Monday, 22 October 2012

How to Deal With a Frozen Bank Account as a Result of a Canada Revenue Agency Tax Debt

When an individual or business has a tax debt owing to the Canada Revenue Agency, the Canada Revenue Agency will begin to pursue enforcement action to collect the debt. One method that the Canada Revenue Agency uses to collect debt is by freezing a bank account. 

A frozen bank account can be extremely disruptive and can cause incredible financial hardship. Many people feel blindsided when they go to the bank and find out that the bank has frozen all of the funds in their bank account. However, a frozen bank account that is the result of a tax debt generally doesn’t occur without warning. 

A Canada Revenue Agency collection practice usually is as follows:

1.       First you will be notified in writing that a tax debt is owed.

2.       Second, you will be sent another letter demanding payment of the tax debt.

3.       Finally, a “Requirement to Pay” letter will be sent to you and your bank, requiring the bank to freeze your bank account.  

When the “Requirement to Pay” letter is issued and sent to the bank, the bank must freeze the bank account indicated. The bank will then hold the money that is in the frozen bank account for 30 days and then will send the money to the Canada Revenue Agency.

The frozen bank account (even after the money has been sent to the Canada Revenue Agency) will remain frozen. Outside of losing all the money that was in the frozen bank account, the frozen bank account will now cause significant disruption because if your pay is directly deposited into the frozen bank account, the bank will continue to seize the money deposited into the frozen bank account and send it to the Canada Revenue Agency.

Once the CRA has frozen your bank account, you will almost always have to open a new account with another institution. Generally speaking, once the CRA has frozen a bank account the account holder will also see that the relationship they once had with their bank has been severely damaged. Most banks will stop offering credit and may even close existing credit products if they become aware that a customer has a tax debt owed to the Canada Revenue Agency. This is because some people who have tax debts end up filing for bankruptcy after being put under the pressure of CRA enforcement action.

Of course, if you have a tax debt and your bank account has not yet been frozen, it is advantageous to act before things come to that. Acting now doesn’t necessarily mean coming up with money you don’t have to pay off the tax debt. Acting now means seeking out professional guidance to deal with your tax problem before things get that far. If your bank account has been frozen you still have a chance to get your account unfrozen.  Getting a bank account unfrozen is difficult but can be achieved through programs that involve legislation that carries the power to stop certain collection actions, such as a frozen bank account.

If your bank account has been frozen or if you owe money to the Canada Revenue Agency that you do not have the means to pay, we can help – including getting your bank account unfrozen and coming up with a plan to deal with your tax debt. Contact DebtCare at 416-907-2582 or visit

Tuesday, 16 October 2012

Garnishment of Wages Blog Series Part 3 of 3 - Garnishment of Wages by the Canada Revenue Agency and Your Options

One of the scariest and most serious garnishments of wages that exists is a garnishment of wages issued by the Canada Revenue Agency. When a tax debt is owed, the Canada Revenue Agency has a vast arsenal of tools at their disposal that they can deploy to collect money from you. A wage garnishment is one of these tools.  

What you may not know is that the Canada Revenue Agency does not need to sue you or obtain a court order against you if they want to impose a garnishment on your wages. The Canadian Income Tax Act gives them the power to require that your employer garnish your wages on notice. If you owe the Canada Revenue Agency money, a garnishment of wages should not be a surprise.

The Canada Revenue Agency will send out a series of notices before a garnishment of wages occurs: 

1.       First, you will get a notice that you have a tax debt.

2.       Second, you will get a notice demanding payment in full.

3.       Third, you will get a final notice for payment.

4.       Fourth, you will get a notice indicating that your wages are about to be garnished.

5.       Finally, your employer will receive notice to garnish your wages and remit payment directly to the Canada Revenue Agency. 

In a perfect world, you would immediately begin looking for a solution to deal with your tax debt before things go so far. Generally people who ignore notices and end up with a garnishment of their wages simply don’t have the money to pay their debt. 

A wage garnishment can involve up to 100% of your income depending on what type of income you have. The problem is that once a garnishment of wages ensues it can cause incredible financial hardship that is difficult to recover from. 

Even if your wages are currently being garnished and the situation seems hopeless, there are financial options that can enable you to stop a wage garnishment from the CRA. Your personal financial situation will have to be thoroughly reviewed by a professional because the route you choose will depend on your personal financial circumstances. Solutions can range from:

1.       Securing financing to pay the debt or enough of a lump sum payment that the CRA agrees to lift the garnishment of wages.

2.       Participating in a program designed to provide relief from tax debt which would involve legislated options that can stop a garnishment even if is being imposed by the government. 

Both solutions will involve the guidance of a financial professional skilled at working with people who have tax problems and the resources to make a plan to deal with a tax debt work.  

A tax problem is a very serious one that shouldn’t be taken lightly. If ignored, a tax problem will only snowball: the debt will grow and the Canada Revenue Agency will only become more aggressive. If the Canada Revenue Agency garnishes your wages you may think that it is the extent of the collection action that they are going to take against you, but this may not be the case. The Canada Revenue Agency has been known to deploy multiple enforcement measures at the same time to force you to pay. This could include garnishing your wages and freezing your bank account or placing a lien on your home. 

If you have a tax debt and are facing a wage garnishment or if your wages are being garnished, help is just around the corner. Contact DebtCare today at 416-907-2582 or visit If you have a bank account that has been frozen by the CRA be sure to check out our article about how to deal with a frozen bank account.

Tuesday, 9 October 2012

Garnishment of Wages Blog Series Part 2 of 3 - How to Stop a Wage Garnishment

In our last blog in this series we answered the question “what is a wage garnishment.  If you have been threatened with a garnishment of wages then you need to know that your employer is about to be notified about your defaulted debt. If your wages are already being garnished then your employer has already been made aware of your defaulted debt and you are likely feeling the financial hardship that accompanies wage garnishments. In this blog we will discuss how to stop a wage garnishment even if it is already in place. 

The three most common wage garnishments are: court ordered wage garnishments that arise because of a defaulted debt to a creditor; a garnishment of wages from the government which does not require a court order for the government to impose; and finally, wage garnishments issued as a result of family responsibility. In this blog we will discuss wage garnishments that arise because of a debt to a creditor and government imposed wage garnishments, and how you can stop them.

When a garnishment of wages has been imposed, there are 3 common ways to stop it:

1.       You get your creditor to agree to voluntarily remove the wage garnishment. This rarely works if you try to negotiate this on your own. If a creditor has pursued a garnishment of wages it is generally because they feel that they have been unsuccessful at negotiating a voluntary repayment arrangement with you. Once a garnishment is in place and they start to receive payments, there is very little you can say to them to convince them to lift it.

2.       You can pay off the debt. Likely this is not a possibility because if you could pay the debt in full, you would have done that already and wouldn’t be putting yourself through the stress of having your wages garnished.

3.       You can work with a financial professional who has access to programs and resources to push your creditor to accept a repayment arrangement that is acceptable to them and that you can live with.

Court ordered wage garnishments can be removed or reduced by going to the court and convincing a judge to give you relief. Pursuing this option can be expensive and time consuming and there are no guarantees. This is not an option in the case of a debt to the government because the government can garnish your wages without a court order.

When there is a debt owed to the government you have far fewer options. Going to the court for relief is not an option, as previously stated. Negotiating with the government once a wage garnishment is in place is often fruitless for the same reason that negotiating with a creditor is. Once the garnishment is in place and the government starts receiving their money, there is no incentive to them to remove the garnishment.

A garnishment of wages is almost always a symptom of a financial problem. Without the existence of a financial problem you would be paying your bills and would not have defaulted on your debt(s). If you want to know how to stop a wage garnishment you must first look at the state of your finances and start the process of coming up with a plan to deal with your financial problems.

There are programs available that can be deployed as effective negotiating tools that can stop a wage garnishment. These programs are available through financial professionals who know how to stop a wage garnishment. When you work with professionals who are skilled at stopping wage garnishments you are able to breathe a sigh of relief as they become your personal representatives, charged with a mandate to deal with your creditors on your behalf. They can also work with you on an overall financial plan to cure your financial problems and begin the process of rebuilding.

If you are facing a garnishment of wages and need help from a company that knows how to stop a wage garnishment, please contact DebtCare at 416-907-2582 or visit

Monday, 1 October 2012

Garnishment of Wages Blog Series Part 1 of 3 - What is a Wage Garnishment?

A garnishment of wages is one of the most common and effective enforcement methods used to collect money through the Small Claims Court by the Canada Revenue Agency, O.S.A.P, and Family Responsibility. 

A garnishment of wages occurs when you have defaulted on a debt and the party you owe money to serves your employer with a legal notice to garnish your wages (i.e. pay some portion of them to that party). Only the government, like the Canada Revenue Agency, Ministry of Finance, Provincial and Federal Student Loans, etc… have the power to garnish your wages without a court order.

For a private company to garnish your wages they must sue you in court, obtain a judgement against you and have an order from the court to garnish your wages. So, if a private company is trying to collect money from you, the garnishment must be sent to your employer in the form of an order from the court that issued the judgement.

A garnishment of wages from Family Responsibility will not occur unless the court has ordered you to pay child support and you go into arrears and the Family Responsibility office enforces the court order through a wage garnishment.

The amount of a garnishment of wages can vary depending on the type of debt you have and who is issuing the wage garnishment. Here are some Canadian examples:

1.       A wage garnishment issued through the Ontario Small Claims Court will require that your employer remit 20% of your net earnings to the Small Claims Court to then be distributed to your creditor.

2.       A wage garnishment from Family Responsibility could involve a garnishment of up to 50% of your earnings.

3.       A wage garnishment from the Canada Revenue Agency could involve a garnishment of up to 100% of your earnings depending on the type of income that you have.

Most people find themselves wondering “what is a wage garnishment” once they have been threatened with one.

Once a wage garnishment is sent to your employer it can be humiliating and leave you feeling powerless. Your employer must garnish your wages or they can find themselves in trouble. If you have a job that requires you to demonstrate financial responsibility this could pose challenges to your employability.

If you have been threatened with a garnishment of wages the question should not be “what is a wage garnishment” but rather “what can you do to avoid a wage garnishment”. This will likely require professional counsel, and not that of a lawyer but of a financial professional who has experience working with people who have had wage garnishments and who is capable of helping you through your financial problem.

Wage garnishments that are the result of unpaid child support will leave you little in the way of options, other than to return to court and request that a judge reduce the amount of the garnishment. If you are being threatened with a wage garnishment from the CRA or a creditor, you definitely have more options, even if your wages are already being garnished.

Now that we have answered the question “what is a wage garnishment”, the next thing you will want to do is learn how you can stop one. This question is answered in our next blog “how to stop a wage garnishment”.

If your wages are being garnished or you are being threatened with a wage garnishment, time is of the essence. Contact DebtCare Canada today by calling 416-907-2582 or visit to find out your options.