How to battle wage garnishment
What are your options to get your finances back on track?
Wage garnishment could leave you and your finances reeling. If you are behind in debt repayments, even if through no fault of your own, your creditor could use a garnishment on your wages to ensure the debt is repaid.
The Garnishment Act allows a creditor to take a big slice of your net wages before you receive a single cent. This could make it difficult to pay your utility bills. You might find it hard to put food on the table. It will probably destroy your social life. Then there’s the embarrassment of your employer’s knowledge of your personal finances.
The key to moving forward is understanding the wage garnishment law in Winnipeg and Kenora. Armed with this knowledge, you can employ the best strategy to avoid feeling like a creditor’s punch bag
What is wage garnishment?
Wage garnishment is a tool of last resort used by a creditor to collect a debt. Usually, a creditor will need to sue through the courts to obtain a wage garnishment order.
If successful, an assessed amount will be deducted from your wages by your employer and paid to the creditor. In general, only when the debt has been repaid or the garnishment lifted will those payments cease to be deducted.
In certain circumstances, a creditor will not need to go to court to make a wage garnishment. If you owe unpaid taxes, the Canada Revenue Agency can enforce a wage garnishment without suing through a court. Similarly, if you have used your wages as collateral for a credit union loan, a court order for wage garnishment is unnecessary.
How does wage garnishment work?
There are four parties involved in wage garnishment:
- You (the ‘debtor’)
- The creditor, to whom you owe the money
- Your employer
- The court
To sue for a wage garnishment, a creditor must present sufficient documentary evidence to support its case. The exact amount owed must be identified – if the exact debt is unknown, no court in Winnipeg, Kenora or the rest of Canada will order a wage garnishment.
As the debtor, you will be expected to provide evidence such as your financial standing, dependents, and income and outgoings.
With all the evidence laid out before it, the court will consider the case and make a ruling. It considers both the interests of the creditor and debtor. Once it has made its decision:
- The court sends the garnishment order to your employer before your wages are due to be paid
- Your employer stops the amount detailed on the garnishment order from your wages, and pays it to the court
- The court pays the creditor
In this process, the court acts as a middleman between the garnishee and the creditor. The employer is responsible for deducting the garnished amounts to pay to the court. In this way they act as a middleman between you and the court.
This process continues until the debt has been paid in full, or you stop working for your employer. However, the creditor must return to court to seek a new garnishment order after a year. Your employer could stop making payments after a year until it receives a new garnishment order.
How much can be garnished from my wages?
The law allows up to 30% of your net wages to be assigned under wage garnishment. Your net wages are considered to include salary, bonuses and commissions, after all taxes and other statutory liabilities have been paid.
When the court assesses how much you can pay under a wage garnishment order, it will consider a host of factors in your ability to pay. It knows there is no mileage in taking so much from you that you could not afford to live. So, while the maximum amount you will be required to pay is 30% of net wages, the court may reduce this with reference to:
- Your family circumstances (e.g. dependents and other financial needs of your family)
- Personal circumstances, including other debts
- Your conduct in court – cooperation is key
- Other familial income
The more financially unstable your circumstances, the smaller the amount of wage garnished. For example, if your spouse and dependents are unemployed, or on short-hours contracts, then the court will assess a smaller amount than if your spouse and dependents are all in long-term, stable employment.
How to stop wage garnishment
There is only a limited number of ways to stop wage garnishment. These include quitting your job, which we would not recommend. If you do this, the debt doesn’t go away. It sits there, waiting to pounce. Quitting your job simply delays debt recovery – it doesn’t eliminate the debt. It’s still a weight on your shoulders.
Far better strategies for dealing with wage garnishment include paying the debt in full (we know, you haven’t won the lottery!). However, even if you can’t pay the debt in full, any partial repayments that you make will help the debt to be repaid earlier.
If you are subject to wage garnishment, don’t make payments directly to the creditor. This includes any extra payments that you may be able to make. All payments must go through the court. It’s not unknown for a debtor to make a payment direct to their creditor, and then be required to make a duplicate payment through the court for it to be recognized.
There may be times when a current wage garnishment would cause financial hardship. While these don’t include your desire to lavish expensive presents on your children at Christmas, you may be able to petition the court for relief. Again, this is a way to stop wage garnishment, but the debt does not go away.
You could declare bankruptcy. This may be your best solution, but you would need to prove that you really are insolvent. Before you take the step of bankruptcy, speak to LCTaylor in Winnipeg and Kenora. We’ll explain the law and your rights and obligations should you declare bankruptcy.
There is one other very powerful debtor strategy you could use in your fight against wage garnishment, particularly if you fight back sooner rather than later.
Consumer proposals in the fight against a wage garnishment
You could file a consumer proposal. For many this is a good option.
We wouldn’t be surprised if you’ve never heard of a consumer proposal. Many people haven’t. Your creditors probably don’t want you to know about this – they tend to receive far lower payments than they would under a wage garnishment. Of those people who have heard of a consumer proposal, few understand how it can be used.
The first step is to seek the help of a Licensed Insolvency Trustee. When we help our clients take this route, we provide legal advice and draw up a consumer proposal to put forward to the creditor. We’ll agree a payment plan which allows you to cover part or all your debt over a specific period. Then you can get back to living, and start enjoying life again.
Wage garnishment options
Being subject to a wage garnishment is not the end of the world, but it can be embarrassing. It can also be more expensive than other options available to you. Exploring those options is key to making the best decision and getting your finances back on track as quickly as possible.
Everyone has periods in life when they battle with debt. To come out stronger the other side, it’s important to keep as many options open as possible. To do this, you should seek legal help and credit counselling at the earliest possible opportunity.
As we’ve discussed, there are strategies you can employ to stop wage garnishment, but the later you leave to discuss your options, the more complex and expensive these strategies become. So, don’t delay the discussion you need. Contact us today in our Winnipeg office on 1.800.463.8371 or use our online contact form to request a free and confidential initial consultation.