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Are you drowning in debt and finding it impossible to keep up with your bill payments despite your best efforts? Are you sick of dodging calls from creditors? If you’re in a situation where you are unable to pay your debts, your creditors may seek repayment through court-ordered wage garnishment. While this can be very stressful, it’s important to know that there is help available. There are ways to stop wage garnishment.
What is Wage Garnishment?
Wage garnishment is a debt collection strategy that can be used if you fail to pay your debts. For instance, if you fail to pay your credit card or child support payments, your creditors can go to the courts to obtain a garnishment.
Wage garnishment, also called payroll garnishment, is a legal proceeding that allows your creditors to legally deduct a percentage of wages from you, the garnishee, in order to repay your debts. Unless you do something to stop it, your creditors can continue to garnish your wages until your debt has been repaid in full.
How It Works
For a creditor to garnish your wages they will typically sue you and obtain a judgment order confirming it is you that owes them money and how much is owed. Next, the creditor can obtain a garnishing order which will then be sent to your employer. When your employer receives this order they are obligated to withhold a certain amount of your wages until your debt is paid in full or until a Consumer Proposal or Bankruptcy is filed.
Be aware that some creditors do not have to go to court to garnish your wages. The Canada Revenue Agency (CRA) is one example. They are not required to get a court order before garnishing your wages.
Similarly, if you owe money on a payday loan, you may have signed a voluntary wage assignment. This permits the payday lender to garnish your wages without a court order.
Who Can Garnish Your Wages in Ontario?
Any creditor you owe money to can apply for a garnishment order to have debts repaid. Creditors can include collection agencies, credit card companies, payday loan lenders, or the Canada Revenue Agency.
What Are Ontario Garnishment Rules?
The amount a creditor can garnish from your paycheque varies based on the rules of your province. According to the Ontario Wage Act, a creditor can garnish a maximum of 20% of your net pay and up to 50% for child or spousal support. The exact amount garnished will be decided by the court and is partly based on your financial circumstance and other relevant factors.
When it comes to the type of income that can be garnished, there are some exceptions. Income such as your regular salary or employer severance pay qualify as income that can be garnished. Even your tax returns are subject to garnishment by some government creditors including the CRA. However, some income sources are off-limits.
According to the Ontario Works Act, income including basic financial assistance (social assistance, welfare), is generally not subject to wage garnishment. Similarly, government pension income such as Canada Pension Plan (CPP) or Old Age Security (OAS) is typically off-limits.
However, if your pension is deposited into your bank account and this is the same bank account that is used to repay your debts, it’s possible that your pension money will be garnished. Regardless of where your income comes from, once it is deposited into your bank account there’s a chance it can be garnished.
How to Stop Wage Garnishment in Ontario
If you are looking to stop wage garnishment, there are a few options available to you including:
1. Repaying the loan. If you want to stop wage garnishment on your own then you will have to pay off your debt. You can look into consolidating your debt to free up more cash or, you look into taking out a personal loan to repay your creditors.
2. Negotiating with your creditors. You can try to negotiate a repayment deal with your creditors in exchange for them agreeing not to impose wage garnishment. If your creditor has already started the process of garnishing your wages, this may be difficult.
3. Filling for Consumer Proposals or Bankruptcy. You can reach out to a Licensed Insolvency Trustee to see if a Consumer Proposal or Bankruptcy is the right move for you. In many cases, wage garnishment is stopped immediately upon filing however, there are exceptions. For instance, wage garnishments might not be stopped for things like student loans.
According to the Bankruptcy and Insolvency Act Section 178(g),
“Any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred
- before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or
- within seven years after the date on which the bankrupt ceased to be a full- or part-time student.”
What to Do if Your Wages Are Being Garnished
If garnishment of your wages has started or you are being threatened with garnishment, you do have options. If you can’t pay back your debts in full, you can try negotiating the terms of your repayment with the creditor. However, once garnishment has started, your creditor might not be open to making a deal. If you are unable to negotiate, reach out to a Licensed Insolvency Trustee (LIT).
An LIT can help you navigate the wage garnishment process by explaining your options and helping you to choose the solution that makes the most sense for you. A Licensed Insolvency Trustee can also help to ensure that you are aware of the legal rights and laws associated with wage garnishment. You don’t have to do this alone. For help stopping wage garnishment contact Adamson and Associates at 519-310-JOHN (5646).