Wednesday, 16 September 2015

Financial Focus: Wage Garnishments in Ontario

Nothing is worse than getting your wages garnished, and it seems as though this is happening with increased frequency - many Canadian individuals are facing wage garnishments in Ontario as a result of debts in collections, CRA tax debts, or Family Responsibility.

No matter how you slice it, wage garnishments are brutal, and carry with them various personal and professional consequences. For example, not only will this type of collection action cause personal financial hardship, making bill payments incredibly difficult, it can also impact your professional life. Since wage garnishments are sent to employers, once your employer learns of your financial troubles, your reputation will be impacted, and this could have important and costly ramifications. Additionally, if you own your own business, it will be your clients that receive notice to garnish receivables, thereby impacting your reputation.

Facts about wage garnishments in Ontario:

-      If you don’t pay your debts, your creditors can take you to court and obtain a court order to have your wages garnished. However, some creditors, the CRA as the most common one, don’t need a court order and can simply send out a Requirement To Pay notice and the deed is done.

-      Under the Ontario Wages Act, a creditor can garnish up to 50% of your gross wages, depending on the organization owed. The actual amount is determined by the court, but typically garnishments in Ontario are around 20%. That being said, if you are self-employed, and owe money to the CRA, a garnishment can get as high as 100% of your receivables.

-      Wage garnishments can be stopped. Some people assume that once a garnishment is in place, it will remain in place until a debt is paid in full. While this is one way to remove a garnishment, it is not the only one.

o       Negotiating a voluntary arrangement with a creditor is an option, although once a creditor has gone through the trouble of garnishing you they are not going to easily let go and may still demand payment in full.
o       Going to court is another option. Keep in mind that this can get expensive, especially if it is tax court. This is because in small claims court you may represent yourself, whereas in tax court you usually need a lawyer.
o       A third option is working with a debt counsellor on a consumer proposal. For many Canadians, this is the option that makes the most sense, often because it will not only stop a wage garnishment in its tracks, it will also freeze interest, consolidate all unsecured debts into one monthly payment, and will often result in a much smaller balance to be paid off.

Wage garnishments in Ontario can quickly turn a financial issue into a financial nightmare. Once a creditor has leveraged this form of collection action, removal may be difficult, but it is not impossible.  You have options.

For more about having a wage garnishment lifted, please contact DebtCare Canada today by calling 1-888-890-0888.

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