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.