Wage Garnishments & Bankruptcy

Garnishments are the legal process to collect money (for a debt or judgement) by a creditor, against a person who owes money.

• wage garnishments are court orders
• creditors can take 50% of your wages
• employers are notified of the garnishment
• garnishments stop when the debt is paid – you cannot stop it yourself

In Canada a garnishment usually means a wage garnishment, where the creditor is trying to take a portion of the debtor’s wages at the source. Creditors can also apply to garnishee bank accounts.

Where a creditor obtains a court order for a garnishment, the order is served on the employer or bank. The employer or bank is required by law to send the garnished wages to the creditor until the debt is paid.

You cannot stop a wage garnishment yourself.  The only way to stop a garnishment is through a licensed insolvency trustee by filing a consumer proposal or by filing for bankruptcy.

Call us today at 905-721-7506 and we will stop the garnishment for you.

In Ontario, creditors like banks and credit card companies can usually take 20% of your net wages through a garnishment.

Where the garnishment is for taxes and family support payment the garnishment can be up to fifty (50) percent.

Typically a garnishment does not allow creditors to seize your:

• Canada Pension
• Old Age Security
• Ontario Disability Support Payments, or
• Social Assistance

Where you have been sued and there is a court order the creditor receives a judgement order from the court, except for these types of income.

The creditor with a garnishment can have the money taken out of your bank account, even if those funds represent pension income.

Canada Revenue Agency or the Family Responsibility Office are allowed to seize a portion of income from pensions, disability, or social assistance.

The Canada Revenue Agency does not have to get a court order to seize your wages. Where your wages have been garnished by the government we can have the garnishment rescinded and show you how to reduce the debt you owe.

Taxes owed are usually considered as unsecured credit and are able to be discharged in a bankruptcy with exceptions.

The exceptions are;

• the tax liability is under 200,000 dollars
• the tax liability is more than 75% of your unsecured debt

In bankruptcy where the bankrupt reaches these thresholds to stop a garnishment the matter must be brought before a judge.

The judge will decide upon the conditions for the debt before it may be discharged, which may included making a payment towards the debt.

Where there are taxes owed a lien can be registered on property held or placed on your home.  Once a lien is registered on property it becomes a secured debt.

When a lien has been placed on your home it means that the debt cannot be discharged through bankruptcy. The bankrupt must either sell the home and pay the debt or make the payments, as if a mortgage has been placed upon the home.

While there is outstanding taxes owing the CRA can withhold payments for:

• tax refunds,
• child tax credits,
• Canada Pension Plan
• Old Age Security
• HST and tax refunds

Where you believe that you have outstanding taxes owing and you own property it is very important that you contact our offices to discuss your situation BEFORE a lien is registered.