A wage garnishment is a legal proceeding where a creditor sues a debtor to ensure that they are repaid for a debt. Any creditor can sue for a garnishment order for any debts owed including outstanding loans and bill payments to alimony and child support.
To garnishee someone’s wages, a creditor must first file a Statement of Claim. The debtor then has 21 days to respond from the day it was mailed to either file a Statement of Defense to dispute the debt, or to notify the creditor of an error. If the debtor fails to respond, the court will assume that the debtor has agree to the debt and the creditor will be granted a garnishment order.
Not all creditors have to go to court to obtain a garnishment order first. Canada Revenue Agency can garnishee wages or take funds from your bank account without having to sue you first. Similarly, credit unions and payday loan companies can garnishee wages if you have signed a voluntary wage assignment, granting them permission to garnish your wages if you default on your payments.
What can you do if one of your creditors has been granted a garnishment order?
Once the creditor has received a garnishment order, they can garnishee up to 20% of your gross wages for debt or up to 50% for child support.
There are ways of dealing with a wage garnishment. You can try to contact the creditor or lawyer to make a settlement or payment plan. However, if they had to go through the effort of suing you to receive payment, they may choose to reject your offer. If they do refuse, your only options for removing the wage garnishment is to either pay off the debt (through the garnishee or directly with the creditor), or to file bankruptcy or a consumer proposal. If you do file bankruptcy or a consumer proposal, the wage garnishment will stop immediately through an automatic stay of proceedings.
If your wages are being garnisheed, we recommend meeting with a licensed insolvency trustee as they will be able to discuss your options. They are also the only professionals who can file a bankruptcy or a consumer proposal.
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