How to Stop Wage Garnishment in Canada
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By Bromwich+Smith Staff | 1170 words | Reading Time: 5 minutes and 51 seconds| Last Update: 2024/03/21
When debt is owed, it feels like creditors will stop at nothing to get a payment made. Phone calls to your house, work, emails, texts sometimes it feels like they never stop. If you have been in this situation you may have heard the term Garnishee order, but what does a wage garnishee mean? In Canada, if you have stopped payment, your creditors can obtain judgment against you. If they are successful then they can contact your employer or your bank and they will be legally required to give a portion of your paycheque directly to your creditors.
How Garnishment Works in Canada?
When you are in debt, one of the actions the creditor can take to regain money owing, is to garnish your paycheck or bank account. This is an extreme measure and creditors will use this as a last resort after phone calls, letters of demand and sending the account to a collection agency have not ended with payment being made.
Typically, they do need to file a Garnishee order in court however banks have the right to offset. Meaning, if you have a credit card with ABC bank and your checking account with ABC bank and you owe on your credit card, ABC bank can and often will, garnish money from your checking account to pay the credit card debt. They do not need to notify you in advance, it’s an automatic right they have in their fine print. Credit unions and CRA are also able to initiate wage garnishment without a court order.
How much can be garnished from wages?
Each province will have its own legislated exemptions, typically the amount falls between 20%-50%. In British Columbia, a creditor is allowed to garnish your wages up to 30% of your take home pay. In Saskatchewan, legislation requires that you be left with a minimum of $1,500 plus $300 per dependant each month. In Ontario, your creditors can garnish up to 50% of your take home pay. In Alberta, the current rules are more complicated. You keep the first $800 of your net income, and then 50% can be garnished from $800-$2400. Any income above that can be 100% garnished to pay off your debt. If you owe money to the CRA, regardless of where you reside, they do not need to adhere to provincial exemptions. As you see, this can be quite complicated, and it is highly recommended to speak to a Licensed Insolvency Trustee as soon as Wage Garnishment is suggested by your creditors.
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Can I stop wage garnishment?
Once steps have been taken to garnish your wages, yare our creditors are less likely to settle that debt any other way. Remember, they have tried making contact previously and were unable to collect. This is one of the main reasons we always suggest taking your creditors calls! If you are in contact with them and attempt to pay off the debt- even if it is in small payments over time, they are less likely to start the process of Wage Garnishment. Once this process has begun, the only way to stop wage garnishment on your own is to pay off the debt. garnishment for current child support payments cannot be stopped.
One way that you can stop wage garnishments, is by filing a consumer proposal or bankruptcy. A Stay of Proceedings is protection from creditors which is only available under the insolvency act. It legally stops your creditors from contacting you, sending demand letters, applying for a judgement or garnishing your wages or bank account. The stay of proceedings is only available through a Licensed Insolvency Trustee firm like Bromwich+Smith. If you owe money on child support, and your wages are garnished due to missed payments it is important to note that Child support is a creditor that gets paid out first because the family unit support is paramount. A Consumer Proposal or Bankruptcy filing may not stop wage garnishments in this scenario.
Court orders
In Canada a court order is typically required for garnishment of wages, although this is not always the case. Wage garnishment is a legal process in which part of an individual's earnings are withheld to pay off a specific debt. For consumer debt, including personal loans or credit cards, a court order is required. Some specific debt that may not require a court order can include family support orders (child support or spousal support), Canada Revenue Agency debt, or student loans.
Your employer is legally obligated to comply with any court issued wage garnishment orders. They will be responsible for deducting the ordered amount from your wages and sending it to the creditor.
There are limitations on how much may be garnished, which are unique to each province.
A wage garnishment order can be disputed, which requires filling an objection in court. In the same way the original order came from a court, the order to an employer to stop garnishment must also be issued by a court.
If wage garnishment is adding to your overwhelming debt issues, another option would be to consult with a Licensed Insolvency Trustee. They will review your situation and discuss if a Consumer Proposal or bankruptcy could be a good option for you. These options allow you to reduce or eliminate your debt and will offer a stay of proceedings which will halt all creditor actions. Speaking to a Licensed Insolvency Trustee will help provide you with all available options, and identify your options.
It is important to be proactive: stop wage garnishment before it happens. Your creditors are legally obligated to give you notice of upcoming wage garnishment, including an opportunity to clear the debt first. If you are unable to arrange to clear the debt, we suggest speaking to a Licensed Insolvency Trustee. A federally regulated debt relief program like a Consumer Proposal or bankruptcy will grant you a stay of proceedings and protect you from wage garnishment. Both options will allow you for a fresh financial start and allow you to get back on track to rebuilding your credit.
Child support
If you are behind on your child support payments, your (ex) spouse can contact the provincial Maintenance Enforcement Program to help enforce support payments. This could include:
- garnishee wages, bank accounts and certain federal government payments such as income tax refunds and employment insurance benefits,
- seize personal or real property,
- require the party in default to file financial information,
- suspend or deny provincially issued licences such as a driver's licence, and
- ask the federal government to suspend passports and certain federal marine and aviation licences.
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Exceptions
There are types of income which can not be garnished, and that includes:
- Employment Insurance
- Pensions
- Social Assistance
- Income Tax Deductions
- Union Dues
- Reimbursement from costs of your job ie- a course taken, work boots, or other supplies purchased so that you can do your job.
If you are facing overwhelming debt, remember that you are not alone. Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. 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 request a call back at contact us page.