Can a Collection Agency Issue a Wage Garnishment?

It is a very common scenario: you’re aware of the existence of a bad debt, but with no means to pay the debt, you instead choose to ignore the calls and notices and hope that you can eventually amass the funds to pay it in full - or just hope that it will eventually go away. Then payday rolls around, and with the intention of taking even just a little bit aside to pay the debt, you find that the creditors have already taken matters into their own hands and issued a wage garnishment - and the amount on your paycheque is far lower than expected.

If this is the position in which you’ve found yourself, you might be wondering how it even came about. Can a collection agency even issue a wage garnishment - how do they have this power? The ugly truth is that yes, although a collection agency is a third party, it does have the power to secure a wage garnishment when going through the proper channels.

When you have a debt that you can’t pay, and a creditor assigns the account to a collection agency, that agency may just choose to pursue the matter in court - in order for a garnishment to be leveraged against you, obtaining a judgement in court is first required.

Does this mean you are being sued? No, the only people who can sue in Ontario courts are lawyers, paralegals, and people representing themselves - meaning, if a creditor has the time and resources, they could choose to sue you. Many don’t, but will pass the matter along to a collection agency, one who will then seek a judgement.

A collection agency can apply on a creditor’s behalf to court to seek a “garnishment” against you. If granted, this legally allows them to seize your salary, money in your bank account, or other money you own to repay your debt.

Often when collection agencies threaten to sue on behalf of the creditor, it is to scare you into paying – but there are many instances where it is not an empty threat and a wage garnishment may be imminent.

If collectors are calling and delivering these threats, a wage garnishment may be headed your way. It is best to deal with the debt before a garnishment is issued, thereby mitigating further damage to your already bruised credit.

These are your options:

•Pay the debt in full - although if this really was an option we hope most would have already done it.

•Make a settlement with the collection agency - sometimes this works, other times it is easier said than done.

•Look at other options to settle the debt and stop collection action, such as filing a consumer proposal.

Once a debt goes to collections it won’t just go away – your creditor will just keep assigning it to different agencies and using different tactics to force you to pay.

If you are standing on a ledge with seemingly no resources at your disposal, don’t despair. DebtCare Canada can help you find a solution to your financial problem and get a wage garnishment lifted before it does more damage. Call us today at 1-888-890-0888.

You Can Stop a Wage Garnishment in Ontario – Here Are Your Options!

Wage garnishments impact thousands of people every day - and can come as a most unpleasant surprise for those individuals.

No matter where you work - whether you are an employee in a large corporation or you own your own business, creditors, through the court, can still place a wage garnishment on your wages or your receivables. If you are an employee, your employer is served with a Notice of Garnishment and must comply. If you are self-employed, your clients are served and must submit any payments directly to the court. 

Beyond the financial implications, a wage garnishment in Ontario can have serious consequences in other areas of your life. For example, if you work for someone else, once that individual receives a Notice of Garnishment regarding the wage garnishment, they will be fully aware of your financial problem and thus may view you in a different light. Responsibility and reliability may be questioned, and any company that required a credit check upon hiring may take this new information into consideration.

If you work for yourself, especially with a small company, your reputation is important, but if your clients are receiving letters telling them to submit payment directly to the court, this could tarnish that reputation. The hassle may cause those clients to look elsewhere in the future.

Once a garnishment is in place, is paying it off the only option? Perhaps not.  A wage garnishment in Ontario can often be stopped but this largely depends on who issued it.

Here are a few of the most common types of wage garnishments in Ontario:

1.     Issued through the court – someone sued you, got a judgement and is enforcing it. Generally this can mean a loss of up to 20% of your earnings, and can only be stopped by paying the debt or making an arrangement with a creditor, by court motion, or by arranging a bankruptcy or consumer proposal with a debt counsellor.

2.     Issued by the CRA - the CRA does not need a court order, and can garnish up to 50% of your wages. If you are self-employed or on a pension this could be up to 100%. A CRA wage garnishment can only be stopped by: CRA’s consent or an arrangement, by arranging a bankruptcy or consumer proposal with a debt counsellor, or by taking CRA to tax court (the most expensive route). A CRA wage garnishment is particularly nasty….

3.     Issued by Family Responsibility – the only way to deal with one of these is to pay it in full or go back to court - there is no other option.

4.     Issued because of EI overpayment or by government after receiving money under false pretense – this can be complicated and these are instances where it is difficult to get protection. Like the CRA, this does not require a court order and if fraud is involved it can get tricky.

When you are facing a garnishment of your wages, no matter the source, your best bet is to speak with a debt counsellor. The solution to your financial problem will largely depend on your personal circumstances, but ignoring the garnishment should never be an option.

Avoid the embarrassment and financial hardship of a wage garnishment in Ontario by calling DebtCare Canada today at 1-888-890-0888.

Fighting a Wage Garnishment that Wasn't Issued by the Court

The only type of wage garnishment that is not issued by the court is one that relates to government debt, like debt to CRA, or other less common debts, like debts related to EI overpayments.

Where CRA garnishments are concerned, if you owe money, CRA can issue a wage garnishment without notice to you and without a court order. The wage garnishment could be up to 50% of your earnings. Once your employer is served with a wage garnishment from CRA they have to honour it or they too could get stuck with responsibility for your tax debt.

Wage garnishments are very embarrassing and often CRA finds out where you work and where to serve them because you gave them this information. Oh yes….remember that nice CRA agent who phoned and said that if you filled out some financial forms including where you work that you could make a payment plan for 3 months. Only the payment plan you agreed to was more than you could afford and Bam! Wage garnishment.

Once a wage garnishment is put in place by CRA you have 4 options:

1.       Pay the tax debt – beg, borrow, steal to get the money (we were kidding on the steal option – the other 2 are viable). Perhaps you can refinance your mortgage or borrow the money from your family. This still leaves a debt outstanding but at least your creditor is not the government.

2.       Ask CRA to reduce or remove the wage garnishment – we wish you good luck with this option. Likely this option will lead to you divulging more information to CRA for them to use against you. In all seriousness, CRA agents are very skilled at what they do – if you plan to try to negotiate directly with CRA, it is best to do so through a seasoned financial professional who is experienced at dealing with them!

3.       Go to tax court – if you can’t pay the debt in full it is highly unlikely, especially with your shiny new wage garnishment, that you can afford to go out and get a lawyer. Tax court is not like what you may remember from Peoples’ Court – it is not a good idea to go to tax court without a lawyer. You will be going up against a trained CRA lawyer who works in the tax court daily and knows the law intimately.

4.       Consumer proposal or bankruptcy – either option would immediately stop a CRA wage garnishment. Whether or not this is an option will depend on other financial circumstances.

The options are clear. However, where the less common government debts that arose as a result of fraud are concerned, EI overpayments being a good example, option number 4 will not work because debts that arise from fraud are not protected in a consumer proposal or bankruptcy.

If you owe CRA a debt, don’t ignore it. Seek out professional financial assistance and get that debt dealt with. DebtCare can help. Call us today at 1-888-890-0888.

Backed into a Corner: Stopping a Wage Garnishment

You’ve just received your bi-weekly paycheque, but the money deposited in your account is far lower than what is stated on your paycheque. After inquiries to your payroll department, you realize that this is not a mistake to be remedied by your company, but rather the result of some unpaid bills. A wage garnishment can be a financially devastating thing, one that is actually incredibly common, so what can you do to stop it?

Firstly, what is a wage garnishment? Well, when you owe money to a creditor that you have not paid, they may opt to head to court and obtain an order to have those debts garnished from your paycheque, unless you owe money to the Canada Revenue Agency and then a court order isn’t even necessary. Once this order is obtained, a requirement to pay letter is sent to your employer, who is then legally required to submit a portion of your wages – to the tune of up to 50% - directly to the court.

Wait – can’t your employer just say no? Not unless they want to deal with the repercussions! When it comes to these court orders, besides paying your debts, there are only 3 other ways to stop a wage garnishment:

1. Making a deal with your creditor. Start here, but we suggest not getting your hopes up. If your creditor has taken the steps to obtain a court order against you, they likely have already attempted to contact you on numerous occasions and would therefore be unlikely to accept a negotiated repayment plan.

2. Consumer proposal. Once a consumer proposal has been filed, all wage garnishments stop! And the bonus here is that not only are you stopping your wages from being taken, you also stop all interest and merge all of your debt payments into one convenient monthly payment that you can afford. The downside – your credit can be negatively impacted (although that has likely already occurred).

3. Bankruptcy. Like a consumer proposal, declaring bankruptcy stops all wage garnishments and eliminates many of your current debts. In exchange for this, you are required to adhere to certain regulations including attending credit counselling sessions and declaring surplus income. And like a consumer proposal, your credit can be negatively impacted.

If you believe a wage garnishment may be forthcoming, or if one has already been leveraged against you, don’t worry – we can help. For more about stopping the garnishment of your wages please contact DebtCare Canada today by calling 1-888-890-0888.

Wage Garnishment Blog Series Part 3 – Wages Garnished by Other Sources

In the first two blogs of our wage garnishment series we discussed how wage garnishments work when you owe money to the Canada Revenue Agency or to a creditor. While these are two very common forms of wage garnishments, there are other forms of wage garnishments that can quickly become severe financial burdens.

A very common ‘other’ form of wage garnishment is a wage garnishment related to unpaid child support. In Ontario, if you fail to pay child support, your wages can be garnished. The typical process is as follows: once your spouse has given you notice, their lawyer or the Family Responsibility Office will make an application to the court to garnish your wages, and once approved, your employer will receive notice and be legally required to do so. If there is back child support your wages can be garnished up to 50%.

Getting your wages garnished by Family Responsibility should never come as a surprise and you should always ensure that your child is financially cared for. When it comes to a wage garnishment from Family Responsibility, there is nothing you can do to reduce or stop this, other than going to court. These types of garnishments are unforgiving, and even if you are financially strapped and finding it incredibly difficult to pay, they will often throw you further into financial turmoil.

So, if you are having your wages garnished as a result of unpaid child support, are you then stuck between a rock and a hard place? Are there really no options to help you pull yourself out of a financial hole? No, you do have options, but these may mean looking at dealing with your other debts as quickly as possible to free up the cash to finally settle up those Family Responsibility payments.

What options are available? If you struggle with what seems like a mountain of debt, including debts for child support payments, a viable option may be a debt consolidation or a consumer proposal. Both of these may represent significant relief, as well as a single monthly payment. Just remember, if you are approved for a consumer proposal, payments to Family Responsibility cannot be included, but the proposal can free up potential monies to pay that debt and lift a wage garnishment.

If you are facing a wage garnishment of any kind, DebtCare Canada is here to help. For information about the many different options that may be available, please contact us today by calling 1-888-890-0888.

Wage Garnishment Blog Series Part 2: Wages Garnished by a Creditor

Many people run into financial problems and can’t pay their creditors. Often these debts end in a wage garnishment. Last week we looked at Canada Revenue Agency wage garnishments, so this week we thought we’d explore what it means when you are faced with having wages garnished by a creditor other than the CRA.

When you have a debt that you have continually had trouble paying down, failing to meet even the monthly minimum payments month in and month out, your creditors will quickly tire of this and will eventually take enforcement action in an attempt to get their money. Sure, if you can’t pay, you can’t pay – your creditors can’t draw blood from a stone – but that doesn’t mean they won’t try!

If your creditor has no security on your loan, they can do one of two things to try and get what they are owed:

•          Sue you in Small Claims Court

•          Send your file to a 3rd party collection agency for collection – they can in turn sue you in Small Claims Court.

Remember – aside from the CRA, a creditor cannot garnish your wages without a court order, so Small Claims Court is a necessary first step.

If you are sued in the Ontario Small Claims court, your creditor has to serve the papers on you. Once you have received the papers, you have 2 options as far as filing a Defense (and only 40 days to do so):

a.         If you file a Defense a date is scheduled for you to make a settlement and repayment terms with your creditor. If a settlement is reached, as long as you don’t breach the terms, the matter is settled. If you breach the terms the creditor can get a default judgment against you. If you don’t make a settlement the matter will proceed to trial; it should be said that most disputes are settled at the pre-trial settlement conference.

b.         If you don’t file a Defense, the creditor can obtain Default Judgment against you. Once they have this, they can file a Notice of Garnishment with the Ontario Small Claims Court and also send it to your employer. The maximum wage garnishment from the Ontario Small Claims Court is 20% of your earnings. Your employer must then begin remitting the specified percentage of your income to the court. The court holds the money for 30 days and then sends the money to your creditor.

If your wages are being garnished because of a Small Claims Court wage garnishment, and you can’t make ends meet, there are only 2 ways to reduce or stop a Small Claims Court wage garnishment.

1.      File a motion with the Ontario Small Claims Court – include and present your financial information and ask the judge to reduce the percentage of the garnishment or mediate a voluntary payment plan that you can afford with the other side. You may need a paralegal to do this as it will involve completing court forms and attending a court date.

2.      Speak to a financial restructuring professional – this could involve discussing options such as a consumer proposal, which will immediately stop a wage garnishment imposed through the Ontario Small Claims Court.

If your wages are being garnished and you don’t know what to do, DebtCare can help. We have the resources to help you pay off those debts and get you back on strong financial footing. Call us today at 1-888-890-0888.

Wage Garnishment Blog Series Part 1 – Wages Garnished by CRA

With the advent of May, the personal tax filing deadline is now well behind us, and for many, a sigh of relief can be had. For others however, the passing of the deadline brings with it a whole new set of issues. If, after filing your taxes, you find yourself with a tax debt that has led to wages being garnished by the Canada Revenue Agency (CRA), this first blog in our wage garnishment blog series might be a smart place to start as far as finding relief.

If you have yet to have your wages garnished by CRA, but are concerned that this might be a reality in the very near future, here are some things to think about:

·        If you are an employee on payroll with taxes deducted at the source, the CRA can garnish up to 50% of your wages. They simply need to send notice to your employer and your employer is legally required to submit a portion of your pay to them to pay off your tax debt.

·        If you are a sub-contractor, or receive a different form of income, such as a pension, the CRA can garnish up to 100%.

·        If you are self-employed, the CRA will send a notice to your customers to redirect your receivables directly to the CRA.

·        A court order is not required for wage garnishments initiated by the CRA.

·        If the person who receives the requirement to garnish your wages does not comply, the CRA can then pursue them (so don’t assume that just because your employer likes you that they will ignore a requirement to pay).

How does the CRA know where to turn to garnish your wages? There are a number of different sources, including the T4 filed by your employer, an audit done on a client or supplier, a call to the CRA tip line, or personal disclosure.

A garnishment can cause serious financial hardship, not to mention embarrassment or negative impacts to your personal business. Knowing this, what can you do to prepare yourself, or deal with a wage garnishment by CRA that is already in place? Remember that dealing directly with the CRA is never a good idea – unless you can pay the debt in full, your chances of getting an agent to even entertain a reasonable payment plan are slim to none.  And, if you attempt to deal with them directly, providing additional information in the hopes of reaching an amicable agreement, a frozen bank account or property lien may be the only result.

There are programs that offer immediate protection from wage garnishments by the CRA, as well as other enforcement action, and finding out about these is the best place to start.

If you are facing a tax debt or a CRA wage garnishment, DebtCare can help. Call us today at 1-888-890-0888.

What to Do if Your Wages Are Being Garnished

If your wages are being garnished then no doubt you are feeling the pain. Having your wages garnished results in severe financial problems and even embarrassment at work. There are different types of wage garnishments that have financial impacts.

If your wages are being garnished as a result of family responsibility there is little that you can do outside of working with a lawyer to try to get the amount of the wage garnishment reduced or to work towards paying up your arrears and then moving to a voluntary monthly payment plan. There isn’t really any protection for individuals who have unpaid child support. Child support wage garnishments can consume up to 50% of your income.

If your wages are being garnished as a result of a judgement in small claims court you do have some options. You can make a motion to the local small claims court and ask a judge to reduce the amount of the wage garnishment or to lift it and allow for an agreed-upon voluntary monthly payment. While this can be effective, the courts do have the final say, and can say no. It also depends on your creditor. You can also look at working with a financial consultant to make a proposal to your creditor so that they agree to lift the judgement. This can be quite effective and even result in the interest that is accumulating on your debt being frozen. A garnishment imposed through the small claims court can consume up to 20% of your wages in most Canadian provinces.

If your wages are being garnished by the Canada Revenue Agency (CRA) this is by far the most dangerous type of garnishment. A CRA garnishment can consume up to 50% of employment income and up to 100% of secondary income. For example, if you are a contractor the CRA can demand that your client send 100% of your earnings. This is the most dangerous type of garnishment because a CRA imposed garnishment can literally make it impossible to pay for the necessities of life, such as food, transportation and shelter. Those who are self-employed may lose business or have clients simply walk away because dealing with the garnishment is just too much hassle.

Like judgements issued through small claims court, a good financial consultant can also help you to combat a CRA garnishment. There are programs and protections available that can stop a garnishment (even one issued by the CRA), freeze interest and even reduce the amount of the debt.

Do not continue suffering in silence. If a wage garnishment is holding you back, help is only a phone call away. For more information please call DebtCare Canada at 888-890-0888 or visit www.debtcare.ca.

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 www.debtcare.ca to find out your options.

Wage Garnishment? We Explain: What is a Wage Garnishment?

If you have experienced having a garnishment placed on your wages you know that it is no fun at all. If you are being threatened with a wage garnishment it is important to act quickly. A wage garnishment can cause financial hardship and considerable embarrassment.  

What is a wage garnishment? A wage garnishment occurs when you default on your debt and your creditor obtains a judgement against you in court. A wage garnishment in Small Claims Court can involve seizing up to 20% of your earnings. When a tax debt is owed to the Canada Revenue Agency they do not need a court order to garnish (seize) your wages because they have the authority to do so under the Canadian Income Tax Act. The Canada Revenue Agency can garnish up to 50% of your primary employment earnings and up to 100% of other earnings, such as pension income.

When a wage garnishment occurs, your employer will be sent a notice to re-direct a percentage of your income. In the case of a wage garnishment issued through Small Claims Court, your employer will direct the earnings to Small Claims Court where it will be held for a period of time, then sent to your creditor. In the case of the Canada Revenue Agency, the funds will be sent directly to The Canada Revenue Agency.

Wage garnishments can not only be embarrassing, but can impact your employment, since your employer is notified and has to ensure that he deducts the money requested from your wages and remits it. This creates an administrative burden, especially in the case of Small Claims Court. If your employer does not garnish your wages as directed by the court, your creditor can ask for a garnishee hearing at the court and the court has the authority to order your employer to pay the amount of your judgement. A wage garnishment issued to your employer alerts your employer to the fact that you have a financial problem. If you hold a position where you must be financially responsible, for example, within the finance industry or a regulated industry that requires a clear financial history, it can create an issue.

If you are self-employed and a wage garnishment is issued by the Canada Revenue Agency, they can send notice to your clients to direct the proceeds of your invoices to them. While it may be more difficult for an employer to use the wage garnishment as cause to dismiss you, it is very common for companies not to want to deal with suppliers who appear to have financial problems.

Financial hardship is one of the major consequences of a wage garnishment. Losing a large percentage of your earnings may result in it becoming difficult to pay the basic necessities of life, such as shelter, food or transportation.

If you have been notified that your wages are going to be garnished, or your wages are being garnished, you don’t have to suffer. There are financial programs available that provide an effective means to stop a wage garnishment. The worst thing you can do if you owe money on a defaulted debt is ignore it. The faster you face the financial problem, the faster you can get back onto a firm financial footing. It can feel confusing and overwhelming when something as serious as a wage garnishment presents itself, but there are financial professionals who specialize in helping people sort out their financial problems.

For more information about wage garnishments, or if you need help to deal with a wage garnishment, please call DebtCare Canada 416-907-2582 or visit www.debtcare.ca.

Stop a Wage Garnishment without Hiring a Lawyer

A “Wage Garnishment” is when a party obtains the legal authority to order your employer to deduct and forward to him a portion of your wages. Truth be told, thousands of Canadians have their wages garnished each year for a variety of reasons.

Let’s explore some of the most common types of wage garnishments:

Court Ordered Wage Garnishments. This is when a creditor or another party files a Claim either in Small Claims Court (small amounts of money) or Superior Court (larger amounts of money). Upon obtaining a judgement in their favour, they can then proceed to collect their money through the court ordered wage garnishment.

Canada Revenue Agency Wage Garnishments. If you have a tax debt, the Canada Revenue Agency can impose a garnishment on your wages of up to 50% of your earnings and up to 100% of any secondary income. The Canadian Income Tax Act enables the Canada Revenue Agency to garnish your wages without obtaining a court ordered judgement against you. This type of garnishment is often swift and will occur with little warning.

Family Responsibility Garnishments. Wage garnishments that result from unpaid family responsibility can involve a garnishment of up to 50% of your wages and can only be removed by Court Order; not even bankruptcy can stop a wage garnishment resulting from unpaid child support.

If you fall into the first two groups, the first thing you have to determine is, do you in fact owe the money? If the answer is yes, then what you have is a financial problem. At this point it would be against your best interests to spend thousands of dollars on lawyers to stop a wage garnishment.

If you have unpaid debt that was caused by a financial problem, a wage garnishment will only intensify this issue and it could make it impossible to pay your basic living expenses. There is good news: you have choices that don’t involve expensive lawyers and bankruptcy trustees.

The Federal Government has programs in place to help individuals that are suffering due to financial hardship. The fastest way to stop a wage garnishment is to take advantage of one of these programs. A problem as significant and severe as a garnishment is cause for concern. The problem is, a lawyer will sell you legal services, a trustee will sell you bankruptcy services, and a bank will be offer you credit products. What you really need is sound financial advice, from an unbiased professional.

the end of the day, there is great value in retaining a financial consultant. One who can educate you about the available Government Programs and other options that are put in place to stop the garnishment of your wages. A professional financial consultant who will guide you through every step of the way. A financial expert, hired by you, to protect your best interests. If your wages are being garnished, stop being garnished now! Call DebtCare Canada at 888-890-0888 or visit http://www.debtcare.ca/.