How to Stop a Wage Garnishment
Creditors will often seek a garnishment order when you have defaulted on your loans or you have not made any payments on your debts. The good news is a wage garnishment order can be stopped at any time during the garnishment process.
There are 3 ways to stop a wage garnishment:
- File a consumer proposal
- Declare bankruptcy
- Make a deal with your creditors for repayment
A wage garnishment is a legal proceeding. Unless your creditor agrees to withdraw the garnishment, a garnishee can only be stopped through a similar legal process. Most creditors are reluctant to remove a garnishment order before they receive full payment.
A bankruptcy or consumer proposal stops a garnishment of wages. The protection provided by bankruptcy law through the Bankruptcy & Insolvency Act is called an automatic stay of proceedings.
At Hoyes, Michalos we act quickly! If you file with us and tell us you are facing a wage garnishment, we can usually have the garnishment stopped the day you file.
It’s also important to know that your employer must comply with a garnishment order unless they receive a subsequent court order, like a bankruptcy or proposal order, authorizing them to stop withholding your pay.
Once a private sector creditor (a bank or credit card company) notifies you that they want to get a judgment against you, do not ignore it. When you find out that a payment arrangement is not possible or if you know before that you cannot afford a payment arrangement it’s time to talk to a Licensed Insolvency Trustee like Hoyes, Michalos.
What is a Wage Garnishment?
If you don’t pay your debts, taxes, or child support, a creditor can go to court and obtain a wage garnishment. This order forces an employer to send up to 50% of your wages to your creditors to pay unpaid debts. People often refer to this as having their wages garnished. The correct legal term is a garnishee or garnishment. A similar order can be obtained against your bank account.
Who can garnish my wages?
Any creditor can begin garnishment proceedings against someone for unpaid debts. Collection agencies, Canada Revenue Agency, the Court, credit card companies, payday loan lenders, or any creditor can enforce collection through a wage garnishment.
How does a garnishment work?
To garnishee your wages, a creditor must first file a Statement of Claim. As the debtor, you have 21 days to respond from the day the claim was mailed to either file a Statement of Defense to dispute the debt, or to notify the creditor of an error. If you fail to respond, the court will assume that you have agreed 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.
How much can be garnished from my wages?
Under the Ontario Wages Act, the maximum a creditor can garnishee is 20% of your gross wages for a debt or 50% for child support.
What to Do When Facing a Wage Garnishment
If you are facing a garnishment you need to act now, before you lose part of your next pay. If a creditor has gone to the trouble of garnisheeing your wages, they are not likely to stop the garnishment because you agree to pay – they only garnishee people with a history of not paying, or whom they believe will not pay.
Before your employer receives a garnishee summons you should try to make a deal with your creditor.
If a settlement is not possible, stopping a garnishment with a consumer proposal or personal bankruptcy is possible. In virtually all cases a consumer proposal or a personal bankruptcy will stop a wage garnishment. The longer you wait to deal with the wage garnishment, the more of your pay you will lose.
If you are threatened with a wage garnishment, or are currently being garnisheed, we recommend that you call one of our bankruptcy offices in Ontario or e-mail us immediately to determine your options.