If your creditor doesn’t receive the money they are owed, they can turn to wage garnishment as a court-mandated way to directly take funds from your income. When you have ignored payments (or have been unable to meet them), your creditors can take up to 20 percent of your gross wages to go towards what you owe.
Creditors often start garnishing wages if you’ve defaulted on your loans or haven’t made payments on your debts despite consistent reminders. That said, you do have options to stop this process.
At David Sklar & Associates, our Licensed Insolvency Trustees in Toronto can help you weigh your options and identify your rights to prevent or stop wage garnishment in Ontario.
What Is Wage Garnishment?
A wage garnishment (often called a garnishee) is a legal proceeding in Ontario from the Courts where money owed to a creditor is taken from the debtor by a third party (i.e., Bank or Employer) and given to the creditor. The money is usually taken from a debtor’s bank account or a debtor’s wages.
How Does A Wage Garnishment Work?
Any creditor that is owed money by a debtor can file a wage garnishment. This includes credit card companies, payday loan lenders, collection agencies, and the Canada Revenue Agency.
To garnish wages, a creditor will need to file a Statement of Claim and bring the motion to the court to obtain a judgement and wage garnishment order. As a debtor, you will have 21 days to respond to the Statement of Claim to either dispute the debt or notify the creditor of an error. If there is no response, the court will assume you agree to the debt, and the creditor gets their Garnishment Order.
It’s important to note that the CRA does not need to wait for a judgment to be passed to apply garnishment to a debtor.
According to the Canadian Government, if an individual owes a sum of money to the CRA and cannot or refuses to pay it, the CRA can garnishee their wages. In the event of a wage garnishment, the CRA will provide a debtor’s employer with a requirement to pay notice instead of presenting it to the debtor.
Upon receiving the notice, an employer will need to remit all amounts specified and be responsible for any necessary amounts that are not remitted. The collection officer’s name will be indicated on the notice of requirement so that the employer can request further information if required.
Who Can Garnish Wages In Ontario?
- Credit card company
- A collection agency
- Payday loan lenders
- The Canada Revenue Agency (CRA
How Do I Stop Wage Garnishment In Ontario?
These options can help protect you and help you to get your financial situation back on track.
How to Stop Wage Garnishment with A Consumer Proposal
One way to stop wage garnishment in Ontario once the order is in action is to file a consumer proposal. If you’re unsure how a consumer proposal works or how it affects your mortgage options, a trustee at David Sklar & Associates can walk you through the process.
Depending on your situation, you may not have to file bankruptcy to get a garnishment lifted. For many debtors, this avenue of debt relief is an ideal way to settle debts without some of the severity of filing for bankruptcy.
If you qualify, filing a Consumer Proposal will enable you to:
- Stop garnishments
- Stop collection calls
- Keep your assets
- Pay off all your debts at a fraction of the total owing in five or less years.
Your Trustee will advise you on whether or not you are eligible for wage garnishment protection by filing a proposal or bankruptcy.
Team Up With A Licensed Insolvency Trustee
Licensed Insolvency Trustees (formerly known as bankruptcy trustees) are licensed by the Office of the Superintendent of Bankruptcy (OSB). They administer forms of debt relief like bankruptcy and can also help you learn about other options to consider, like a consumer proposal.
There are a few steps that you need to take before your creditors approve your proposal. Only a bankruptcy trustee can officially file the proposal for you, so it’s essential to work with someone empathetic and knowledgeable when you are ready to initiate a consumer proposal in Ontario.
Paying Off Your Consumer Proposal
The amount of time you have to pay your creditors through your consumer proposal depends on your agreement’s terms, but the process can take up to five years.
One of the attractive qualities of a consumer proposal vs bankruptcy is that, while a bankruptcy affects your credit score for up to seven years after completion, a consumer proposal only stays on your credit history for three years after completion.
If you take out a loan to pay off your proposal, you’ll pay more money in the long run. Be smart and conscientious about your repayment strategy. It’s better to be financially responsible than to try to make the problem disappear quickly with long-term consequences.
Even if you have five years to pay off your consumer proposal, the promise of having the record wiped from your credit history means you might want to pay off your proposal as fast as possible. If you are thinking about taking out loans while in a consumer proposal to speed up the process, consider that while consumer proposals do not collect interest in the period that you pay them off, your loan will.
How to Stop Wage Garnishment with A Division 1 Proposal
If your total debts exceed $250,000 (not including your mortgage), you will not qualify for a consumer proposal — but that doesn’t mean that you need to file for bankruptcy. In this case, you can still be eligible for a Division 1 Proposal. Division 1 Proposals can also be filed by businesses looking for debt relief.
This proposal signifies a compromise agreed upon between debtors and their unsecured creditors. The proposal helps lower the total amount of debts owed to make it easier for the debtor to repay their creditors.
How to Stop Wage Garnishment with Bankruptcy
Dealing with wage garnishment can be very frustrating both financially and emotionally. If you are dealing with garnished wages, needless to say, you are in financial trouble.
Bankruptcy is the last resort when dealing with wage garnishments, but it is nevertheless an option that you can use if needed. We will help you through every stage of the process.
When you file bankruptcy to stop wage garnishment, any garnishees on your wages and or bank accounts will stop — and so will the collection calls. Your employer will need to be informed by the Trustee to stop the garnishment of your wages.
One important side note is that a consumer proposal or bankruptcy will not stop alimony or child support payments.
Can Creditors Garnish Wages in Ontario?
Creditors can garnish wages in Ontario. That said, when a creditor pursues garnishment against a debtor, they have specific rules and regulations to abide by. For example, if a creditor wants to get a garnishing order against a bank account, the creditor must first file a Statement of Claim and obtain a garnishing order.
After a debtor receives this claim, they will then have 21 days to respond either by identifying any errors to the creditor or by filing a Statement of Defense to dispute the debt,
As per the Ontario Wages Act, a creditor can garnish a maximum of 20% of your gross wages for debt. This limit varies in different provinces.
Creditors may only contact your employer once to get your employment information unless your employer has guaranteed your debt or the call is about legal action (i.e., garnishee, court order, etc.). Before telling a creditor and beginning legal action, your employer must notify you in writing.