Wage Garnishments. No Need To Panic

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Posted in Debt Help
Posted by J. Douglas Hoyes, CA, CPA, LIT, CIRP, CBV

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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:

  1. 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.
  2. If you do not respond, it goes to court and you automatically lose, allowing that creditor to garnishee your wages.
  3. 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.

Resources Mentioned

FULL TRANSCRIPT show #28 with Rebecca Martinwage-garnishments-transcript

Doug Hoyes: Welcome to Debt Free in 30 where every week we take 30 minutes to talk to industry experts about debt, money and personal finance. I’m Doug Hoyes.

As frequent listeners to this show know, I’m the co-founder of Hoyes, Michalos & Associates. A firm that does bankruptcies and consumer proposals and I can tell you that based on my experience over the last couple of decades, that if I was to make a list of all the reasons someone calls a Bankruptcy Trustee in a panic, there is one common reason that is always at the top of the list. What makes someone in debt call my office in a panic? Two words, wage garnishment.

Obviously people go bankrupt because they have too much debt, but debt is generally something that builds up over an extended period of time. It doesn’t accumulate over night. So what’s the straw that breaks the camel’s back? What drives people to the breaking point and forces them to call our 310 plan helpline? Wage garnishment. If a bill collector threatens a wage garnishment or if a wage garnishment actually starts, many people decide they have no choice but to seek the protection of a consumer proposal or a bankruptcy because a bankruptcy or consumer proposal filing immediately stops most types of wage garnishment.

So, what is a wage garnishment? Is it legal? Who can get one? How do you stop it? Those are important questions so let’s spend the rest of the show talking about everything there is to know about wage garnishments.

To help me do that I’m joined today by Rebecca Martin, Rebecca thanks for being here. Welcome to the show. Can you give us a quick introduction about you?

Rebecca Martyn: Yes, as you said my name is Rebecca Martin. I am a trustee here with the Windsor & Leamington offices of Hoyes, Michalos & Associates. I got my training at a big accounting firm and joined Hoyes, Michalos back in 2003 once I received my license.

Doug Hoyes: There you go. So, let’s talk about the legalities of this first. So, let’s kind of go through this quickly and hit all the key points to begin with. So, we’re talking about wage garnishment, so tell me right off the bat, what is a wage?

Rebecca Martyn: A wage is something you get paid for working.

Doug Hoyes: Okay and what is a garnishment?

Rebecca Martyn: A garnishment is the actual 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.

Doug Hoyes: Okay so what then is a wage garnishment?

Rebecca Martyn: So, the actual wage garnishment is the legal procedure where the creditor collects the debt owing to you by your employer.

Doug Hoyes: Okay so that’s where they’re taking the money off my paycheque. So, you call it a legal procedure, so I assume therefore it is governed by some law?

Rebecca Martyn: Yes there is a legislation or for it. It’s called the Ontario Wages Act.

Doug Hoyes: And therefore this only – what we’re talking about today – applies specifically in Ontario. It’s provincial legislation. So, if you happen to be listening to this show somewhere other than Ontario, the rules are probably very similar, but maybe not exact. So, that’s our little caution for the day. This is Ontario law that we’re talking about here today.

So, what based on the law, would not be included as part of wages?

Rebecca Martyn: Well, whenever you get paid you automatically have certain deductions, like E.I, C.P.P, income tax, those aren’t included as wages.

Doug Hoyes: Okay, so the wages are what I actually get. So, how much then under the law, the Wages Act of Ontario, how much can be garnisheed? What’s the maximum a creditor can get if they go through this legal procedure?

Rebecca Martyn: So, 20 percent can be garnisheed unless it’s for family support in which case it goes to 50 percent, but you have to keep in mind that the court can either increase or decrease that amount.

Doug Hoyes: Okay, so a typical creditor that would be someone like the credit card I didn’t pay, my bank loan, anything like that, the most they could get is 20 percent of my wages, unless the court says something different. Is that a correct summary?

Rebecca Martyn: That’s right.

Doug Hoyes: Okay, and so who can get a wage garnishment?

Rebecca Martyn: Well, anyone if you’re owing money. The creditor can take you to court, and if they win the court can give them the order to garnish your wages.

Doug Hoyes: And so, if I’m a creditor, let’s flip it around here then, somebody owes me money; let’s say I’m a bank or a credit card company, what do I have to do then? What’s the process? I have to go to court. How does that work? What’s involved there?

Rebecca Martyn: So, essentially the first thing you do is you issue what’s called a Statement of Claim. That gives the debtor so much time to actually respond to it. If there’s no response and it goes to court, the creditor automatically wins and the court issues a judgment and that judgment then allows them to garnishee the wages.

Doug Hoyes: And so, that judgement then I have to turn it into the garnishment order itself. So I have to go back to court to get that or there’s some further legal process I guess to get that. And how long does that take? Like if someone owes me money, can I get a garnishment today?

Rebecca Martyn: No, you can’t get a garnishment today. If you’ve ever seen a Statement of Claim form it says that you’re given a certain amount of time to respond, as the debtor. And I believe that’s 21 days from when it’s deemed to have been mailed, they will get a judgment unless there’s some sort of statement of defense filed.

Doug Hoyes: Got you. And in my experience, and I’m sure your experience is the same, it usually takes a lot longer than that. A big bank isn’t going to cut it right to the day. They’re probably going to send you out the notice, give you ample time to respond; they might give you 30 days, 40 days, 50 days, 60 days, whatever. And then, that’s when the court date actually happens. And so what you said, if I don’t show up in court, I automatically lose.

Rebecca Martyn: That’s right.

Doug Hoyes: Whereas if I do show up in court, I’ve got a chance to fight it. But my chances are pretty slim I would assume because I owe them money; unless I can prove I don’t owe them money, I’m going to lose is what’s going to happen.

So, are there any – we talked about the usual guys, banks, credit card companies, things like that - are there any special rules for anyone else other than those guys I just mentioned?

Rebecca Martyn: Yeah, that’s true. Canada Revenue Agency, they don’t need a court order. They can just notify your employer that you’re owing tax money and they can garnish your wages.

Doug Hoyes: So, what’s the piece of paper that they would send to your employer to do that?

Rebecca Martyn: The document is called a Requirement to Pay.

Doug Hoyes: So, it’s a Canada Revenue Agency Requirement to Pay notice. They don’t need to go to court to do that. They fill it out, they send it to your employer, boom, a wage garnishment can start. So, okay Revenue Canada - Canada Revenue Agency - doesn’t need to go to court.  Who else has special rules when it comes to wage garnishments?

Rebecca Martyn: Credit Unions do. They don’t need a court order as well. A lot of times when you get your loan from a Credit Union, they have you sign a piece of paper called a wage assignment. And if you’re not making those payments on that loan, they just send that wage assignment to your employer and that gives them the authority to garish your wages as well.

Doug Hoyes: That’s something that perhaps people don’t fully understand because they always think of a Credit Union as being, well they’re in my neighbourhood, they’re not a big bank, they’re very friendly. Well, yeah they are, but they also have this special power under the Ontario Wages Act that allows them to get a garnishment without having to go through the normal court process. Does that apply to anyone else? Anybody else on this list of special people that we’re talking about?

Rebecca Martyn: Well, I suppose if you get in any kind of debt and you signed with a creditor they can then technically send that to your employer and ask that your wages be garnisheed.

Doug Hoyes: So, any voluntary wage assignment. And we see this quite common. At least it has been in the past with things like payday loan. So, they give you the payday loan but they get you to sign a piece of paper saying if you don’t pay me then we can immediately go to court and – in fact we don’t need to go to court, we can just send this piece of paper right to your employer and start garnishing your wages.

Okay, so that’s the big picture on wage garnishments. Have you got any examples of people that you’ve run into, people you’ve helped, who had a wage garnishment and then you know if so, what did you do? What was the solution?

Rebecca Martyn: Well, you’re right. Just like you said at the beginning of the program that just the wage garnishment is what causes a lot of people to call us in the first place. And, so I thought I would share a couple of stories of people who I helped last week.

So, the first guy and I’ll call him Frank. And Frank’s not his real name; it’s just a name I made up. A few years ago he was self employed and as a lot of times happens, they ran into trouble and then started using his tax money, the money he should have been paying for tax money to help fund his business and before he knew it, he owed Revenue Canada $25,000. He eventually had to retire but he still owes Revenue Canada this $25,000. He can’t pay it. He can’t work out a payment plan so the only source of income he has now is C.P.P. So, Revenue Canada, Canada Revenue Agency starts garnishing his C.P.P. So, he came to see me and he decided to file bankruptcy. So, he files for bankruptcy, we sent notice to Service Canada, they’re the ones who issued the Canada Pension Plan and we sent notice to Canada Revenue Agency and then the next month he gets this full pension cheque again.

Doug Hoyes: And that stopped it right away then.

Rebecca Martyn: And that stops it right away. There’s a little big of a lag. But depending on when you’re filing and you can’t come in on, let’s say the last day of the month and expect the pension cheque tomorrow to have the garnishment removed from it. But the next month will have the garnishment removed.

Doug Hoyes: And that’s because obviously the cheque is being cut a few days in advance by the government or the electronic deposit has been paid.

Okay, so that was an example of somebody who had a government debt. Have there been other types of debts you’ve been able to help with when it came to wage garnishment?

Rebecca Martyn: Oh yeah absolutely. So, the other person I saw, I’m going to call her Joan. She went through a marriage separation and lost her car. So, the car company sold it and went after her for the balance owing. And so they took her to court and got the garnishment order and sent it to her employer and she said she didn’t even know about it. All of a sudden she gets a note for her HR department saying we have this notice, we’re going to garnishee your wages. She came to see me, she filed a consumer proposal. So, we notified the court, we notified the creditor, we notified her employer. You’re under consumer proposal protection so now the wage garnishment stops.

Doug Hoyes: So, the message here is for those types of debts that you just talked about, a bankruptcy or a consumer proposal, very quickly stops wage garnishments, and that for a lot of people is the whole reason that they do them. Great thank you very much, Rebecca, thanks for joining me. We’re going to take a quick break and then come back and talk a bit more about wage garnishments here on Debt Free in 30.

Announcer:       You’re listening to Debt Free in 30. Here’s your host, Doug Hoyes.
Doug Hoyes: We’re back here on Debt Free in 30 and today we are talking about wage garnishments. It’s one of the most common reasons that someone starts thinking about having to go bankrupt or file a consumer proposal. In the first segment Rebecca Martin walked us through some of the technical aspects, what is it? How does it work? And now we’re going to look at some practical things. I’m joined again by Ted Michalos. Ted, how are you doing?

Ted Michalos: I’m fine Doug. How are things?

Doug Hoyes: It’s all good. So, wage garnishments. Would you agree that this is in fact one of the main reasons that someone is contacting you? That’s kind of the impetus; the straw that broke the camel’s back kind of a thing?

Ted Michalos: That’s a perfect analogy. It is the straw that breaks the camel’s back. You’re already afraid about your debt loads and the people that you owe. You get notices from the court or collection agency and maybe you’ve been ignoring them. Finally somebody has taken you to court. They’re garnishing your wages, now what do you do about it?

Doug Hoyes: And it’s really the symptom of the underlying problem. I’ve had this underlying problem for a long time. It takes a while to go to court and garnishee someone’s wages, but now it crops up.

So, okay you asked the question. Give us the answer. What do you do about it? When you are threatened with a wage garnishment, and let’s start with that. Let’s say there’s not any actual court actions yet, but the collector says well if you don’t pay me I’m going to garnishee your wages. What’s your thought process at that point in time?

Ted Michalos: So, the first thing people have to recognize is, a threat is different than the actual wage garnishment. So, 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. So, they may or may not do it. Don’t leave yourself open to what they want to do. You need to take progressive steps that deal with the debt problem now. Now that may mean contacting someone like Doug or myself, somebody from our firm. It may mean simply moving money around. It depends on your own unique financial situation. The important thing to emphasize is, somebody’s made the threat, you need to deal with it before they actually make it a reality. You do not want a wage garnishee. You start missing mortgage payments and so on.

Doug Hoyes: So, what you’re talking about then is that you’ve got to be in control.

Ted Michalos: Yep.

Doug Hoyes: You’ve got to be proactive. Okay, so let’s talk about some proactive things you can do. So, you mentioned moving money around; what are you talking about there?

Ted Michalos: Okay, so the person that only has one problem account. Let’s say you defaulted on your Rogers account because you got mad at them because they’re crooks. You stopped paying that bill. They’re now threatening you with a wage garnishee. They’re going to take legal action against you. Alright well, pay off the account. That’s the simplest solution to make that problem go away.

The difficulty is, most folks we talk to don’t just have one account that’s in trouble, they have a series of accounts that’s in trouble or they’ve got accumulated debt; they don’t have access to money they can move around. I suppose you could take a cash advance on a credit card to pay off the Rogers bill, but now you’ve got a problem with the credit card.

Doug Hoyes: Yeah and that’s not certainly something we would want to recommend. So, if you have one account that’s relatively small and you can deal with it then you’re advice is pay it and you’re done. Problem solved. That’s it. So, if it’s an old cell phone bill, okay it’s $500, fine. I will come up with the $500 and pay them off. If it’s a $20,000 line of credit that I wasn’t able to pay, and now I’m a few months behind, they’re threatening to take me to court, they’re threatening to garnishee my wages, I can’t just ignore it. I can’t just move money around cause it’s too big a number. And you’re saying I shouldn’t be ignoring it because with an amount like that they’re probably going to do something.

Ted Michalos: Okay so the way that you phrase that question, pretty much produces the answer. You’ve got more of a problem than you can deal with yourself. So, you’ve got to look to outside sources.

So, the first place I always recommend is family and friends. So, if you’ve got other people that you rely on and you trust that will give you good financial advice. Now be careful here. You’re talking about your money. I know you’re uncomfortable talking to anybody about it but getting advice from Aunt Betty may not be the best source of advice to deal with this problem because there’s a threat for legal action.

Doug Hoyes: Well, and Aunt Betty may not be a financial expert. So, when my car’s making a funny noise I probably don’t talk to Aunt Betty because she’s probably not a mechanic. Now I do have a brother-in-law who is a mechanic and she would be a perfect person to talk to. So, family and friends is a great place to start but you’ve got to kind of take the advice with a grain of salt. And I guess what you’re really saying is look if Aunt Betty is rich and can loan you the money to pay off the debt, fine, then she’s an excellent person to talk to.

Ted Michalos: Or Aunt Betty may have been through this herself before. So, she may have a solution or a path that you can follow. And what you’re looking for is tools to help you through the problem. So, you start with family and friends because these are people that you trust.

The next layer out is some sort of professional. Do you talk to your banker? Well maybe if you don’t have a lot of debt, if there’s only one or two things and then there’s a chance that you can consolidate or group things together. It might be more effective to talk to your accountant or lawyer if you have access to those things. Frankly, I think the average person, their best bet is to go on the internet and find someone like us; a Credit Counsellor perhaps, a Trustee in Bankruptcy, somebody who is a trained professional in dealing with debts.

Doug Hoyes: So, let’s talk about the banks. That would be an obvious thing. I owe a bunch of money to this guy, if I can borrow some from that guy, pay it off then I’m good. What do I need to worry about though when I’m talking to the bank?

Ted Michalos: Well, the first concern for the bank is, they want to lend you money when you don’t need to borrow it. If you’re already in trouble, the bank’s going to say well we’ve already loaned you some money in the past, if I loan you more to pay off the other guy, now I’ve got all your eggs in my basket if something goes wrong, I’m going to take a hit. And more importantly, they may charge you extra money because they’re now saying oh you want us to help you out when you’re in trouble? That’s a little more problematic than when you go to them when you don’t have any problems at all. So, the bank is a logical place to look, but I wouldn’t put a lot of faith in that unless you don’t have a lot of debt; your situation isn’t complicated.

Doug Hoyes: And this is a numbers game.

Ted Michalos: It’s all a numbers game.

Doug Hoyes: So, if the bank or the finance company is going to charge me a pretty high interest rate because like you say I’m already in a bit of financial trouble, then am I just making my problems worse by trying to replace one debt by another? Obviously I don’t want to be doing that.

Ted Michalos: What you are, is you’re trying to buy some time. And remember what we’re talking about here is how do we avoid a wage garnishee. So, buying time is good, it doesn’t solve the problem. What you really want to do is dig down and solve the problem. So, if you have a sore tooth you go to the dentist. If you’re hair’s looking bad you go to your stylist. If you have problems with your finances, with debt, you should talk to an expert that deals with finance and debt.

Doug Hoyes: My hair looks great. You can’t see it on radio. I just want to make that point. And so you’re right. You’ve got to look at the bigger picture here and treat the underlying problem. I’ve got too much debt, that’s why I haven’t been able to pay them back. Now, buying time might be a perfectly good answer in some cases. If I’ve got a $1,000 cell phone bill but I know my tax refund’s coming in in a month and I know it’s going to be $1,500, okay then buying time makes sense. If I know that at summer shut down we get all our vacation pay paid out and I get a summer bonus, great maybe that’s enough to clean it up so buying time makes sense.

But let’s take the scenario then where buying time isn’t going to solve the problem, yeah okay I’m getting $1,000 tax refund but I’m being potentially sued for $20,000, that’s not going to work. Buying time isn’t the answer. So, what are the next steps then? What are the next things I should be thinking about?

Ted Michalos: Alright, when you do speak to a professional they’re going to talk to you about credit counselling as a solution, consumer proposals, maybe even personal bankruptcy. All of those things may be intimidating because you’re not familiar with them, you don’t know they mean. So, do a Google search on all three terms to get a better idea about it.

But frankly, what we’re talking about is a structure or solution that somebody can provide you with to get you out of this trouble. Now right now we’re just talking about the threat of a wage garnishee. So, the problem here is you’re afraid. If you want a real problem, don’t do anything and they start garnisheeing your wages. Now you got a real problem the wage garnishee is a bigger problem than just owing the debt because now there’s no money for the rent, groceries, you can’t put gas in the car. Things are going to start – it’s a domino effect. You’re going to have a problem across the board, not just where you were.

Doug Hoyes: And if you got a legal garnishment coming against you or it’s already started, then at that point you’ve got a consumer proposal or a bankruptcy or pay it; those are your only choices and that’s what you got to do.

Ted Michalos: Pretty much it.

Doug Hoyes: Okay, well I think that’s a good summary. So, in summary what you’re saying is you’ve got to be in control, you’ve got to be proactive, sitting there waiting for the problem to go away isn’t going to help. The threat of a garnishment is nowhere near as serious as an actual garnishment. They’re going to threaten you all the time, but you can’t leave it forever cause if they do take you to court then you’ve got a garnishment and that really mucks up your personal finances. I appreciate that, thanks for coming in, Ted.

Ted Michalos: Have a nice day.

Doug Hoyes: Thanks very much. We’ll be back to wrap it up right here on Debt Free in 30.

Doug Hoyes: Welcome back. It’s time for the 30 second recap of what we discussed today. My first guest today was Rebecca Martin who explained that a wage garnishment is a legal procedure where someone you owe money to, collects a debt by taking a portion of your pay cheque.

In our second segment Ted Michalos gave a practical approach for dealing with a wage garnishment. That’s the 30 recap of what we discussed today.

So, what are my thoughts on wage garnishment? Well, as I said twice during the show, a wage garnishment is often the proverbial straw that broke the camel’s back when it comes to debts. We often assume that our debt problems are not serious until a wage garnishment starts. When we start losing a chunk of our paycheque, we know we have a problem.

I agree with what Rebecca and Ted said on the show. A wage garnishment will not just disappear on its own. You have limited options for dealing with a wage garnishment. You can quit your job, but that’s not a great long-term solution. You can let the garnishment continue, but that can be very costly. Think about what it’s like to have an immediate 20 percent cut in your pay, and you can see by just letting the garnishment continue may put you in a very difficult financial position. If you’re wages are being garnisheed for one debt, it’s quite likely that you have other debts as well and that’s why often the solution is to file a consumer proposal or bankruptcy. That’s not a decision to be taken lightly, but as Ted said earlier sometimes it’s better to put your debts behind you and get a fresh start.

That’s our show for today; we’ve got more information on how to stop a wage garnishment on our website at hoyes.com. We also have full show notes on our website and links if you want to download an audio copy of this show. That’s hoyes.com, h-o-y-e-s-dot-com. Thanks for listening. Until next week, I’m Doug Hoyes. That was Debt Free in 30.

It’s time for the Let’s Get Started segment here on Debt Free in 30. I’m Doug Hoyes and today I’m joined by Rebecca Martin, who is a Bankruptcy Trustee and Consumer Proposal Administrator at our Hoyes, Michalos office in Windsor and Leamington, Ontario.

Rebecca, thanks for sticking with me here. We’re talking about wage garnishments today so let’s start at the very beginning. Give me a quick definition. What is a wage garnishment?

Rebecca Martyn: A wage garnishment is the document that allows the creditor to take a portion of your income.

Doug Hoyes: Okay and it’s governed by the Wages Act of Ontario. There are specific limits. A normal creditor can only garnishee 20 percent of your paycheque; however for people listening today, think about that. If I was to lose 20 percent of my paycheque, what kind of shape would I be in? The answer is, not very good.

So, if someone is faced with a wage garnishment, walk us through your advice. So, let’s say they get a piece of paper in the mail that says there’s going to be a court action coming up. What’s your advice? What should they do with that piece of paper?

Rebecca Martyn: Well, if they get a document saying there’s a court action coming up, they really need to take some sort of action. As you mentioned earlier if they actually are disputing this debt, they need to go to court. They can’t just ignore it. If they ignore it, it doesn’t matter if they don’t owe the money, they’re going to get a judgment against them.

So, if they think they have some sort of defence, they need to actually file a Statement of Defence and if they look at the bottom of that Statement of Claim form, it actually does list a website address where they can obtain the document. Or it will have the phone number for the local court. Call the court, tell them you’re disputing the debt, have them walk you through it and how to fill out a piece of paper to file a Statement of Defence. If there is no defence, if this is legitimately your debt, you haven’t been able to work out a payment plan then you need to talk to someone.

Doug Hoyes: And really the only legitimate defence is going to be I don’t owe them money. I already paid it. I have cancelled cheques that show I paid it or this was never my debt to begin with, they’ve obviously got me confused with somebody else. There’s some legitimate reason why it’s not your debt, in which case, as you say, you’ve got to file a statement of defence and usually the local court is pretty helpful with that. But like you said you can go on the government website and get that information as well. And based on that then you file your statement of defense.

Assuming you legitimately do owe the debt, you go to court and the judge says well you owe the debt, sorry, you lose, here’s a garnishment order given to the creditor. So then, let’s put myself in that position. I now know that my wages are about to be garnisheed because I’ve got this judgment against me, what are my options?

Rebecca Martyn: So you essentially have I guess four options. You do nothing, you just let the garnishment go on and you just deal with 20 percent of your wages taken until the debt is paid off in full with interest.

Doug Hoyes: And that maybe makes sense if it was an old cell phone bill for $300. Okay fine I guess I’m going to lose $300, plus interest, plus court charges off my paycheque, but okay probably not that big a deal. What if it’s a bigger amount? What are the other options I’ve got?

Rebecca Martyn: Well you can try going back to the creditor and working out a payment plan. I say try because the reason they went to court is you weren’t able to work out a payment plan. But you could always go to the creditor and say I realize I owe all this money, let’s see if we can figure out a payment plan to get the garnishment lifted and allow me to receive my wages and you to get some money for the next how many years to get it paid off in full.

Doug Hoyes: And in your experience is that likely to be successful or not?

Rebecca Martyn: No, I don’t think it’s likely to be successful because the creditor’s there because you couldn’t work out a payment plan in the first place or you chose to ignore them.

Doug Hoyes: Yeah and they’ve already got this piece of paper from the court saying that they can garnishee wages, so why – there’s no leverage now why -

Rebecca Martyn: Yeah, why are they going to take less?

Doug Hoyes: Makes sense. Okay, so that’s the first two options, what are the final two?

Rebecca Martyn: So, to get the wage garnishment lifted you can either file an assignment of bankruptcy or you can file a consumer proposal.

Doug Hoyes: And we’ve talked about those different options in shows in the past. And the decision as to whether I do a bankruptcy or a consumer proposal is going to be a number of different factors. It’s going to have to do with my income, what I own. If I own a lot of assets I don’t want to go bankrupt because I could potentially lose them. A proposal is often a better option in that case. So, let’s assume we pick the proposal option then. So, the debtor then contacts someone like you. That would be the next step I assume, right?

Rebecca Martyn: Yep, that’s exactly it. They contact us. We basically have to gather a whole bunch of paperwork and then we get them back here to actually start the process. And the day they sign, that’s the day that the court and their employer gets notification saying that the debtor’s under protection, the wage garnishment lifts.

Doug Hoyes: So, let’s walk through that piece of it. So, let’s say I come in. You need a bunch of information. You need to know who I owe money to, what my income is, that sort of thing. That takes a couple of days, to get that up and running. You get the paperwork printed up. I come in to see you at 9:00 in the morning to sign the paperwork. Walk me through what happens next then. So, I sign the paperwork, what happens next?

Rebecca Martyn: So, once you sign the paperwork we electronically submit it to the Office of Superintendent of Bankruptcy. As soon as we get that file number we can then issue what’s called a Stay of Proceedings -

Doug Hoyes: So, how long does it take to get that file number?

Rebecca Martyn: Basically as soon as you press the button, it’s instantaneous.

Doug Hoyes: Instantaneous. So, you’ve got a direct link with the government. It’s not like you’ve got to fax it in and wait three days. If everything’s in order, I’m still sitting there having just finished signing the piece of paper, you’ve now got that file number back from the government.

Rebecca Martyn: That’s right.

Doug Hoyes: And then from there it’s just a case of sending a special piece of paper, the stay to the creditors and that stops the garnishment.

Rebecca Martyn: Yeah and we notify the employer so they know.

Doug Hoyes: So, it’s not coming off my cheque. Perfect, well that’s a good way to end it. That’s how wage garnishments work and that’s how you can stop them. Rebecca thanks very much for being here today.

Rebecca Martyn: My pleasure, thank you.

Doug Hoyes: Thank you. That was Let's Get Started here on Debt Free in 30.