Wage Garnishment

When an employer is obligated to withhold an individual’s earnings for the payment of a court-ordered or government agency ordered judgment, known as wage garnishment, it can cause distress.

However, there is no need to panic if you are facing garnishment or currently experiencing it. This article aims to provide you with the necessary information on garnishment and how to prevent or halt it entirely.

To garnish your wages, a creditor must follow specific procedures. They need to file a suit in court and obtain a garnishing order. Additionally, they must provide evidence of the exact amount you owe. If the creditor wins the suit, they can then request the court to garnish your wages.

Wage garnishment is a legal process where a creditor can collect money directly from your paycheque. It’s important to note that the Canada Revenue Agency is the only creditor that does not need to file a petition to the court in order to initiate wage garnishment. The CRA has the authority to create a garnishment without court approval.

If the court rules in favor of your creditor, a portion of your paycheque will be deducted and sent to the court, who will then forward it to your creditor. Typically, a new garnishing order needs to be issued by the creditor for each pay period, resulting in a slow and potentially costly process. 

There are laws that protect individuals whose wages are being garnished. Your employer cannot legally terminate you for a wage garnishment. The law usually limits garnishing orders to a maximum of 30% of your wages, although child or spousal support claims may attach up to 50% depending on your income and the number of dependents. If the garnishment causes severe financial hardship, you have the option to petition the court to reduce it or establish a payment plan that you manage.

Stopping a Garnishment

If your wages are being garnished, or if you are facing the threat of garnishment, there are three possible methods to stop it.

To stop garnishment, pay off the debt. However, if the debt is too large or overdue, most people can’t afford to do so. Sometimes, negotiation with creditors can remove the garnishment, but it’s unlikely they’ll agree. Garnishment guarantees payment for them.

To settle your debts for less than what you owe, you can file a Consumer Proposal. It is a legal agreement between you and your creditors. Under this arrangement, you make one monthly payment for all your debts for up-to five years. Filing a Consumer Proposal stops all collection activities against you, including garnishment. Only a Licensed Insolvency Trustee can prepare a Consumer Proposal.

Filing for Bankruptcy stops wage garnishment and other collection attempts, and unlike a Consumer Proposal, it eliminates your debts but may require surrendering your assets.

If your wages are being garnished for child support or spousal support, it is worth noting that a Consumer Proposal or Bankruptcy will not halt the garnishment.

Wage garnishment can worsen an already challenging financial situation. If your wages are being garnished or are about to be, it may indicate that your financial situation is unmanageable. Consulting a Licensed Insolvency Trustee can assist in safeguarding your wages and regaining financial stability.