When you have outstanding debt obligations, creditors may decide to take legal action to try and collect. In Canada, debtors may be subject to wage garnishment if a creditor sues to obtain a judgment or if they owe unpaid taxes or domestic support. There are specific rules governing when and how a wage garnishment order can be enforced. Canadian residents need to be aware of how the process works and what their rights are.
Types of Garnishment
Canadian law recognizes two forms of garnishment: pre-judgment and post-judgment. A pre-judgment garnishment means that creditors can attach your assets, including property and bank accounts, before obtaining a court order. A post-judgment garnishment means creditors can only attach your assets after winning their case. Only post-judgment garnishment orders apply to wages. A court order is not necessary for the enforcement of a wage garnishment if you owe unpaid taxes to the Canada Revenue Agency or if you've given an assignment of wage to a credit union as collateral for a loan or credit contract.
Canadian law regulates the amount by which your wages can be garnished each week. Depending on which province you live in, creditors can garnish between 15 and 30 percent of your wages. Provincial law determines whether this figure is based on net or gross pay. In cases where the garnishment order is for unpaid spousal or child support, the garnishment amount may be higher. If you're being garnished for back taxes, the Canada Revenue Agency may use its own discretion in determining what amount of wages will be garnished.
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Garnishment and Hardship
In cases where a wage garnishment presents an undue financial hardship, you may be able to get the amount of the garnishment reduced. Under Canadian law, you can ask the judge or registrar of the court to reduce the percentage of your earnings that are being garnished or release the garnishment entirely. You also have the option of setting up an installment plan to pay the judgment, which requires the court's approval. If you request an installment plan, you'll have to attend a court hearing where the judge will evaluate your financial situation to determine whether payments are appropriate.
Stopping Wage Garnishment
If your wages are being garnished and you don't qualify for hardship relief, your options for ending the garnishment are to pay the judgment in full, file a consumer proposal or declare bankruptcy. Filing a consumer proposal means you agree to pay down your debts over a set period of time; in exchange, you get to keep your assets and any wage garnishments stop. The process works similar to the way a Chapter 13 bankruptcy does in the United States. Filing bankruptcy also stops wage garnishments and allows you to eliminate your debts entirely; however, you run the risk of losing your home or other property.
- Canadian Bar Association: Garnishment
- Law Firm of Hoyes and Michalos: What is a Consumer Proposal?
- Bankruptcy Canada: How Do I Stop a Wage Garnishment in Canada?
- Office of the Superintendent of Bankruptcy Canada: Declaring Bankruptcy
- Ceridian Canada: Garnishments and Maintenance Orders
- Canada Revenue Agency: Collections Policies
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