How to stop wage garnishment in Canada

Posted on 16 November 2021

Written by Alan Spergel

A wage garnishment can seem like a terrifying prospect. The idea that a portion of your wages will be deducted by your employer to pay off your debt is hardly the most helpful action when you are wading in debt, unsure of how to repay it. A wage garnishment is a common approach taken by creditors to regain their money. While you may not know what to do when threatened by a wage garnishment, it is possible to stop them. There are two forms of debt relief you can take to stop a wage garnishment with the assistance of a Licensed Insolvency Trustee. In this article, we explain how to stop wage garnishment in Canada.

What is a wage garnishment in Canada?

A wage garnishment is a legal proceeding requested by a creditor to deduct your salary to pay back debts like credit card debt, tax debt, or child support. If you find yourself falling behind on debt repayments, your creditor has the right to go to the court in Canada and request garnishment against you. If granted, your employer must then send up to half of your wages to your creditors in line with provincial law, like the Ontario Wages Act. This goes towards any overdue debts you have. Before a wage garnishment can go ahead, your creditor must inform you by sharing a garnishment order with you first. Once you receive this, you can dispute or repay the full amount of your debt. The time period for which you can do so varies by province, although in Ontario you have three weeks.

Who can file a wage garnishment?

Any creditor that is owed unpaid debts can gain a wage garnishment in Canada. This is inclusive of private lenders, payday loan lenders, credit card companies, the Court, collection agencies, and the Canada Revenue Agency (CRA). Most creditors will need to go to court to get a judgment and a Garnishment Order, although certain creditors like the CRA can gain one without. A wage garnishment may not just be for your employer. Creditors or collection agencies can also serve a wage garnishment to your bank to seize money directly from your account at source.

When can a wage garnishment be obtained?

A creditor or collection agency will not obtain a wage garnishment as soon as you miss one payment. Instead, they will likely go through the process of obtaining a wage garnishment after a period of missing payments. They may also have demanded payment via written notice and tried to discuss a repayment plan with you on the phone. If they are still not receiving any payment or an attempt by you to repay your debts, they are well within their rights to go to the court. First of all, they may be granted a summons to see if you have any assets for seizure. If you do not, the creditor may then try to obtain a wage garnishment against you.

How much can your wages be garnished?

if you are employed, there is a limit on the amount that can be deducted as part of a wage garnishment. This varies depending on your province of residence. In certain provinces, like British Columbia for example, the rules of wage garnishment are simple – a creditor can deduct a maximum of 30% from your wages. In other provinces like Alberta, you are able to keep the first $800 of your monthly net income. Creditors may then garnish up to 50% of your income between $800 and $2,400, and then 100% of any monthly net income over $2,400. These rules are different if you owe the Canada Revenue Agency, if you are self-employed, or if you owe child support or alimony under a court order.

How to stop a wage garnishment

Generally speaking, there are three key ways to stop wage garnishment in Canada. No matter how much you are being hassled by creditors or collection agencies, there is always a way to stop a wage garnishment. This can be at any stage of the wage garnishment process. You should first speak to a reputable Licensed Insolvency Trustee for support throughout the process.

Negotiate with your creditor

This may not be possible in all cases and depends on the circumstances for your debt. If you can, as soon as you receive notice of a garnishment order, you should contact your creditor. They may allow you to negotiate repayment terms, potentially removing the wage garnishment if you can repay your debt. This could work well for both parties if you are able to avoid further action. Your creditor may expect interest payments on top of the debt owed. An important point to note about this method is that there is no guarantee your creditor will want to negotiate. If you do come to an arrangement, it is important to capture the agreement in writing for both parties to refer back to. As it is not a legal, formal agreement, you do need to be wary.

File a consumer proposal

One way to know how to stop wage garnishment in Canada is with a consumer proposal. A consumer proposal is a legal form of debt relief in Canada and a bankruptcy alternative that reduces your debt by up to 80%. Filed by a Licensed Insolvency Trustee, it is the process of agreeing an affordable monthly payment with your creditors. Once they agree, the remaining amount of debt is cleared. There are a number of advantages of a consumer proposal, including being able to keep your assets, and a stay of proceedings. A stay of proceedings is automatically generated when you file a consumer proposal, and means that creditors and collection agencies are legally no longer able to contact you or pursue legal action against you. It will therefore stop a wage garnishment. At Spergel, unlike other debt relief firms, you will be assigned your own Licensed Insolvency Trustee to walk you through the process of filing a consumer proposal, instead of being passed from person to person.

File bankruptcy

Bankruptcy offers many Canadians a fresh financial future and is also a way to stop wage garnishment. Bankruptcy is the legal process of clearing any overwhelming debts by assigning any non-exempt assets to a Licensed Insolvency Trustee. This is in exchange for complete clearance of any unsecured debt you have. A stay of proceedings will also be triggered, putting an immediately stop to wage garnishment and preventing creditors from contacting you and permanently ending collection calls. There are a number of advantages of bankruptcy that can help you to move on with your life. Each Canadian province has its own rules on which assets you may or may not keep. At Spergel, our trustees will be with you to walk you through each step of the bankruptcy process. The sooner you file bankruptcy, the sooner you can stop wage garnishment.

If you need more information on how to stop wage garnishment in Canada, book a free consultation with Spergel. Our reputable Licensed Insolvency Trustees have dealt with wage garnishment for years, and we can advise you on the best form of debt relief for you. We can help you to begin a fresh financial future, free from the anxiety of debt or having your wages deducted.

Alan Spergel

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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