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Wage garnishment in Ontario: what you need to know

Posted on 30 March 2022

Written by Alan Spergel

If you are struggling with unmanageable debt in Ontario, you are not alone. With the rising cost of living in expensive cities like Toronto and Ottawa, debt is only becoming more common. In fact, in 2021, the average Ontario consumer owed $27,523 excluding mortgages. Consumer debt encompasses everything from personal loans to payday loans to car loans to student loans and credit card debt. Perhaps you are struggling so much that you are ignoring any debt repayments you owe, and even collection calls. One thing to be aware of, however, is that there are further consequences to ignoring these notices of action. If you do not pay your debts, taxes or child support, your creditors are legally able to take you to court to obtain a wage garnishment in Ontario. In this article, we explain all you need to know about wage garnishment in Ontario, including how to stop one and pursue a life free from debt.

What is a wage garnishment in Ontario?

In Canada, a wage garnishment is a legal order from a creditor to have your wages deducted at source from your employer to go towards repaying your debt. This happens when you are overdue on debt repayments, whether it is credit card debt, tax debt, payday loans, or other consumer debt. A wage garnishment is a legal enforcement for your employer to send up to 50% of your paycheque to your creditors until the debt is repaid in full, or you stop the wage garnishment. If you do not have an employer, and are perhaps self-employed instead, a similar action can be arranged directly from your bank account instead. Before your wages are deducted, creditors must legally share a legal garnishment order with you to give you notice of their intention, unless the creditor is the Canada Revenue Agency. At this stage, you can dispute the claim or repay the debt in full if you can – for a wage garnishment in Ontario, you have three weeks to do so. At Spergel, we understand how stressful and frustrating it can be to undergo a wage garnishment. After all, having your wages deducted is not going to help you when you are already overwhelmed with debt. The good news is that it is possible to stop a wage garnishment in Ontario. As soon as you receive a legal garnishment order, you should reach out to Spergel. We will help you to stop a wage garnishment, and ensure your full income is restored.

Who can request a wage garnishment in Ontario?

Any creditor you owe debt to can request a wage garnishment in Ontario. This can be for any unpaid debt including credit card debt, tax debt, student loan debt, outstanding bills, and so on. These creditors can request a court order against you for a wage garnishment in order to regain the payments they are owed. If granted, this court order means your employer is obligated to send up to 20% of your wages to your creditors, or 50% for overdue child support payments. As well as the inconvenience of having your wages deducted, it can also affect your relationship with your employer. For some types of debt, there are exceptions on creditors who do not need to go to court to request a wage garnishment:

  • The Canada Revenue Agency – they can begin a wage garnishment without a court order in place
  • A Credit Union – if you have given an assignment of wages, they can share a copy of your assignment directly with your employer
  • A payday loan company – if you have signed a voluntary wage assignment, they can notify your employer without gaining a court order beforehand

What specific rules are there for a wage garnishment in Ontario?

The rules surrounding a wage garnishment can vary slightly from province to province in Canada. There are some specific rules that apply for Ontario, which you should be aware of when it comes to wage garnishment in Ontario. In line with the Ontario Wages Act, a creditor can only garnish up to 20% of your wages, or up to 50% for child support. The court will ultimately make this decision based on your unique financial circumstances. Your employer legally cannot end your employment or demote you if they receive a wage garnishment order for you. As well as creditors, collection agencies can also request a wage garnishment in Ontario, provided they file a lawsuit for a judgement order beforehand. Finally, while payday loan companies can request a wage garnishment, most payday loan lenders prefer to have a voluntary payroll deduction in place as it is less hassle for them. This is often added into the contract when you initially borrow a payday loan from a lender. There are some differences between a voluntary wage assignment and a wage garnishment in Ontario, however. With a voluntary wage assignment, you can revoke your permission at any time to stop your wages being deducted. This is not the case with a wage garnishment.

How can I stop a wage garnishment in Ontario?

There are a few ways you can stop a wage garnishment. First of all, you can attempt to repay the debt in full. If this is not possible, perhaps you can work to negotiate with your creditor to see if they will stop it, although this is unlikely. Even if your wages are already being deducted, there are still ways to stop a wage garnishment in Ontario. First of all, you must speak to a Licensed Insolvency Trustee. They are the only professionals in Canada legally able to file the forms of debt relief that will end a wage garnishment, a consumer proposal or bankruptcy. The sooner you speak to a trustee, the sooner the problem will be resolved. As well as addressing any debt you have by reducing or clearing it, both forms of debt relief will stop a wage garnishment. Filing either a consumer proposal or bankruptcy triggers a stay of proceedings, offering protection from your creditors and immediately stopping a wage garnishment. This even applies to the Canada Revenue Agency. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through the process of stopping a wage garnishment. This is instead of being passed from person to person. Often, we can send a court order to your employee to stop wage garnishment in a number of hours.

The sooner you address your wage garnishment in Ontario, the less money you will lose. Book a free consultation with a Licensed Insolvency Trustee at Spergel today – we have offices across Ontario. We will review your financial situation and to discuss your options, working quickly to stop a wage garnishment. Get in touch today to begin clearing your debt – you owe it to yourself.

Alan Spergel

Alan Spergel is the founder and President of Spergel. A leader in our industry, he is also a former chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) and has served on Canada's Superintendent of Bankruptcy Management Board. He actively supports multiple charities, ensuring that Spergel gives back to our communities and has recently been appointed as Chairman of the Board of the Humber River Hospital Foundation. Outside of the boardroom, you can find Alan playing golf, tennis, or skiing and enjoying quality time with his grandchildren.

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