With Halloween around the corner, we’re thinking about all of the scary financial situations that Canadians might face. And one of those that tends to spook people the most is a Canada Revenue Agency (CRA) wage garnishment.

The CRA has broad garnishment powers. They can issue garnishments on your employment income, your bank account, and even other forms of income, like pensions. If you are self-employed, they can send requirements to pay to your clients. And unlike other creditors, the CRA doesn’t need a court order to garnish you.

There are four ways you can stop a CRA wage garnishment:

1. Pay the debt in full. If you can take out a loan or have home equity to access, this might be the time to use it.
2. Get the CRA to agree to remove the garnishment. This is very difficult to do once collection action is in place. If you do attempt to negotiate with the CRA, you shouldn’t do it alone.
3. File for a consumer proposal.
4. File for bankruptcy.

If you don’t have a sizable sum to offer or the ability to pay the CRA through a loan or home equity, then filing for a consumer proposal or bankruptcy will immediately stop a wage garnishment.

So, what is the difference between a consumer proposal and a bankruptcy?

Consumer proposals:

• Are for non-mortgage debts up to $250,000.
• Make a settlement offer to your creditors. The majority of creditors must accept this proposal for it to go through.
• Typically, will not require you to give up any assets.

Bankruptcies:

• Are for any amount of unsecured debt. There is no limit.
• May mean that you have to give up your assets.
• Leave you with the worst credit rating possible — an R9.

These options may seem extreme, but if you are faced with a CRA wage garnishment, they can be the better choice. The CRA will be aggressive with their garnishments and will not stop until they have recouped the full amount — plus any interest or penalties you have accumulated. This could mean thousands of dollars (or more) in garnishments by the time all is said and done.

In turn, that could leave you struggling financially for months, or even years, on end. You need your employment income to pay your other day-to-day expenses, so having up to 20% to 50% of it (or more) go to the CRA could mean going even deeper into debt to other creditors.

At DebtCare Canada, we can help you explore your options for stopping a CRA wage garnishment in its tracks. We will look at your credit rating, financial standing, and debt management choices to make the best plan of action.

Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.