There’s no doubt about it. Collection calls are stressful, and threats of wage garnishment are especially frightening. You can avoid garnishment by learning more about when it happens, and what you can do to protect your paycheck. If you have already experienced wage garnishment, help is available.
Here’s what you can do if a collection agency or creditor is threatening to garnish your paycheck or checking account.
Wage Garnishment Basics
First, let’s discuss how wage garnishment works. Garnishment is a legal step your lender can pursue if you stop making payments. When the creditor believes you are not going to pay back what you have borrowed, he may decide to garnish your wages. Before doing so, the creditor must get a court order. He is required to provide the court with information such as:
- How much money you owe
- How long it has been since you made a payment
- How much money you have in checking or savings accounts
- How much your assets are worth
If the judge decides the claim is valid, he issues a court order.
A court-ordered wage garnishment involves three different parties—you, your lender, and your employer. Your employer will receive notice that they must turn over a certain percentage of your paycheck to the court. The court will then send the money to your lender. Sometimes, a court order isn’t necessary. If you owe back taxes, the Canada Revenue Service can attach your wages without a judgment.
Preventing Wage Garnishment
Sometimes, a creditor may threaten to sue you or take you to court, especially if you ignore bills or phone calls. A court order costs your lender a lot of money and time. It’s usually a last-ditch effort to get you to pay what you owe.
You can avoid losing your paycheck and the embarrassment of having your wages attached by keeping the lines of communication open. If you can’t afford to make your payments, let your lender know. Most creditors want to be paid back without the expense of going to court.
Getting Wage Garnishment Help
Help is essential if your wages have already been garnished. You should visit with a licensed insolvency trustee if you suspect there has been a judgment against you, or if you receive notice that your wages have been garnished.
There are only two legal options that can stop the process—a consumer proposal or bankruptcy. A licensed insolvency trustee will help you decide which option is best for you.
A consumer proposal will stop all legal action against you and allows you to propose new payment terms to your creditor. You may negotiate a lower monthly payment or interest rate, or you may settle your balances for a percentage of what you owe.
A bankruptcy also stops all legal action against you, but it is a more serious decision. Your licensed insolvency trustee will help you understand what will happen if you file bankruptcy and if it is the best solution for you.
You can prevent garnishment by staying on top of your payments and keeping the lines of communication open. And if you do need wage garnishment help, a trustee can provide it.