April 16, 2025
There are ways to stop wage garnishment. To make that happen, you need to understand how wage garnishment works. We explain the before, during and after process.
Having unmanageable debt is an incredibly stressful situation to be in. It often involves dealing with calls from debt collectors and experiencing constant worry and stress. Having your wages garnished is potentially even worse than dealing with collection calls.
Wage garnishment is when your creditors receive a portion of your paycheque before it even reaches your hands, which can create even more financial strain and make it difficult to stay on top of your bills.
Fortunately, there are options available to help prevent this situation, even if you feel trapped.
Wage garnishment allows creditors to collect unpaid debts directly from your earnings. If you’re behind on payments and creditors can’t collect through standard methods, they may request a court order to garnish your wages. Here’s what the wage garnishment process looks like:
Creditors need a court order to garnish wages. They can seek this order if you’ve missed multiple payments and have not responded to other collection attempts. Once they secure a court order, they send it to your employer, who must then withhold a portion of your wages to cover the debt.
However, some debts, such as unpaid taxes, don’t require a court order before garnishment begins. The Canada Revenue Agency (CRA) can garnish your wages without one.
A creditor can choose to ask the court to garnish your wages at any time. There is no set period they must wait; it depends on when they decide to take legal action against you. Typically, this happens 3 to 6 months after you have begun to miss payments. Some creditors may wait longer, others may act sooner.
If you’re receiving letters or phone calls from debt collectors, there’s a high probability that wage garnishment will be the next step.
With a court order in place, your employer receives instructions to deduct a specified amount from your paycheque and send it to the creditor.
Since employers must comply with garnishment orders, they will be aware of your debt situation.
Wage garnishment continues until you repay the full debt or take action to stop it through a consumer proposal or bankruptcy. You may also be able to reach a settlement with your creditor to end the garnishment early, but this unlikely to happen once your wages are being garnished, wage garnishment is a sign that the creditor has lost faith in your ability to pay on your own.
When you complete the payment, your employer receives notice, and the garnishment deductions stop, allowing you to receive your full paycheque again.
The rules for wage garnishment vary across provinces, with each having its own rules determining how much of your earnings creditors can take. Typically, between 20% and 50% of your income can be garnished, a real blow to anyone struggling to get by.
Your unique financial situation, such as the number of dependents you support, can also affect the amount.
Ontario, for example, usually allows 20% of your salary to be taken. The court can look at your unique circumstances and raise that amount if it sees fit though.
In contrast, Alberta has very strict guidelines that outline exactly what portion of your income creditors can garnish. Your income and your number of dependents play a large role in how much of your wages can be garnished, but at least $800 a month is exempt from garnishment.
New Brunswick was the last province to legalize wage garnishment in 2019. There, a Sheriff or Bailiff evaluates your financial situation to decide how much creditors can deduct from your wages.
All this goes to say that the rules really depend on where you live.
Click the link below for a clear picture of how much salary can be garnished in your province.
Find out how much income can be taken in each province and territory.
See wage garnishment rules in your provinceThe best way to stop wage garnishment is to prevent it from happening in the first place. But what if you can’t afford to keep up with your bills as they are now?
Preventing wage garnishment is often possible if you contact your creditors. Remember, they want you to pay them back and may be willing to modify the terms of your repayment to make it possible for you.
They may choose to lower your monthly payments in exchange for a longer repayment period. It’s possible they also choose to forgive some of the debt if you pay a lump-sum amount instead.
Take control of the situation by addressing payment difficulties as soon as they arise. Explain your financial challenges to your creditors and present a realistic repayment plan.
Once garnishment starts, creditors rarely agree to negotiate. After obtaining a court order and deducting payments from your wages, they focus on recovering the debt directly. At this stage, stopping garnishment often requires legal action, such as filing a consumer proposal or declaring bankruptcy.
Filing a consumer proposal or bankruptcy immediately halts wage garnishment by activating a legal mechanism called a "stay of proceedings." This stay halts all collection actions, including wage garnishments, as soon as you file. It applies to most types of debt and prevents creditors from continuing any attempts to collect money from you without court approval.
A consumer proposal is a legal agreement between you and your creditors to repay a portion of your debts over an extended period, typically up to five years. Filing a consumer proposal can reduce the amount you need to pay back by up to 80%. It also allows you to keep all your assets, such as car and home, while making manageable payments based on your financial situation.
You must work with a Licensed Insolvency Trustee to file a consumer proposal. A Licensed Insolvency Trustee works to ensure both you and your creditors agree on the terms of the proposal. Once filed, the stay of proceedings stops garnishments, giving you the breathing room needed to regain financial stability.
Bankruptcy, on the other hand, is a formal process where you declare that you’re unable to repay your debts. It involves surrendering certain assets and making payments based on your income.
Contrary to popular belief, you won’t lose everything if you declare bankruptcy, each province has a number of items that are except from seizure.
Like a consumer proposal, bankruptcy also triggers a stay of proceedings, putting an immediate stop to wage garnishment.
Both options not only stop garnishments but also help reduce or eliminate unmanageable debts, allowing you to rebuild your financial future.
If your wages are being garnished, or you’re afraid they will be soon, speaking to a BDO Licensed Insolvency Trustee can help. Our Trustees can assess your complete financial situation and help you choose the best path to stop wage garnishment.
Our Licensed Insolvency Trustees can guide you through the process, helping you choose the best option for your circumstances and ensuring you take the first step toward financial recovery.
April 16, 2025
There are ways to stop wage garnishment. To make that happen, you need to understand how wage garnishment works. We explain the before, during and after process.
