Debt Relief Experts
It is not uncommon for someone to contact us soon after being notified that their wages are, or will be, garnished. If you receive a notice of garnishment or your employer has notified you they will be garnishing your wages, it’s important to understand your rights and be proactive.
First, let’s understand some basic definitions:
- Wage – An amount of money that a worker is paid
- Garnishment – A legal procedure where a creditor tries to collect money owed by taking property that is in someone else’s possession other than the debtor
- Wage Garnishment – The process of collecting a debt by requiring your employer to take a portion of your wages to pay your creditor
Table of Contents
How Do Wage Garnishments Work in Canada?
Wage garnishments in Canada are primarily governed by provincial laws, though some federal legislation applies to specific types of debts. In Ontario, garnishments are regulated by the Wages Act R.S.O. 1990, c. W.1, while other provinces have similar legislation:
- British Columbia: Court Order Enforcement Act
- Alberta: Civil Enforcement Act
- Quebec: Code of Civil Procedure
Legal Limits on Garnishment
There is a limit on the amount of wages a creditor can garnish. For example:
- In Ontario, most creditors can garnish up to 20% of your net wages after mandatory deductions for Employment Insurance (EI), Canada Pension Plan (CPP) and income tax.
- In BC, the limit is 30% of a debtor’s net income, while in Quebec, the 30% limit is based on gross income
- Alberta has a structured system (the first $800 is exempt, creditors can take 50% of amounts between $800 and $2400, then 100% of amounts above $2400)
- Each province has higher limits (usually 50%) for child support and alimony garnishment orders
The Garnishment Process
Here’s how the standard wage garnishment process works:
- The creditor issues a Statement of Claim
- You have 21 days from when it is mailed to respond
- You can dispute the claim by filing a Statement of Defense if the debt isn’t yours or there’s been a mistake
- If you don’t respond, you automatically lose, and the court rules in the creditor’s favour
- If you lose or don’t defend the action, the court will make a judgment in favour of the creditor for the debt
- The court issues a judgment for the debt
- The creditor can then apply for a garnishment order
- Once obtained, your creditor will notify your employer
- Your employer must comply with the garnishment order and begin deductions
- The garnishment continues until the debt is paid in full, including interest and legal costs
Your Employer’s Requirements
Once a garnishment begins, your employer must:
- Calculate the garnishment amount based on your pay
- Deduct the required amount from each paycheque
- Send the money directly to the creditor or court
- Continue the garnishment until the debt is paid or they receive a court order to stop
Are Creditors Required to Give Notice Before Garnishing Wages?
Most unsecured creditors must follow the court process outlined above before they can garnish your wages. This includes:
- Credit card companies
- Banks and finance companies
- Collection agencies
- Payday loan companies
- Other unsecured creditors
Through this process, you receive notice by being a participant in the legal proceedings. Your employer can begin garnishing your wages without additional notice once they receive the court order, though most employers will include a note with your pay stub showing the garnishment amount.
Creditors Who Can Garnish Without Court Orders
Some creditors have special powers that allow them to bypass the court process:
- Canada Revenue Agency (CRA) can send a Requirement to Pay directly to your employer without going to court
- Credit Unions and some payday lenders often include a voluntary wage assignment clause in their loan agreements that allows them to garnish wages without court action
When these creditors garnish your wages:
- The garnishment begins as soon as your employer receives their notice
- The same provincial limits usually apply (except for CRA, which can take more)
- Your employer must comply immediately
- You may receive notification after the garnishment has already started
Understanding Garnishment Threats
A threat of garnishment is different from an actual wage garnishment. While it’s easy for any creditor to threaten to garnish your wages, they must follow the legal process outlined above unless they fall under the special exceptions.
Take a garnishment threat as a warning sign that you have a serious debt problem. A threat is usually a symptom of an underlying issue – you owe a debt you can’t pay.
What Should You Do If You Receive a Garnishment Notice?
If you receive a Statement of Claim, you have three main options:
- If the debt isn’t yours or contains errors, file a Statement of Defense within the 21-day period
- If the debt is legitimate and manageable, try to work out payment arrangements with the creditor
- If you can’t pay the debt, talk with a Licensed Insolvency Trustee to learn how:
The worst thing you can do is ignore the notice. Without a response, the creditor will automatically win their case and obtain the right to garnish your wages.
If you’re facing wage garnishment or have received notice of legal action from a creditor, contact a Licensed Insolvency Trustee at Hoyes Michalos for a free consultation. We can review your situation and explain your options to stop wage garnishment before it impacts your finances.
Question…how do I pay back taxes without wage garnishment?
Hi Jacquie. I’m not sure I fully understand your question, but if you owe back taxes you have three options if you want to avoid having CRA garnishee your wages:
First, you can make a repayment plan directly with them. In most cases they will agree to a plan if you can repay all of the outstanding balance within one year, and keep your current taxes up to date.
If that’s not possible, your other options would be a consumer proposal or bankruptcy to deal with the debt. Feel free to contact our office if you would like a more detailed answer.