Facing wage garnishment? Learn how it works, what creditors can take, and the legal ways to stop garnishment and protect your income.
When Creditors Take Your Paycheque
Wage garnishment is one of the most stressful collection actions a creditor can take. Suddenly, a portion of your paycheque is being sent directly to your creditors before you even see it. Understanding your rights and options is crucial.
What is Wage Garnishment?
Wage garnishment (also called wage attachment) is a legal process where a creditor obtains a court order requiring your employer to send a portion of your wages directly to the creditor to pay off a debt.
Who Can Garnish Your Wages?
Creditors Who Need a Court Order:
- Credit card companies
- Banks and financial institutions
- Collection agencies
- Personal loan lenders
These creditors must sue you, obtain a judgment, and then apply for a garnishment order.
Creditors Who DON'T Need a Court Order:
- Canada Revenue Agency (CRA) for tax debt
- Family Responsibility Office for child/spousal support
- Student loan authorities (in some cases)
How Much Can Be Garnished?
The amount that can be garnished varies by province and creditor type:
Ontario:
- Regular creditors: 20% of gross wages (or 50% of net wages, whichever is less)
- CRA: Up to 50% of gross wages
- Family support: Up to 50% of net wages
Alberta:
- Regular creditors: Based on a formula considering dependents and income
- CRA: Up to 50% of gross wages
- Family support: Up to 50% of net wages
British Columbia:
- Regular creditors: 30% of gross wages
- CRA: Up to 50% of gross wages
- Family support: Up to 50% of net wages
The Garnishment Process
Step 1: Default on Debt You stop making payments on a debt.
Step 2: Creditor Obtains Judgment The creditor sues you in court. If you don't defend the claim, they obtain a default judgment.
Step 3: Garnishment Order The creditor applies for a garnishment order from the court.
Step 4: Notice to Employer Your employer receives the garnishment order and is legally required to comply.
Step 5: Deductions Begin A portion of each paycheque is sent to the creditor until the debt is paid in full.
How to Stop Wage Garnishment
Option 1: Pay the Debt in Full
If you can afford it, paying the full amount owed (including interest and legal costs) will stop the garnishment immediately.
Option 2: Negotiate a Settlement
Contact the creditor or collection agency and negotiate a lump-sum settlement for less than the full amount. Once paid, the garnishment stops.
Option 3: File a Consumer Proposal
A Consumer Proposal immediately stops all wage garnishments. This is often the best option if you have multiple debts or cannot afford to pay in full.
Benefits:
- Garnishment stops the day you file
- Reduces total debt owed
- Provides legal protection from all creditors
- Allows you to keep your assets
Option 4: File for Bankruptcy
Bankruptcy also immediately stops wage garnishment. This may be the right choice if you have few assets and low income.
Can You Be Fired for Wage Garnishment?
In most provinces, it is illegal for an employer to fire you solely because your wages are being garnished. However, repeated garnishments from multiple creditors may create issues.
Your Rights:
- You cannot be fired for a single garnishment
- Your employer cannot discriminate against you
- The garnishment is confidential (only payroll needs to know)
What If You Have Multiple Garnishments?
If multiple creditors attempt to garnish your wages simultaneously, they typically must share the available portion according to court rules. However, this can result in a larger total deduction from your paycheque.
CRA Wage Garnishment: Special Rules
The CRA has extraordinary collection powers and can garnish wages without going to court. CRA garnishments can be particularly aggressive:
- Can take up to 50% of gross wages
- Can garnish federal payments (GST credits, tax refunds)
- Can freeze bank accounts simultaneously
If you're facing CRA garnishment, a Consumer Proposal or bankruptcy can stop it immediately and reduce the amount owed.
Take Action Before It's Too Late
The best time to deal with wage garnishment is before it starts. If you've been sued or received a judgment, don't wait for the garnishment order. Contact a Licensed Insolvency Trustee to explore your options.
Once garnishment begins, your financial situation becomes much more difficult to manage. A Consumer Proposal can stop the garnishment, reduce your debt, and give you breathing room to rebuild your finances.