Wage garnishments are a nightmare for many people, but with a little knowledge, you can find a way out of the darkness.
First, what is a wage garnishment?
In Canada, there are three types of wage garnishments:
- Canada Revenue Agency (CRA)
A CRA garnishment can take up to 50% of your employment earnings and 100% of other earnings, such as pensions and contract income. The CRA can garnish your wages simply by sending a letter to your employer, or to your clients if you’re self-employed. They do not need a court order.
- Court-Imposed Collection or Creditor
A collection agency or creditor typically needs to file a lawsuit to garnish your wages. If it is successful, they can serve the wage garnishment order to your employer or clients. Unlike the CRA, the amount a creditor can garnish varies from province to province. It is usually 20%, but can go as high as 50%of your gross earnings.
- The Government
If you owe the government, your wages can be garnished with a court order, and in some cases, without one. Examples of government-mandated wage garnishments include unpaid student loans, money you received that you shouldn’t have, employment insurance, etc. It could also include a court-mandated family responsibility, such as unpaid child support.
Wage garnishments are not only embarrassing – since your employer and/or clients now know you’re in debt – but can also cause severe financial issues. Losing so much of your paycheque makes it hard to keep up with other bills. And as some jobs require financial responsibility, the presence of a wage garnishment can permanently damage a banking relationship.
If you have a wage garnishment, how do you get rid of it?
1. Canada Revenue Agency
With the CRA, there are two options:
a) You pay the debt in full. The CRA must agree to remove the garnishment.
b) Seek the protection offered by a Licensed Insolvency Trustee (LIT). A LIT is the only professional in Canada, besides a judge, who can remove a CRA garnishment.
2. Court-Imposed Collection Agency or Creditor
With private creditors, there are three main options:
a) You pay the debt in part or in full and the creditor agrees to reduce it or remove the garnishment.
b) You file a motion and ask a judge to reduce or remove the wage garnishment (this can be expensive and there are no guarantees).
c) You seek protection through procedures only available from a LIT.
3. The Government
a) You pay the debt in part or in full and the government agency agrees to reduce or remove the garnishment.
b) You seek the protection offered by a LIT. However, the protection a LIT can offer in this case depends on several factors — the government agency, type of debt, age of debt, etc.
An important exception with a government-mandated wage garnishment is family responsibility. A LIT cannot offer protection as it relates to not paying your child support. You can either pay the debt or go to court and ask a judge to reduce or remove the garnishment.
If at all possible, it is highly advisable to deal with the debt before a wage garnishment is issued. Once a garnishment is in place, the creditor is empowered and often becomes far more difficult to negotiate with.
What to do if you’re threatened with a wage garnishment:
a) Ask yourself, do you have the ability to pay the debt? If yes, then pay it. If no, proceed to the next step.
b) Consult a LIT about your financial options. A consultation is free, and you can learn your rights and all options.
c) Deploy a solution to deal with your wage garnishment.
If you’ve been threatened with a wage garnishment, whether it’s a CRA garnishment or otherwise, don’t wait — contact a LIT today to see what protections can be offered. The professionals at Fuller Landau Debt Solutions are experienced in dealing with wage garnishments and can help you put a plan in place to get back on financial track.
Contact us today for a free consultation. Call (416) 927-7200 or visit www.fullerdebt.com.