Q. What is garnishment?
A. Garnishment is a legal process whereby a creditor requires a third party to turn over to the creditor a debtor’s wages or bank accounts.
When you fail to pay creditors the money you owe them, they may apply to court to seek a “garnishment” against you. This legally allows them to seize your salary, money in your bank account, or other money you own to repay your debt.
Q. Is a court order always required?
The two situations in which a court order is not required for a creditor to garnish wages is:
- when an individual turns in an assignment of wages to a credit union
- when an individual owes unpaid taxes to the Canada Revenue Agency. The CRA may notify your employer directly and require wage garnishments to begin immediately.
Q. What is a wage levy?
A. A wage levy is like a wage garnishment. It is an enforcement action initiated by the Canada Revenue Agency (CRA) against someone for back taxes.
Q. What happens when there is a wage garnishment or wage levy?
A. In both cases, the employer gets notice of a garnishment order. They are required by law to withhold the amount specified in the order from the debtor’s wages.
Q. What is the difference between a wage levy and a wage garnishment?
A. For a wage levy, the CRA does not have to get a court order. As a government agency, it has the right to initiate a wage levy on its own administrative authority.
Q. In Ontario, what is the maximum amount my wages could be garnished by creditors?
A. The maximum amount your wages could be garnished by creditors according to the Ontario Wages Act is 50% of your gross monthly wages.
Q. Are there exceptions from garnishment?
A. Yes. Under the Wages Act, for instance, employment insurance, social assistance and pension payments cannot be garnished, even if the funds have been deposited into an account at a financial institution.
Q. What actions can creditors take to garnish my wages?
A. As you slide into debt, creditors might threaten a wage garnishment. To actually garnish your wages, creditors must go to court.
But creditors go to the courts as a last resort since it is costly and time-consuming.
First, they need to go to court to get a judgment order validating the debt is yours and you are obligated to pay. Then they must return to court to get an enforcement order for the garnishment or other means of collection.
Creditors also hire companies to investigate public documents regarding property ownership and income. If they have reason to believe you have sufficient income or assets, they will come after you.
Credit counseling solutions and debt settlement plans cannot stop a garnishment.
Q. My wages have been garnished or I think they soon will be. What are my options?
A. To stop a wage levy or wage garnishment, you need a legally binding debt solution that comes with the protection of the courts.
Ontarians have two options to revoke a garnishment and prohibit all future collection activity. One is a declaration of personal bankruptcy.
The other is a non-bankruptcy alternative – a consumer proposal. In a proposal, all your assets are protected in exchange for repaying a reduced amount of the total you owe over a period of not more than five years.
If your creditors stand to get more money from a proposal than from a bankruptcy filing, they are more likely to accept this alternative.
To find out which of these two legal options is best for you, give us a call. Also, if there is a wage levy, we can advise you if your circumstances put you at further risk with the CRA.
Q. Is garnishment one way that creditors seek to enforce a court order?
A. Yes. For instance, an order from Small Claims Court (maximum monetary award is $25,000) can be enforced by the creditor by his filing a notice of garnishment.
The rules on garnishment are strict and have to be followed carefully. As Ontario lawyers, we can help navigate through the myriad of specific rules about garnishment.
Q. How can I stop or prevent the Canada Revenue Agency from garnishing my wages or seizing my bank account or placing a lien on my property?
If you are unable to pay fully your taxes on time because you are experiencing financial hardship, contact us.
We can negotiate with the Canada Revenue Agency on your behalf for a payment plan that is fair and within your capabilities.
We will seek to get for you a payment arrangement with lower monthly payments and little or no interest charges and even no additional penalties.
HLF legal services: 330 Highway 7 East
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