While you want to keep up with payments on your loans, it can be a challenge when you are already trying to make ends meet. To add to your stress, you’ve received a wage garnishment from one of your creditors, allowing them to instruct your employer to directly send a portion of your paycheque to them to repay your debt.
We know just how difficult this situation can be for you. To ease your worries, we want to reassure you that you have options to stop the wage garnishment and deal with your debt at the same time. We’ve outlined important facts about wage garnishments and how a consumer proposal, or bankruptcy in some situations, will allow you to have the wage garnishment stopped.
“The only thing that can stop the court order allowing garnishment, is another court order. Filing for either a consumer proposal or bankruptcy issues a stay of proceedings that stops your wages being garnished right away,”
Rebecca Sudano, BDO Licensed Insolvency Trustee.
Each province/territory has different rules about wage garnishment. The amount that can be garnished depends on where you live.
These rules only apply to people who earn a salary. This section looks at corporate wage garnishment (being sued by a creditor) rules in each province for people who are employed full or part-time.
Self-employed people are subject to different rules than those below and there are also different rules for CRA tax wage garnishment, please see the section after this one for those.
Here’s a breakdown of what percent can be taken in each province/territory in Canada.
In Alberta the first $800 of your monthly salary is exempt from garnishment. If your monthly net income is between $800 and $2,400, creditors may garnish up to 50% of that income. If you have a monthly net income over 2,400, 100% of that can be garnished.
These exemption limits are increased by $200 for every dependent you have.
We know this is confusing so here’s an example. If you made $1,200 the first $800 of that would go entirely to you. The remaining $400 would be garnished at 50%, meaning you would keep a further $200, and your creditor would get the remaining $200.
In British Columbia 30% of your wages can be garnished. There is a minimum exemption of $100 for an individual with no dependents, and $200 for an individual with one or more dependents.
In Saskatchewan you are required to be left with $1,500 a month. Above that amount 70% of your wages can be garnished. There is an exemption of $300 per dependent each month.
Creditors can usually garnish up to 20% of net salary in Ontario. The court will take your unique financial circumstances into account though and it is possible for the judge to decide to allow more than 20% to be garnished.
Many provinces use net pay to determine wage garnishments. Quebec however uses gross pay. Corporate creditors cannot garnish more than 30% of gross pay in the province. There is also $30 exempt per week for each dependent.
Newfoundland and Labrador is another province with a complex system. Here’s the easiest way to break it down:
New Brunswick was the last province to allow wage garnishment from corporate creditors, passing the legislation into law in 2019. There is no set amount for what is exempt in New Brunswick. The amount to be garnished is set by the Sheriff, after assessing an individual’s needs.
Nova Scotia, like Quebec, uses gross pay as the basis for garnishment. At most a corporate creditor can garnish up to 15% of wages, unless a judge orders for more to be taken.
Wage garnishment exemptions in Prince Edward Island are made by the court based on an individual’s financial needs and the number of dependents.
A total of 70% of wages are exempt from corporate garnishment. A minimum of $600 is exempt for a single individual with no dependents. If an individual has between one to three dependents, $1,000 is exempt. If you have four or more dependents a further $150 is exempt for each one.
The NWT allows for 70% of wages to be exempt from garnishment after a minimum exemption of $1,000 per month, plus $250 each month for every dependent.
The first $1,500 of pay is exempt from being garnished, after than they can garnish as much as 30% of your salary. There is a further minimum of $300 exempt each month for every dependent.
The CRA is allowed to garnish up to 50% of a payroll employee’s salary but typically it is more often done at around 30%. They can garnish up to 100% of a self-employed individual’s salary but this is highly unlikely and often a lower number is reached.
Self-employed people are treated differently than those with full-time positions. “As [SR1] [GJ2] self-employed people don’t have a regular paycheque and have no payroll department/employer to contact they often have their bank accounts frozen,” says BDO Licensed Insolvency Trustee Rebecca Sudano.
It is recommended that self-employed people speak to a Licensed Insolvency Trustee if they have their bank account frozen or their wages garnished.
Credit card debt is often behind many wage garnishments. Rebecca says one of the most common reasons she sees people getting their wages garnished. “It’s not that surprising when you consider the high interest rates and large credit limits these companies hand out to people,” she says.
How quickly after you stop making payments you can be hit with a salary garnish isn’t the same for everyone though.
“It depends on the agreement you signed and if the credit card companies are connected to third party collections. The terms and conditions of your card will state how long before it goes to collections,” Rebecca says.
Many people don’t know they can stop wage garnishment, says Rebecca. “It’s something they just think is happening and they have no control over.” That’s not the case though. Filing a consumer proposal or bankruptcy will immediately issue a stay of proceedings, which stops your wages being garnished. These are legal agreements which trump the garnishment decision issued by the court. “Only by filing something in court can you stop another court order,” Rebecca says.
She points out the quicker you reach out to a Licensed Insolvency Trustee, the better. “Reaching out means the debt doesn’t keep rising with interest payments, your debt load is less as a result. There’s an advantage to seeking help before it gets too big to reduce the amount you need to pay back.”
A consumer proposal can really help people not just stop their wages being garnished now, but in the future as well, Rebecca Sudano says.
“If you’re being garnisheed $300 a month that one creditor gets all that money. If you were to file a consumer proposal and pay $300 a month that would satisfy all your creditors. Otherwise, they’ll just stand in line, and you’ll get hit over and over with garnishments from different creditors.
If your wages are being garnished, or creditors are calling you threatening to sue you, please call one of our Licensed Insolvency Trustees for help. They’ll take action to prevent your wages being garnished and help you come up with a plan to become completely debt free.
A BDO Licensed Insolvency Trustee will explain the differences between filing for bankruptcy and a consumer proposal and answer any of your questions, including which types of income cannot be garnisheed. Schedule a free consultation – we are ready to help.
