Protecting Your Bank Account from Garnishment 

^{By Bromwich+Smith Staff | 989 words | Reading Time: 5 minutes| Date: 2023/12/07}

Having your bank account garnished can be a difficult time for anyone so how do you protect your bank account from garnishment? Garnishment is a legal process allowing your creditors to collect unpaid debt by taking the funds directly from your bank account. While garnishment laws vary from province to province, protecting your bank account is a matter of understanding your rights and taking preventative measures in addressing financial challenges proactively. Let's look at various strategies that can safeguard your bank account from garnishment. 

Understanding Garnishment 

Garnishment typically occurs when a creditor has obtained legal court action to collect a debt that you owe. This is most commonly for unsecured debt including credit cards, medical bills, or personal loans. Here are some key things to consider: 

1. Court order. Garnishment requires a court order that grants your creditor permission to collect a set amount of money from your bank account. The court order is served to your bank which will then freeze the funds. 

2. Exemptions. Some funds including child support payments, Canada Pension Plan and other government income benefits will be exempt from garnishment. 

3. Timing. Typically, you will receive notice of the impending garnishment terms and conditions amounts dates etc which will allow you to respond and potentially negotiate with your creditor or seek legal counsel prior to the garnishment. 

Protecting your bank account 

The first step to protect your bank account from garnishment is to be aware of your rights. Understanding the garnishment laws and exemptions in your province is a great starting point. Some income may be legally protected, and you have the right to challenge a garnishment if it's not adhering to these regulations. If you are struggling to repay your debt, having an open line of communication with your creditors will be a huge benefit for you. Many creditors will prefer working out payment plans or settlements with you directly rather than going through the legal process of a garnishment.  

Separating your funds in multiple bank accounts can also help protect you from garnishment. For example, let’s say you have a credit card through the same bank where you have a savings or chequing account. If you fall behind on making your credit card payments, in many cases your bank has the “right to offset”, which means they can take money out of your accounts to pay the credit card debt.  

Avoid cosigning for others. We understand that you want to help support loved ones, However when you choose to cosign you become equally responsible for the debt. If the primary borrower defaults on the loan creditors can pursue legal action against you, potentially jeopardizing your bank account and assets. 

Consider protecting your assets by creating a living trust or structuring your assets in a way that make them less vulnerable to creditors. Consulting with an attorney who specializes in this will help you explore your options. Additionally, if you do receive notice of a garnishment consult with a lawyer who specializes in debt and bankruptcy law. They can provide guidance on your specific situation and help you navigate this time. 

Emergency Fund 

Having an emergency fund is potentially one of the wisest financial decisions you can make. Having savings set aside for these unexpected life emergencies can help you avoid accumulating debt in the future. One of the best preventative measures to avoid bank account garnishment, is to avoid overwhelming debt to begin with. Often it's an unforeseen life event like a household or medical emergency, that throws a wrench in our otherwise financially stable path. Without emergency savings, these crisis situations are often paid by adding on to credit card debt, or seeking less favorable short term loans to get by. 

Debt Relief Options 

If you are facing an overwhelming amount of debt and garnishment is imminent, a consumer proposal is an option that will allow you to protect your assets and obtain a fresh financial start. Bankruptcy is another option that will provide similar protection. An initial consultation with a Licensed Insolvency Trustee like Bromwich+Smith is free of charge, and will provide more insight about these and other options. 

Protecting your bank account from garnishment requires proactive financial planning and effective communication with your creditors. Being informed about your rights and  debt relief options can help you avoid the having your bank account garnished. In challenging financial times seeking help from a Licensed Insolvency Trustee will help you maintain control over your assets and set you up for future success. 

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and avoid wage garnishment. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at  1.855.884.9243, Live Chat   or you can request a call back at contact us page. We want to see you flourish!    

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FAQs:

1: How does garnishment of a bank account occur?

Garnishment happens when a creditor obtains a court order, allowing them to collect a specific amount directly from your bank account. The court order is served to your bank, leading to a freeze on the funds.

2: What funds are exempt from bank account garnishment?

Certain funds, such as child support payments, CPP, and other government income benefits, are exempt from garnishment, providing a level of protection for those specific sources.

3: How can I protect my bank account from garnishment?

Understanding garnishment laws, exemptions, and timely communication with creditors are key steps. Additionally, separating funds into multiple bank accounts and avoiding cosigning for others can provide protection.

4: Why is having an emergency fund important in avoiding bank account garnishment?

An emergency fund helps prevent accumulating debt in unforeseen life emergencies, reducing the likelihood of resorting to credit cards or unfavorable loans during financial crises.

5: What  debt relief options are available to protect assets from garnishment?

If facing overwhelming debt and imminent garnishment, exploring options like a Consumer Proposal or Bankruptcy with a Licensed Insolvency Trustee can provide a fresh financial start while protecting assets.