Does Wage Garnishment Affect Your Credit Score?

Sometimes, debt can become so overwhelming that we simply can’t pay it down. In cases like this even before you start exploring debt relief options; creditors can take an extreme step of collecting what is owed to them, called a wage garnishment. 

A wage garnishment is a legal procedure in which a court order mandates that an employer withhold a person’s earnings for the payment of a debt. The types of debt that can lead to wage garnishment include: 

• Credit card bills
• Medical bills
• Debts tied to a sudden and unexpected event, such as a job loss or divorce

How Does Wage Garnishment Affect Your Credit Score? 

A garnishment will have an impact on your credit score and stays on your credit report for up to seven years. The good news is, both during and after a garnishment, there are ways to rebuild your credit and reduce your debt.

What debts can be garnished?

Generally, any of your unpaid debts can result in creditors being able to garnish your wages. Let’s take a look at some of the unpaid debts that can result in wage garnishment.

• Child support and alimony

Wage garnishment limits for child support and alimony are typically higher than for other types of debts. 

• Unpaid income taxes

The amount the Canadian Revenue Agency (CRA) can garnish depends on your filing status, including the number of dependents you have and the amount of deductions you may have overall. 

• Student loans

Student loans are typically viewed as some of the most forgiving forms of debt because they can be deferred for repayment for longer periods of time. This means that in the event of a job loss or other economic hardship, you may be eligible for a deferment.

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How can you avoid wage garnishment?

Ultimately, the best way to avoid garnishment and maintain a high credit score is to ensure timely payments on all of your debts. If, however, you do find yourself in a situation where your wages are being garnished, you can take action by requesting that the court adjust the amount of the garnishment to a level that allows you to continue supporting yourself.  Enabling you to take steps to lessen the effect and bounce back.

Remember that you are not alone, if you are facing overwhelming debt. 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, or request a call back at contact us page.