Debt Relief Experts
How to Stop a Wage Garnishment
Creditors will often seek a garnishment order when you have defaulted on your loans, or you have not made any payments on your debts. While creditors must follow a legal process to garnish your wages in Ontario, the good news is a wage garnishment order can be stopped at any time during the garnishment process.
There are 3 ways to stop a wage garnishment:
We’ll explain how creditors can obtain a garnishment order, what you can do if you receive a notice of garnishment and when a garnishment can be stopped.
A bankruptcy or consumer proposal stops a garnishment of wages. The protection provided by bankruptcy law through the Bankruptcy & Insolvency Act is called an automatic stay of proceedings.
At Hoyes, Michalos we act quickly! If you file with us and tell us you are facing a wage garnishment, we can usually have the garnishment stopped the day you file.
What is a Wage Garnishment?
A wage garnishment is a legal order that requires your employer to send a portion of your wages directly to your creditors. People often refer to this as having their wages garnished. The correct legal term is a garnishee or garnishment. A similar order can be obtained against your bank account.
It’s also important to know that your employer must comply with a garnishment order unless they receive a subsequent court order, like a bankruptcy or proposal order, authorizing them to stop withholding your pay.
How Much Can Be Garnished From My Wages?
There is a limit on how much creditors can garnish your wages. In Ontario, creditors can garnish up to:
- 20% of your gross wages for regular debts or
- 50% of your wages for child or spousal support
A creditor with a court order can garnish 100% of the funds in your bank account. Unlike a wage garnishment, which is limited to 20% of your wages, there is no legal limit on how much money a creditor can seize from your bank account.
Who Can Garnish My Wages?
Any creditor can begin garnishment proceedings against someone for unpaid debts. Collection agencies, Canada Revenue Agency, the Court, credit card companies, payday loan lenders, or any creditor can enforce collection through a wage garnishment.
Most creditors must first obtain a wage garnishment order from the court. However, some creditors can garnish your wages without notice or court order, including:
- Canada Revenue Agency (CRA) can enforce a Requirement To Pay for any government debt, including unpaid taxes or student loan debt. While pensions and child support are exempt from voluntary garnishment, this income can be garnished to repay government debts.
- Credit unions and payday loan companies with voluntary wage assignments can garnish your paycheque without going to court first.
- The Family Responsibility Office (FRO) can issue a Support Deduction Notice.
How Does a Garnishment Work?
To garnishee your wages, a creditor must first file a Statement of Claim. As the debtor, you have 21 days to respond from the day the claim was mailed to either file a Statement of Defense to dispute the debt or to notify the creditor of an error. If you fail to respond, the court will assume that you have agreed to the debt, and the creditor will be granted a garnishment order.
How Long Before a Creditor Can Garnish Wages?
The time between a missed payment and wage garnishment typically takes 3-6 months, depending on how quickly your creditor takes legal action. After receiving a garnishment order, your creditor will notify your employer, who must immediately enforce the order once it is received.
Garnishment may be coming if you’re receiving multiple collection calls, letters threatening legal action, or notices from CRA. Acting quickly when you receive these notices gives you more options to avoid garnishment.
How Can I Stop a Wage Garnishment?
Whether you’ve just received a warning letter or your wages are already being garnished, you can take action to protect your income.
A wage garnishment is a legal proceeding. Unless your creditor agrees to withdraw the garnishment, a garnishee can only be stopped through a similar legal process. Most creditors are reluctant to remove a garnishment order before they receive full payment.
Here are your legal options to stop a wage garnishment:
1. Filing a Consumer Proposal
A consumer proposal immediately stops a wage garnishment through a legal stay of proceedings. This court-ordered protection prevents creditors from taking collection action while you make affordable monthly payments.
The benefits of stopping garnishment with a consumer proposal include:
- You get immediate protection from garnishment the day you file
- You can reduce your total debt to an amount you can afford to repay
- You make one affordable fixed monthly payment that fits your budget
- You preserve your assets like your home and car
- You get protection from future garnishments on all debts included in your proposal
2. Declaring Bankruptcy
Personal bankruptcy also provides immediate protection from a wage garnishment. Upon filing:
- You receive immediate protection, as all wage garnishments must stop
- Your trustee may be able to get back money creditors garnish from your wages after your filing date
- Your employer receives legal notice to stop taking money from your pay
- You can eliminate most of your unsecured debts through the bankruptcy process
Like a consumer proposal, bankruptcy protection starts the day you file with a Licensed Insolvency Trustee.
3. Can I Negotiate with Creditors?
While it is possible to negotiate before garnishment starts, creditors rarely stop an existing garnishment without full payment. If you want to negotiate:
- Contact creditors as soon as you receive legal notice
- Be prepared to make a significant down payment
- Have a realistic payment plan ready
- Get any agreement in writing
- Understand creditors may still proceed with garnishment
Most creditors prefer having a garnishment order since it guarantees payment. They often won’t cancel garnishment for payment arrangements alone.
More Related Articles:
- How to Stop a CRA Wage Garnishment
- Can a Joint Bank Account be Garnished in Canada?
- Can CERB Benefits (CRB) Be Garnished?
What to Do When Facing a Wage Garnishment
Don’t ignore collection letters or legal notices, hoping they’ll go away. The earlier you seek professional advice, the more options you’ll have to deal with your debt. If you are facing a garnishment, you need to act now before you lose part of your next paycheque. If a creditor has made an effort to garnish your wages, they are not likely to stop the garnishment because you agree to pay – they only garnishee people with a history of not paying or whom they believe will not pay.
Before your employer receives a garnishee summons, you should try to make a deal with your creditor or contact a Licensed Insolvency Trustee.
Licensed Insolvency Trustees Are Here to Help
A Licensed Insolvency Trustee can help you stop wage garnishment immediately. We’ll review your financial situation, explain all your options, and help you deal with your creditors.
Don’t wait until more of your wages are garnished. Contact Hoyes Michalos today for a free consultation to discuss how to stop your wage garnishment. We can usually stop garnishment the same day you file a consumer proposal or bankruptcy.
