You have likely heard of people having their wages garnished. You may have some questions about what this means. More importantly, you may want to know what you can do to protect yourself if you find it happening to you. When a person’s wages are garnished, an employer is required to withhold the sum of their paycheck and send it directly to the person to whom the individual owes money. This process continues until they resolve the debt.
This commonly happens with individuals who have back child support, student loans, or consumer debt. Once the debt is paid off or is otherwise resolved, the garnishing quits. Understandably, a person who is having their wages garnished can feel as if they have no control over their finances. Steps can be taken to minimize the impact of having their wages garnished and help a person bounce back.
You Always Have Options
What is important to remember when facing wage garnishment in Canada is that you always have options. Anyone who you lawfully owe money to can attempt to garnish your wages. However, this process can be stopped if you work with a licensed insolvency trustee.
A dramatic option is quitting your job. If this happens, there is nothing for them to garnish. Understandably, this option is unrealistic for most people as they use their employment to survive.
A more realistic option is to negotiate terms for repayment with your creditor. These terms would stipulate that you would repay the debt as long as they remove the garnish.
Another option would be to pay back your creditors by taking out another loan. This option could feel like you are robbing Peter to pay Paul. Usually, if your financial situation has gotten to where your wages are being garnished, then your credit is also damaged. Getting a loan at a reasonable interest rate may be difficult.
You could file a consumer proposal. You could also file for personal bankruptcy. Both of these legal actions can put an immediate stop to the garnishing of wages. However, it is important that you act quickly. The sooner you take advantage of court protection, the sooner you can stop the garnishee from taking your money.
When Creditors Start to Garnish Your Wages
It’s important to realize that a creditor will not garnish your wages because you didn’t make a payment. You might face interest charges or other fees for missing just one payment. Creditors garnish your wages after you have missed multiple payments and your account is now delinquent. Before creditors take the step of garnishing your wages, they are going to contact you on the phone and try to work out some arrangement that will work for you and your creditor.
It’s good to note that in Canada, creditors can’t just garnish your wages willy-nilly. They need to follow procedures, including getting a court order. First, the court is going to see if you have assets that could be seized to pay the debt. If you don’t or if the assets you have only cover part of the debt, the debtor may take steps to garnish your wages.
What Is the Maximum Amount of Money That Can Be Garnished?
The answer to that question is going to vary from province to province. For example, in British Columbia, a creditor can take up to 30 percent of your after-tax wage. However, in Saskatchewan, the law requires that they leave you with $,1500 per month plus $300 for each dependent. If you are making $6,000 a month and only had one dependent, a creditor could garnish $4,200 a month from you.
Things even more complicated in the province of Alberta. You can keep the first $800 you earn. Then creditors can take 50 percent of your income up to $2,400. Anything you make over $2,400, creditors can take 100 percent. For each dependent that you have, the exemption limit jumps by $200.
You should know that these limits are not universal. For example, owing taxes to the government, if you owe child support or alimony, or if you are self-employed, you could face higher levels of garnishment.
If it worries you that a creditor is going to garnish your wages, don’t fix things on your own. It’s better to speak to a professional, like a licensed insolvency trustee. They will give you advice on how to deal with wage garnishment in Canada.