Wage garnishment is something that is not new to debtors. For years, it has been a practice that a debtor has to watch out for when struggling to repay their debts. Creditors across the nation have different rules they have to follow when pursuing the garnishment of wages and there are also limits to how much your wages can be garnished. Garnishment can put even more financial strain on a debtor that is already struggling with their finances. While it is a way of repaying back your debts, it may not be the best solution for debtors who already rely on their wages to pay for basic living essentials. However, there are ways to stop wage garnishment and set up a repayment program that actually works for a debtor, not against them.
What is Wage Garnishment?
While some may be familiar with wage garnishment, it is safe to say many people are unaware of wage garnishment and maybe be unaware of the risk it poses to their paycheck. Wage garnishment happens when you stop paying your creditors. If a debtor has stopped paying them for a long enough time period, creditors can apply to the court to obtain a judgment order against the debtor. If the creditors are successful in doing so, then a percentage of the debtor’s wages will be taken from their paycheck every time they get paid. Percentages can range and are decided based on the amount of income a debtor makes. This can be an uncomfortable process because the creditor will work with your employer directly, exposing your financial situation to your employer. A debtor can also voluntarily sign off on having their wages garnished if they choose to do so, but payment would still have to be forwarded by your employer.
Percentages Across Provinces
Different provinces have different limits and percentage systems that allow them to calculate how much of a debtor’s pay will have to be surrendered during garnishment. While the general limit across Canada is 30%, there are some provinces that differ from the norm:
- Ontario: a maximum of 50% of your wages can be garnished by creditors, but generally only 20-30% is garnished
- Saskatchewan: creditors can garnish up to 100% of wages as long as you still have $1500 left over each month. Every dependant that you care for would increase that threshold by $300 per month, per dependant
- Alberta: in Alberta, garnishment works on a tiered system. The first $800 of your pay must remain untouched, between $800 and $2400 50% of your wages can be garnished and any income made above $2400 can be garnished at 100%
- New Brunswick: in New Brunswick garnishment works case by case. The Sheriff who administers the garnishment act would be responsible for looking into the debtor’s financial situation and deciding on an amount that the debtor must pay to their creditors.
- Newfoundland & Labrador: 50% of a debtor’s wages can be garnished
- Nova Scotia: Allows only 15% of a debtor’s wages to be garnished
If you are self employed or a contract worker, garnishment percentages will work a little differently. Because a self-employed person’s income is not considered as regular pay or wages, 100% of their earnings may be garnished in order to satisfy their creditors’ debts. In some cases, the creditor could obtain garnishment orders to give to your clients directly. So instead of receiving your earnings from your clients for whatever service or good you provide, they would pay your creditor directly to get your debt paid off. It does not always work this way however, sometimes a creditor could garnish your income from your bank account.
Income Exempt From Garnishment
There are types of income that are exempt from creditors when it comes to garnishment. In a nutshell, government assistance and payment programs are exempt from being garnished by creditors. Programs like Employment Insurance (EI), the Canadian Pension Plan (CPP) or Old Age Security (OAS), and Disability pay are all exempt from being garnished by creditors.
However, these types of income are still at risk of being manipulated, creditors can get around this law by simply just seizing your account so you no longer have access to take out your money or use the card associated with that account.
Canada Revenue Agency (CRA) Garnishment
While there are exemptions to certain types of income as previously mentioned, the CRA themselves do not have to follow these exemptions. This means if the CRA is garnishing your wages they are allowed to garnish from your employment insurance or your pension.
The CRA also does not have to follow the same rules as other creditors would, like filing with the court for a judgment. If the CRA decides to garnish your wages they can do so without a judgment and as soon as they deem it is fit to start garnishing your wages. They will notify you that they may start legal action against you if you do not make payments to your debt or contact them to make payment arrangements, but after that they will send no further notice. This means when they actually start garnishment of wages your employee will get sent the notice so they can start paying the CRA directly, but a debtor may not know garnishment has begun until they start to see the deduction in their pay. The CRA also does not follow the general 30% of income garnishment rule; they can garnish up to 50% of your wages if they believe it is necessary.
Stopping Wage Garnishment
Stopping wage garnishment can be a long and difficult task, but there are some options available.
A debtor could try to reason with a creditor and get garnishment to stop if they set up a payment plan in order to repay their debts but it is unlikely that a creditor would want to cooperate if they are already receiving guaranteed payments directly from your income source.
The only surefire way to stop garnishment and get your wages protected is to file a consumer proposal or personal bankruptcy. In the event of filing these all wage garnishment stops and your creditors are paid alternatively through the bankruptcy or consumer proposal. These government regulated programs will also help to actually pay off principal loan amounts instead of a large portion only going to interest repayment on a loan or debt.
If you are looking to get your wage garnishment stopped and become debt free you can always contact DebtReview at 800-335-8176! We can help you out with filing a consumer proposal or personal bankruptcy and protect your wages while also protecting your assets and getting you debt free! Contact one of our advisors today to see if you qualify!