What To Do If You Receive A Wage Garnishment
Today I speak with Rebecca Martyn, Trustee in Bankruptcy and Consumer Proposal Administrator at Hoyes, Michalos & Associates Inc. and our co-founder, Ted Michalos. We talk about one of the biggest reasons people contact a Bankruptcy Trustee in a panic - they've received notice from a creditor or their employer that their wages are being garnished. Today's podcast explains everything you need to know about wage garnishments and what you can do about it.
Rebecca explains what a wage garnishment is, how it works, and who it effects. To round out the discussion, Ted offers solutions for dealing with a wage garnishment if it happens to you. His biggest piece of advice: be proactive and take control of your financial situation. Don't let a wage garnishment be the straw that breaks the camel's back; make a plan to deal with debt before it gets that far.
A Few Basic Definitions
- Wage - An amount of money that a worker is paid.
- Garnishment - A legal procedure the creditor goes through to collect on the debts owing by trying to take property that is in someone else’s hand other than the debtor.
- Wage Garnishment - Collecting a debt owing by notifying your employer to take a certain amount of money from your paycheque for the benefit of a creditor.
The Wage Garnishment Process
Rebecca explains that a wage garnishment is part of provincial legislation under the Ontario Wages Act. Certain wages cannot be included in a wage garnishment including automatic deductions such as Employment Insurance, CPP and income tax. The maximum that a creditor can garnishment is 20 percent (50 percent for family support) and anyone who owes money can be garnisheed.
Rebecca explains how the wage garnishment process works:
- The creditor issues a Statement of Claim, giving you 21 days from the time that it is mailed to respond. You can dispute the claim by filing a Statement of Defense within those 21 days if the debt is not yours or a mistake has been made.
- If you do not respond, it goes to court and you automatically lose, allowing that creditor to garnishee your wages.
- A garnishment order is obtained.
Exceptions To The Rule
- Canada Revenue Agency does not need a court order and can send a Requirement to Pay to your employer which automatically triggers the wage garnishment to start.
- Credit Unions include a Wage Assignment clause in the paperwork that you sign that stipulates that if you fail to pay, they can simply send that wage assignment to your employer.
- Any creditor can ask you to sign a document known as a voluntary wage assignment that entitles them to notify your employer to garnish your wages without going to court.
Dealing With The Garnishment And The Debt
Ted offers advice for dealing with the threat of a wage garnishment. He explains that,
...a threat is different than the actual wage garnishment. It's pretty easy for anybody to say I'm going to garnishee your wages. Take that as a warning sign or a signal that it's time for you to do something about this debt...Don't leave yourself open to what they want to do.
A garnishment, or threat of garnishment, however is usually a symptom of an underlying problem - you owe a debt you can't pay. Ted emphasizes the need to be proactive and deal with the debt head-on. You need to take control, which may mean finding a way to arrange payment if you can or contacting a Bankruptcy Trustee to help eliminate your debt if you can't.
If you've received a garnishment already, and you can't pay the debt, now you need a legal proceeding to stop the garnishment. Ted explains how filing bankruptcy or a consumer proposal stops the wage garnishment as soon as your trustee gets your file number from the government (which is instantaneous) through a Stay of Proceedings.
Listen to the full show or read the transcript Show 28 - Full Transcript - Wage Garnishments for more information and advice.