For those of us going through tough financial times, it can be difficult to find the money to pay back the debt we owe.
And if you’re having trouble repaying your debts, you’re probably no stranger to letters and phone calls from creditors.
But you might not know what to do if you’ve received a notice of garnishment from one of your creditors…
Or if your boss calls you into the office to let you know your employer has just received a garnishment order.
Here’s what you need to know about wage garnishment.
What is a wage garnishment?
Wage garnishment is legal action that your creditor – or a collection agency – takes to collect money on a debt you owe.
It allows your creditor to directly seize money from your pay cheque before you even get paid.
For example, depending on what the court decides, you might receive 30% less of your pay cheque than you normally would once the garnishment is in effect…
And that garnishment can last until your debt is paid in full.
How does a creditor garnish my wages?
In British Columbia, as in most parts of Canada, a creditor can proceed with garnishment of wages to collect a debt you owe.
To do so, a creditor must:
- File a lawsuit.
- Obtain judgment from the court.
- Make an application to the court for a garnishment order.
- Serve the garnishment order on your employer or the party they want to seize funds from. The latter can include your bank (to seize the money in your accounts) or, if you’re self-employed, those of your clients that owe you money (to seize your receivables).
One important exception to this process is that the Canada Revenue Agency (whose collection enforcement powers are powerful and wide-ranging) does need a court order to garnish your wages.
Another exception to this process is that under the BC Family Maintenance Enforcement Program (FMEP) wages can be garnished once a court order for child support or maintenance has been obtained. Such a garnishment cannot be removed through the insolvency process since these debts will survive a bankruptcy or a proposal.
Which creditor is most likely to get a garnishment against me?
If you’ve missed only one or two payments, it’s unlikely a creditor would seek court intervention to get you to repay.
But those creditors who have been unsuccessful in trying to work out an arrangement with you for repayment over the phone or in the mail for any period of time may find this to be the best option for them to actually get paid back.
Can I stop a wage garnishment?
Yes, you can. And you have five ways to do it.
- Quit your job, so there’s no income to garnish. This is a sure-fire way to stop the garnishment, but it also stops your source of income, so it’s clearly not the most sensible option.
- Repay the debt in full. Since you probably don’t have the money to do this, you may consider getting a loan to pay off the garnisheeing creditor in full. You’d probably then have to re-examine your budget to figure out how you’ll pay off the new loan.
- Negotiate repayment with your creditor and have them agree to remove the garnishment.
- File a consumer proposal. This legal proceeding is essentially a repayment plan that takes into account your current financial situation so you can repay your debts. It will put an immediate halt on the garnishment.
- File for personal bankruptcy. Usually considered a last resort because of the effects bankruptcy has on your credit, this option immediately stops your creditors from taking any collection action against you, including garnishment of your wages.
It’s important to note that options 4 and 5 directly above are the only ways to put an immediate stop on the garnishee. That’s because they offer court protection the moment you sign off on insolvency.
If you’re facing wage garnishment, contact a Licensed Insolvency Trustee TODAY.
If you have already been garnished – or want to avoid it from happening in the first place – contact a Licensed Insolvency Trustee today.
A Licensed Insolvency Trustee is required to assist you if you choose to proceed with either a consumer proposal or bankruptcy. But that’s not all these licensed and federally-regulated professionals can do. We offer a full range of debt relief help.
In your initial, free consultation, we review your financial circumstances and help to explain the different options available to you, and which solution may be best in your personal circumstances. Get the help you need today so you and your family can start to live the healthier financial life you all deserve.
Photo by Nik Shuliahin on Unsplash