a wage garnishment in Canada, it can be an extremely stressful experience. The most important thing to know is that a wage garnishment can be stopped.
A wage garnishment is a legal order requested by a creditor for your employer to deduct your wages to pay back your debts. The primary ways to stop a wage garnishment are filing a consumer proposal or bankruptcy, which is why it is important to speak to an experienced Licensed Insolvency Trustee quickly if you are being threatened with a wage garnishment.
What is a wage garnishment in Canada?
If you are overdue on debt payments including credit cards, taxes or maintenance payments, your creditor has the legal right to go to court and ask for a wage garnishment against you. In Canada, a wage garnishment is a legal enforcement for your employer to send up to half of your wages to your creditors to go towards your overdue debts. It is possible for a similar action to be requested from your bank account. Before a creditor is able to take your pay away, by law they must present you with a legal garnishment order. It is possible to dispute the claim, or to repay the debt in full, and in Ontario you have three weeks to do so.
Who can request a wage garnishment?
In Canada, a wage garnishment can be requested from any creditor to whom you owe debts. Wage garnishments are most often requested by the following:
- Debt collection agencies
- The Canada Revenue Agency
- The Court
- Credit card companies
- Payday loan lenders
In order to receive a wage garnishment, a creditor must file a Statement of Claim. In Ontario, you would then have three weeks to respond to the claim to dispute the wage garnishment. If you do nothing, the court will assume you agree to the debt and a wage garnishment will begin. This is why if you receive a Statement of Claim, it is so important to get professional advice fast. In fact, the Canada Revenue Agency are even able to go ahead and garnish your wages without having to take you to court beforehand.
How much can be garnished from your wages?
The most a creditor can garnish from your wages under the Ontario Wages Act is 20% of your gross wage to pay towards debts, or up to 50% for child support. It is a good to idea to try and negotiate with your creditor before your employer receives a wage garnishment order to prevent this deduction from your paycheque.
What happens when you are faced with a wage garnishment?
Once your employer receives a garnishment order, they are legally mandated to make deductions from your paycheque until your debt is paid in full or until they receive a legal notice to stop. It is crucial to take immediate action before your paycheque is docked. As a creditor has by this point taken you to court, they are serious about receiving what they are owed and will unlikely stop the wage garnishment easily. That said, it is more than possible to stop a wage garnishment. The best thing for you to do is to contact an experienced Licensed Insolvency Trustee who is able to take the appropriate legal action to stop a wage garnishment.
How to stop a wage garnishment
If a debt settlement or a negotiation with creditors is not an option, there are two primary ways to stop a wage garnishment under the Bankruptcy and Insolvency Act – filing a consumer proposal or filing bankruptcy. Both of these options can stop a wage garnishment from institutes like banks, credit card companies, payday loan companies, and even the Canada Revenue Agency. The longer you wait to stop a wage garnishment, the more of your salary that you will lose.
A consumer proposal is legally required to be administered by a Licensed Insolvency Trustee. Your trustee will work with you to determine an affordable monthly repayment, and will then negotiate with your creditors to agree a reduced debt amount. Typically, filing a consumer proposal reduces your overall debt by up to 80%. Most importantly, a stay of proceedings is put in place, meaning wage garnishments must stop, and creditors are unable to contact you.
Filing bankruptcy is the process of assigning any non-exempt assets over to a Licensed Insolvency Trustee. They will then use these assets to repay some of your debts to your creditors, in exchange for full clearance of your debts and a fresh financial start for you. Once again, a stay of proceedings is generated to stop your wage garnishment.
It is so important to act quickly if you are threatened with a wage garnishment by reaching out to an experienced Licensed Insolvency Trustee. The longer the problem is left, the longer it will take to get sorted and the more of your paycheque that will be taken. At Spergel, we have over thirty years’ experience of helping Canadians gain debt relief, and we work extremely quickly to help stop your wage garnishment and get you on the road to financial freedom.
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