Few things come as such a shock as a garnishee on one’s wages. Not just the feeling of violation at not having access to your full, hard-earned paycheque, but the embarrassment as your employer is now aware of your financial situation. It can come as a real blow.
So what IS a wage garnishee, exactly? How do they have the right to take my wages?
A wage garnishee is a legal action available to an unsecured creditor whereby they may apply to the court for an order to force one’s employer to turn over a percentage of their wages in payment of an unpaid debt.
Most creditors do not pursue this avenue of collections unless the debt is enough to make it worthwhile, of course, as they have to pay a lawyer to handle the matter (although the banks have law firms on retainer for this and much of it is automated once certain triggering parameters have been met).
There are two exceptions to creditors having to obtain a court order for a wage garnishee:
- Taxes owing (Canada Revenue Agency)
- Debtor (you) signing a wage assignment
Yes, CRA can garnishee wages without going to court – they simply inform the employer of the amount to pay and require a percentage of wages to be directed to them from each pay period until the debt is satisfied – while still accumulating penalties and interest. Being a government agency, it has inherent administrative authority to initiate a garnishee.
A wage assignment is voluntary, but made often as a stipulation of credit lending, often to payday lenders or credit unions. In it, you voluntarily assign your wages (well, a portion of them) to pay that debt if in default. Since it is voluntary, however, you can also withdraw it, thereby stopping those wages being taken.
The maximum amount of a garnishee varies from province to province, but in Ontario, the Wages Act allows a creditor to take a maximum of 50% of your gross monthly wages. Typically, only 20% is taken. For legal obligations such as child or spousal support, up to 50% can be garnisheed, depending on a few factors. For CRA, there is no maximum or limit – they can garnishee up to 100% – depending on specific financial circumstances (i.e., if they suspect there are other undeclared sources of income).
So how can you stop a garnishee?
You could try to convince the creditor that you’ll pay, but that in all likelihood won’t work. They didn’t go to all the trouble of initiating a legal action (lawsuit) against you and thereby paying a lawyer to enforce a court order just to turn around and drop it when you ask them to.
The only realistic ways to stop a garnishee are either:
– When the debt in question is satisfied/paid in full (which, with penalties and interest still accumulating and depending on the amount of the debt, may take a long time, indeed);
– By filing a legal action such as a personal bankruptcy or a Consumer Proposal.
When you file either a bankruptcy or a proposal, the Trustee issues a Stay of Execution immediately stopping the garnishee. The creditor in question, including CRA, must stop all collection activity against you as of that point. Often a Trustee can stop a wage garnishee the very same day in which the person files.
So what do you have to do?
Call a licensed Trustee. A chat on the phone and even an initial in-person consultation are free with any Trustee. We will advise you on the best overall solution to your financial situation. Contact us to find out more.