Let's Talk: Wage Garnishment

I've been talking about wage garnishing a couple of times now. It's an important concept to understand since your income is affected. Today, I'll go over it in more detail to help you develop a basic understanding of how it works if it ever happens to you.

How It Works

I previously discussed that wage garnishment is a result of a person not paying their debts to their creditors. This is just another name for your lenders. Wages can also be garnished by Canada Revenue Agency (CRA) when you avoid your taxes and sometimes through credit union loans when you agree to sign an 'Assignment of Wages'. Both of these types of garnishes do not require a court order.

As for your other debts that you owe, your creditors would need a court order before they can take a portion of your earnings or assets in your bank accounts. This is how the process works:

• Your creditors file a lawsuit and sue you for unpaid debts
• You can respond or ignore it (You'll most likely lose the case either way)
• When you lose the lawsuit, your creditors receive a court judgment and order to either seize your assets in your bank accounts or garnish your wages from your employer

This isn't always the case though. I've seen creditors write off losses depending on how much the amount is. The reason is because it costs time and money to pursue a lawsuit. If their cost to sue you is greater than amount you owe, they probably won't pursue legal action against you. You may be given a free pass in life but be aware this does not happen very often. It is up to the discretion of the creditors and I've only ever seen it once in my life. You also shouldn't take this as a chance to see if you can get away with it as your credit will still be negatively impacted. This can affect your applications for loans, mortgages rent and employment.

Rules Regarding Garnishment

I don't like being vague when I can avoid it because I want to explain as much as I can. However, there is a lot of individual provincial rules and exceptions. It would be best to talk to a professional regarding your personal situation. My information is more of a guideline to help you understand it.

• Wages - The limits and rules are different for each province. Some provinces have a maximum limit of 30% of your wage while others can have a complicated graduated system based on how much you earn, similar to the tax bracket system. (Generally, the same rules apply for all provinces with the exception of British Columbia and New Brunswick. For more details, consult a Licensed Insolvency Trustee)
• Assets - Rules are also different for each province, consult a Licensed Insolvency Trustee on what can and can't be seized.

How To Stop It?

If you don't have a job then there are no wages to garnish. Although this method may work, it is not necessarily the most appropriate. How long can you last without any earnings? People actually do this but the responsible thing to do is to be compliant and work with your creditors. You can always seek help from a professional Licensed Insolvency Trustee in your area as an option. The garnishment of your wages or assets will continue until you either:

• Pay off your creditors. This is the only option to maintain a good credit rating.
• Your consumer proposal is accepted. Your credit is still negatively impacted.
• File for bankruptcy, which also negatively impacts your credit.