How to Stop Wage Garnishment in Canada
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What does garnishment mean? According to Wikipedia, Garnishment is a legal process for collecting a monetary judgment on behalf of a plaintiff from a defendant. Garnishment allows the plaintiff (the "garnishor") to take the money or property of the debtor from the person or institution that holds that property (the "garnishee").
How Garnishment Works in Canada?
Basically, when you owe money you are the debtor and the company you owe that money to is the creditor. Weather you live in British Columbia or Ontario or anywhere in between, one of the actions the creditor can take to recover money owing, is to garnish the debtor’s paycheck or bank account. This is an extreme measure and creditors will take many other actions first, such as phone calls, letters of demand and sending the account to a collection agency.
Can creditors garnish your wages/paycheck?
A creditor or lender can in fact, garnish your wages. This is an extreme measure and they will usually exhaust all other methods to demand repayment of their funds. Some of the actions creditors can and will take before garnishing wages are:
- sue you for the amount outstanding and any interest and fees
- seize the security or the item that they lend money for; your car or house for example
- stop service; for example cell phone or utilities
- send your account to a collection agency
- send you demand letters
- apply for a court judgement
- garnish your wages or your bank account
One thing to note is that banks have the right to offset. What this means is, if you have a credit card with ABC bank and your checking account with ABC bank and you are in arrears with the credit card, ABC bank can and often will, garnish money from your checking account to pay themselves back. They do not need to notify you, it’s an automatic right they have in their fine print. All other lenders or creditors would need to apply to the courts to garnish your wages, unless the creditor is a credit union or CRA. Credit unions and CRA can initiate wage garnishment without a court order.
How to legally stop wage garnishment?
Creditors, including Canada Revenue Agency will usually take many other steps and give a debtor many other opportunities to clear their debt, before taking the steps to garnish wages. Once they take action to garnish your wages, they are less likely to settle that debt any other way. The only way to stop wage garnishment on your own is to pay off the debt you owe.
Filing a consumer proposal or bankruptcy will immediately stop all garnishment action, wage garnishment and account garnishment both. A Stay of Proceedings is protection from creditors which is only available under the insolvency act. It legally stops your creditors from contacting you, sending demand letters, applying for a judgement or garnishing your wages or bank account. The stay of proceedings is only available through a Licensed Insolvency Trustee firm like Bromwich+Smith.
Wage garnishment for child support
Child support payments are set up by a support order from a court or with a written support agreement signed by both parties. If you are not making your child support payments, your spouse can contact the provincial Maintenance Enforcement Program to help enforce support payments. Programs may use a variety of measures to enforce support. For example, they may:
- garnishee wages, bank accounts and certain federal government payments such as income tax refunds and employment insurance benefits,
- seize personal or real property,
- require the party in default to file financial information,
- suspend or deny provincially issued licences such as a driver's licence, and
- ask the federal government to suspend passports and certain federal marine and aviation licences.
Although, in most cases, filing into a consumer proposal or bankruptcy can and will stop wage garnishments, it is imperative to note that, garnishment for current child support payments cannot be stopped. Child support is a creditor that gets paid out first because the family unit support is paramount, that’s why that debt survives. If someone has not been making payments, Maintenance Enforcement will get a judgement and serve your employer. You may owe several thousands of dollars in back pay plus need to keep up with your current payments. Let’s say your employer is withholding $500 per month and of that, $250 is current and $250 is for back pay, signing into a consumer proposal or bankruptcy, can get the back pay forgiven. The current an ongoing payment would survive. It’s important to have a no obligation consultation to see what option is best for you.
Licensed Insolvency Trustees, Bromwich+Smith have debt relief specialists available to offer debt advice and debt restructuring entirely from the comfort of your own home. Now offering video appointments with clients, Bromwich+Smith’s Debt Relief Specialists are available for initial free and confidential consultation by phone at 1-855-884-9243 or request a call back at contact us page.