throughout the majority of Canada’s provinces Wage garnishment is a very popular approach that anyone who is legally due money can use.
What is exempt from garnishment in Canada?
You know that even if the judge rules against you, it won’t make a difference. You have no valuable possessions and very little income to speak of. So, what can a creditor do if you can’t pay, don’t have anything to give up, and don’t have any wages to garnish? More importantly, how can you permanently resolve this issue?
Creditors can take legal action against debtors who do not pay their bills or respond to collection efforts. Once the creditor has obtained a court order granting you a judgment, it is up to them to enforce the judgment using various means, such as asset seizure or wage garnishment.
Certain government-mandated exclusions to these judgments exist to ensure that you can maintain an acceptable quality of living. Your creditor will be unable to enforce the judgment if all of your assets and wages fall under that exemption, making you ‘judgement proof.’
The Employment and Support Act of British Columbia specifies that any provincial income assistance is free from garnishment.
Non-government creditors are prohibited from garnishing federal income benefits such as the Canada Pension Plan (CPP), Old Age Security (OAS), Guaranteed Income Support (GIS), and Employment Insurance (EI) payments sent by cheque or direct deposit. Other government agencies, such as the Canada Revenue Agency (CRA) or the British Columbia Family Maintenance Enforcement Plan (FMEP), can still garnish these payments for unpaid government bills like income tax or child support.
Personal Property – Each province has its own legislation that determines which items are exempt and which are not. This is covered by the Court Enforcement Act in British Columbia. Among the assets that are safeguarded are:
- For the debtor and/or their dependents, any required clothing and medical aids (s)
- $5,000 from a car ($2,000 if you owe spousal or child support arrears)
- Equity in the primary house is $12,000 ($9,000 outside the Greater Vancouver Area).
Jointly Owned Assets — Assets that you and another person jointly own are immune from seizure unless you and the other person are both subject to the judgment.
Whatever source of income you have – including the above-mentioned exclusions – once money reaches your bank account, it is no longer judgment proof. If your major financial institution is the same one to which you owe money, they may freeze your accounts and apply the amounts to your outstanding debts in the worst-case situation.
To be safe, consider opening a bank account with a financial institution with which you have no credit relationships and directing your automatic deposits to this account.
As long as your financial situation stays stable, you will be immune to legal action.
It’s crucial to realize, however, that being judgment proof does not imply your debt or the judgment will disappear. Your creditors may continue enforcing judgment against your property if your financial status changes and/or you earn income or property that is not judgment proof (e.g. employment wages).
Unsecured creditors (such as credit cards, lines of credit, and payday loans) have two years from the moment you made your last payment to file a lawsuit against you under B.C.’s Limitation Act. However, this simply restricts their capacity to get a wage and asset seizure judgment; it does not cancel the obligation.
Your creditors may continue pursue routine collections action, such as seeking payment, issuing written collections notifications, contacting you by phone, or reporting your delinquency to the credit bureaus, if they do not take you to court. They can do this indefinitely until your accounts are settled to their satisfaction.
As previously stated, judgment proof status and the two-year statute of limitations can only shield you from creditors executing or securing a court judgment. They have no effect on creditors’ ability to pursue other forms of collection. Because your judgment proof status might last an unlimited amount of time, you may have to deal with the stress and annoyance of collections for months or even years. As a result, it’s critical to understand your rights as well as what creditors may and cannot do.
- Unless one of these people has co-signed your loan, suggest to your friends, employer, relatives, or neighbors that they pay your bills.
- Unless you’ve given us your mobile phone number as a way to contact you, we won’t call you on it.
If you believe a debt collector is violating your rights, you can register a complaint with the Provincial Consumer Affairs Office.
Being immune to judgment may appear to be reassuring at first. However, it can only protect you against wage garnishment or asset seizure for a limited time. It isn’t a long-term answer. Keep in mind that your situation could alter at any time. When that happens, your creditors will be ready to file a lawsuit against you or enforce whatever judgment they have against you.
There is only one way to free yourself from the stress of debt and the harassing of creditors: you must settle once and for all.
A Licensed Insolvency Trustee can assist you, even if it seems impossible given your current situation. They will work with you during a Free Confidential Consultation to analyze your financial position and determine if you qualify for a Life-Changing Debt Solution like personal bankruptcy or a Consumer Proposal, and if that is the best road forward for you. They’ll go over your options with you and assist you in making the best decision for you. Though things may appear terrible right now, a financial fresh start is only a phone call away.
How long before a creditor can garnish wages in Canada?
What is the maximum amount of wage garnishment? In Alberta, there is no such thing as a maximum amount. Your creditor, on the other hand, can only garnish your income until your debt is totally paid off, and the first $800 of your monthly paycheque is exempt.
How much of your wages can be garnished Canada?
Provided you owe someone money, they may be able to garnish your earnings if they obtain court approval. The CRA, on the other hand, differs from a standard creditor in that they do not need a judgment to garnish your earnings.
Any other creditor will need to obtain a court order and notify your employer, who will then send a percentage of your salary to the creditor to be used to pay off your obligations.
If you owe money to the CRA, they can garnish your earnings without giving you notice or obtaining a court order. This implies you can get a smaller paycheck than usual one day without knowing why.
When you work for a corporation and are on the payroll (T4), the CRA has the authority to deduct up to 50% of your wages at the source. This means that the money will be deducted from your paycheck and sent to the individual you owe money to; the rest will be returned to you.
If you are self-employed, a contract worker, a retiree, or receive income from another source, the CRA has the authority to take up to 100% of your earnings directly from the source.
The CRA has no right to garnish your income if you file a consumer proposal or personal bankruptcy, and the Stay of Proceedings will take effect immediately, effectively terminating any wage garnishment.
Remember that any money garnished prior to filing for bankruptcy or a consumer proposal is forfeited, so the sooner you file, the less money you’ll lose in the future.
If you have any questions about wage garnishment, please contact our friendly staff at any of our 11 convenient locations or call 1-800-268-8093 toll free.
Can a creditor garnish your bank account in Canada?
If you can’t avoid having a bank account, consider co-owning one with someone else. Unless it is a joint account that is co-owned by another individual, the bank account garnishment regulations in Ontario or anywhere else in Canada allow creditors who have a judgment against you to garnish the entire account. There is one condition, however: they would still be entitled to garnish 50% of the account.
Can creditor seize your bank account?
What is a levy on a creditor’s account? A levy on your bank account allows a creditor to lawfully remove money from your account. When a bank receives notice of this legal action, it will place a hold on your account and transmit the funds to your creditor. Your creditor then applies the amount to the debt you owe.
Can Collection Agencies freeze your bank account in Canada?
- Unpaid debts such as credit card bills, bank loans, finance loans, and even payday loans might cause your bank account to be frozen. Your creditor must first acquire a judgment against you in court, which is a piece of paper that states that you owe them money. They can seek to the court for an order freezing your bank account or garnishing your wages once they have a judgment.
- Without a court order, the Canada Revenue Agency can freeze your accounts. If you owe the CRA money and have not worked out a payment plan, submitted a consumer proposal, or declared bankruptcy, your bank account may be frozen to force you to deal with your tax debt.
- If you have a judgment against you as a result of a lawsuit or other legal proceedings, your creditors might freeze your bank account in order to collect payment.
In addition to having your account frozen, certain creditors have the authority to recover funds from your account through a process known as a ‘right of offset.’ If you owe money to Bank A and have an account with them, they can deduct the amount from your account to cover any outstanding payments without your permission. While you can keep using your bank account, every new money you deposit is subject to this seizure right.
How do I fight wage garnishment?
If your wages are being garnished, bankruptcy isn’t the only way to stop it. There are a few things you may take to avoid having your wages garnished by a creditor. Continue reading to learn more about them.
(See Using Chapter 7 Bankruptcy to Halt Wage Garnishment for more information on how to stop wage garnishment quickly.)
Respond to the Creditor’s Demand Letter
Many jurisdictions require a creditor to send you one final warning letter before garnishment commences once a judgment has been secured against you. This is commonly referred to as a “demand letter.” If your creditor sends you a demand letter, don’t disregard it. Many creditors would rather receive voluntary payments from debtors than deal with the expense and time-consuming paperwork that garnishments entail. Use this time to work out a payment arrangement with your creditor before they start garnishing your wages.
Seek State-Specific Remedies
Some states provide extra safeguards against garnishment. In Ohio, for example, you can ask the court to appoint a trustee. You make payments to the trustee in a trusteeship, and the trustee distributes those payments to your other creditors. A creditor cannot garnish your wages while you are in a trusteeship.
You can file an exemption claim in California. If you can establish that you are experiencing financial difficulty and that your income is required to sustain your family, the garnishment may be reduced or eliminated.
To find out what choices are available in your state, contact the clerk of your municipal or county court or speak with a local attorney.
Get Debt Counseling
Stopping a garnishment may be possible with the help of a consumer credit counseling firm (CCS). A credit counseling service (CCS) is a non-profit organization that can assist you in negotiating and reaching an agreement with your creditors to pay them over time. If your creditors agree to join this group payment plan, they will not be able to garnish your wages as long as you keep up with your payments.
Object to the Garnishment
If you do nothing after receiving the demand letter, you will almost certainly receive copies of the garnishment order and notification of garnishment from your employer.
Any objections to the garnishment should be filed in writing with the court, along with a request for a hearing. You could find forms among the garnishment filings that you can fill out to request a hearing. Otherwise, you’ll have to complete and file anything on your own.
The Creditor is Taking Too Much Money
- 25% of your disposable income (gross income minus taxes and statutory deductions), or
If you’re being garnished for child support or alimony, you could lose up to 50 percent or 60 percent of your disposable income. Garnishments for student loan debts and IRS taxes, for example, are calculated differently. Your state’s laws may impose even more restrictions. (See How Much of My Wages Can Be Garnished?) for further information.
If the amount requested to be garnished from your salary is greater than what is allowed by federal and state law, you should oppose to the garnishment right away.
The Creditor Did Not Follow Proper Procedures
The court may terminate the garnishment order if the creditor does not follow the garnishment procedure. A creditor failing to provide you timely notice of the garnishment is an example of improper garnishment.
The Creditor Was Paid
You must object if you have already paid the judgment or if the creditor has received full or partial payment toward the judgment through other means (bank attachments, earlier post-judgment voluntary payments, etc.).
Attend the Objection Hearing (and Negotiate if Necessary)
Following the filing of your objection, you must attend the hearing. If you make an objection but do not show up for the hearing, the court may overrule it and the garnishment will begin.
Even if you show up for the hearing and the court dismisses your objection, you can still meet with the creditor and work out a payment plan. If you can convince the creditor to agree, it might not be too late to stop the garnishment.
Challenge the Underlying Judgment
It may not be too late to stop the garnishment if you have a legal basis to contest the judgment (for example, you were never properly served with the complaint and following legal paperwork). You won’t be able to contest the judgment at the garnishment hearing, so any arguments or objections you make will be ignored. You may be able to get the verdict overturned by filing a new motion, posting a bail (typically), and attending a new hearing. Because this can be a challenging process, you should talk with a local attorney to learn more. You must also act promptly, as you may only have a short window of opportunity to pursue this option.
Continue Negotiating
Even after a garnishment has begun, you might try to reach an agreement with the creditor, particularly if your circumstances change. If you have an income tax refund that could cover some of the judgment, for example, you might be able to persuade the creditor to drop the garnishment in exchange for a lump sum payment to cover the rest of the debt.
If none of the other choices are working for you, you might want to consider filing for bankruptcy.
How much can legally be garnished from your wages?
Creditors that have a statutory right to collect past taxes, child support, or student loans, as well as judgment creditors (those who have filed a lawsuit against you and won), can garnish or “take” money immediately from your paycheck. They can’t, however, take it all. The amount a creditor can garnish is limited by federal and state law.
Federal Wage Garnishment Limits for Judgment Creditors
If a judgment creditor garnishes your wages, federal law states that it can only take the following amounts:
- whichever is smaller, the amount by which your income exceeds 30 times the federal minimum wage.
By removing required deductions from your entire payment, you can calculate your disposable income. Federal and state taxes, state unemployment insurance levies, Social Security, and mandated retirement deductions are all examples of required deductions. Health and life insurance, charitable donations, savings programs, and other optional deductions are not included.
EXAMPLE
The federal minimum wage is currently $7.25 per hour (as of July 2020). After mandatory deductions, if you earn $600 per week, 25% of your disposable income is $150. Your income surpasses 30 times $7.25 for a total of $382.50 ($600 – 217.50). That implies a maximum of $150 can be deducted from your weekly salary.
Wage Garnishment Limits for Student Loan Debts
To collect on defaulted student loans, the US Department of Education or anybody collecting on its behalf can garnish up to 15% of your disposable income. These agencies do not have to sue you first and obtain a judgment before garnishing your wages, but they must provide you advance notice of the garnishment.
Wage Garnishment Limits for Child Support or Alimony
Since 1988, all new or modified child support orders, even for non-delinquent child support, have included an automatic wage withholding order. Child support is deducted from your paycheck and sent directly to the other parent by your employer. If you are forced to keep your child’s health insurance coverage, the cost will be collected from your paycheck as well. Without resorting to wage withholding, you and the other parent can agree to pay child support on your own.
If you are currently supporting a spouse or child who isn’t the subject of the order, up to 50% of your disposable income can be withheld to pay child support. If you don’t support a spouse or child, you could lose up to 60% of your wages. If you’re more than 12 weeks behind on your payments, you can get an extra 5%.
Wage Garnishment Limits for Tax Debts
Wage garnishment has varied limits depending on the taxing authority. The amount is determined by the number of dependents you have and your standard deduction amount. Formulas are often used by state taxing authorities. The IRS will send you a notice before garnishing your wages, but it is not required to obtain a judgment beforehand.
State Wage Garnishment Limits
States can provide greater protection to debtors in wage garnishment cases than the federal government, but they cannot provide less. Many states follow federal guidelines, although some states protect a debtor’s wages to a greater extent. In Massachusetts, for example, most judgment creditors are only allowed to garnish up to 15% of your salary.
The Head of Household Exemption and State Wage Garnishments
A state provision called the head of household exemption allows you to keep more of your earnings. It is available to judgment debtors who are the family’s major source of financial support. However, not all states have a head of household exemption, and the amount of disposable income that is exempt can range from 100% to 90%, or be the amount necessary for your family’s care and support.
Claiming a Head of Household Exemption
Keep in mind that in most circumstances, earning the head of household exemption isn’t automatic. In many places, you’ll need to file documentation with the court to obtain the exemption. It’s possible that you’ll have to protest to the garnishment as well. If you don’t follow your state’s rules, the judgment creditor will most certainly acquire more of your wages than the creditor is legally entitled to.
It’s critical to figure out what you need to do to safeguard your income as soon as you receive a wage garnishment notification or order—especially if you have family members who rely on you. The response time will most likely be brief, perhaps a few days.
Reading any papers that is given to you carefully is a great place to start. It could include information about your alternatives or even the documents you’ll need to fill out. If not, local courts frequently offer instructions on their websites. You can also contact the sheriff or constable in charge of serving collection actions, as well as the court clerk. Many courts also offer self-help services on a weekly basis. If you still can’t locate what you’re looking for, talk to a lawyer in your area.
How can I stop a bank garnishment?
Seek legal help if you want to stop a garnishment. Your goal is to overturn the decision. If a wage garnishment or bank levy would prevent you from meeting basic needs like rent and food, or if you believe the decision was rendered in error, you can object.
Will my employer know if my wages are garnished?
A court order or an IRS levy is usually used to notify employers of a wage garnishment. They are required to comply with the garnishment order and normally begin withholding and remitting money as soon as the order is received. The IRS wage garnishment and levy papers will lead you through each step of the wage garnishment process. Any necessary contact information should be included on the paperwork, which you should not hesitate to use if you have any questions. This is one situation when it’s better to reach out to a large number of people rather than try to guess and make mistakes.
Every garnishment request must be honored by employers. Business owners must often begin withholding and remitting payment as soon as they receive an order.
Can collectors garnish your wages?
The creditor receives money deducted from the debtor’s paycheck to apply to the late debt when wages are garnished. Wage garnishment is most commonly used in delinquent tax issues and unpaid child support, but it can also be used to collect credit card debt. When a garnishment involves another asset, such as a property, a lien is put on the asset for the amount of the judgment. When a property is sold, the proceeds are initially dispersed to the property’s creditors.
Does a garnishment hurt your credit?
A wage garnishment, which occurs when a court ruling states that a lender can retrieve money owed to a borrower by going via the borrower’s employment, will not appear on your credit report and hence will not affect your credit score.
