Category: Wage Garnishment Home Page

How Does the CRA Garnish My Wages? CRA Garnishment

A Canada Revenue Agency, a CRA garnishment is one of the most dreaded forms of collection action – and for good reason. If you’ve found yourself asking, “How does the CRA garnish my wages?” you’ve come to the right place.

In a CRA garnishment (called a requirement to pay) the CRA can garnish your employment income or client invoices if you are self-employed.

They can also garnish from your other sources of income, including any federal agency or department that owes you money, such as the Canada Pension Plan or Employment Insurance.

What’s worse is that the CRA does not have to warn you about this, nor do they need a court order to garnish. If they have decided to garnish your wages, they will either contact your employer or your clients (if you are self-employed) and request that the necessary amount is taken off your paycheque or invoice and sent straight to the CRA.

This can have far-reaching consequences. If you are employed, your employer will now know that you are in financial trouble, which could be embarrassing depending on your situation. It can be even worse if you are self-employed, as your clients will now know that you are struggling, which might make them question whether they should continue to do business with you.

If your employer, other income providers, or clients are contacted by the CRA, they are legally obligated to comply with the payment request.

The best course of action is to avoid a CRA garnishment before it even starts. Once a wage garnishment is in place, the CRA becomes that much harder to negotiate with.

If you have advance warning of a garnishment, or know that you owe the CRA, it is in your best interest to look for ways to pay the taxes owing. If you can’t afford it, talk to a professional debt counsellor who can help you find the right course of action to make sure the CRA gets their money and your professional reputation is kept intact.

If you’re already under a CRA garnishment, there are only two things that can force the CRA to involuntarily stop collection (besides paying the debt in full): filing for a consumer proposal or filing for bankruptcy.

In a consumer proposal, an offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment. The downside is that it can critically affect your credit score, so it will likely be very difficult to qualify for any type of credit until years later.

Filing for bankruptcy leaves you with only one monthly payment, stops interest and collection action, and reduces debt, but your assets may be taken, and it also affects your credit in a major way.

Both a request for consumer proposal and a request for bankruptcy must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay.

If you’re on the line for a CRA garnishment, you need someone who will represent you — and only you.

This can include going over your debt consolidation options, making a plan to pay the CRA, or being your advocate while filing for a consumer proposal or bankruptcy.

At DebtCare Canada, we provide all these services and more. Learn about how we can help today.

Contact us for a free consultation. Call 1-888-890-0888.

July 11, 2018
The Only Ways to Stop a Wage Garnishment without Going to Court

A wage garnishment put in place to repay a creditor can be a terrible thing to deal with. The knowledge that a significant portion of your income is being taken from you before you even see it, money that would usually go towards paying for things you need, can be hard to swallow, and it can be tough to know where to turn for help.

This blog deals with wage garnishments – those put in place to deal with civil debts such as credit cards, or loans, as well as tax debts. It does not apply to Family Responsibility debts and some unique types of debt. If you want to know more about how to get rid of a wage garnishment put in place to deal with the former, here is where you need to be.

The easiest way to stop a wage garnishment, obviously, is to pay the debt. Sure, this may seem like a very simple solution, but if you can’t pay the debt, in full, it is a simple solution that really doesn’t help you. Don’t worry, all is not lost.

Two additional ways that you can immediately stop a wage garnishment include a consumer proposal and bankruptcy.

In a consumer proposal, you propose an amount that you are prepared to repay your creditor with a repayment term of usually 5 years. The moment the proposal is filed by a trustee, the garnishment stops. Once your creditors accept your proposal you begin repaying. A consumer proposal can be paid in full at any time. A consumer proposal also stops interest and can even reduce the amount of debt you owe.

In a bankruptcy, a trustee, based on an income calculation, will determine if you have to pay into bankruptcy for 9 or 21 months. During this time you will make a monthly payment to the trustee for the term of the bankruptcy and that payment is based on your income. Generally higher income earners opt for consumer proposals because bankruptcy payments end up being higher. Once you complete your obligation to the trustee you become discharged from bankruptcy. The moment a bankruptcy is filed the wage garnishment stops, interest stops and your overall debt can even be reduced.

It is important to note that, in either scenario, you will need the services of a licensed trustee in bankruptcy; but you do not want to go to the trustee directly because they represent your creditors and you may not get the best deal. A debt counsellor can help you prepare your information and structure relevant information so that the trustee makes an arrangement that is fair for both you and the creditors.

Want to stop a wage garnishment or learn more about how a consumer proposal or bankruptcy can help you clear those debts?

Call DebtCare Canada today at 1-888-890-0888.

August 23, 2016
How to Stop a CRA Wage Garnishment
You may be surprised to learn how many people have their wages garnished by creditors on a regular basis. This is such a common collection enforcement method, especially when it comes to the Canada Revenue Agency (CRA). We get calls on a regular basis asking about the ways to stop a CRA wage garnishment. This week we thought we’d tackle the topic and give you some tips to help.

A wage garnishment is a method of collections which requires, in most cases, a court order. This order is then sent to your employer and they are required to remit a portion of your paycheque to your creditor. In the case of the CRA, a court order is not required. If your employer fails to comply, they may be liable for those funds.

How does CRA find out where people work?
- The most common method for finding out where you work is by asking. If, at any point, you’ve called the CRA to try and negotiate a payment plan, to try and discuss relief, etc., you’ve likely provided information regarding where you work.
- Your T4s – your employer files a T4 with the CRA every year – this is part of their own tax obligations.
- Someone you work for is audited by the CRA – meaning all employee documentation becomes part of that audit.
When a wage garnishment is imposed by the CRA, the amount varies, but employment income up to 50% and self-employed income up to 100% is fair game.

There are a few ways to stop a CRA wage garnishment.
1. The first, and most obvious, is to pay it off. Once the debt is paid in full, that garnishment will be lifted.
2. Going to tax court is another option, but this can be very expensive and there are no guarantees.
3. Use an asset to finance the debt, such as your home, through a second mortgage.
4. File a consumer proposal offering monthly payments to the CRA (this is often the only way to reduce a tax debt).
5. File for bankruptcy.
If you have no equity in assets and no ability to do anything more than make monthly payments, options 4 and 5 are viable options that will stop a garnishment immediately.

When your wages are being garnished, this can take a significant toll on your ability to make payments with respect to other financial responsibilities, so it needs to be taken care of as soon as possible.

Don’t wait – call DebtCare today. We can walk you through the various options and help you get that garnishment lifted. 1 (888) 890-0888.
May 25, 2016
Can a Collection Agency Garnish my Wages?
No one wants to be unable to pay their bills. For most it is devastating to reach a point where you simply can’t afford your obligations to a creditor, causing you to default and forcing your creditor to assign your account to third party collections.

When the collectors start calling they mean business. They have one goal and one goal only, and that is to collect money on behalf of your creditor. Some may even threaten to garnish your wages, leading you to wonder, “can a collection agency garnish my wages?”

Answering this question means taking a closer look at collection agencies, their powers and the regulations governing them.

In Ontario, collection agencies are regulated by the Ontario Government and have to adhere to guidelines in terms of what they can and cannot do when collecting a debt.

Here are some examples of things collection agencies can’t do:
- Contact you on a Sunday, except between 1 p.m. and 5 p.m.
- Contact you on any other day of the week between 9 p.m. and 7 a.m.
- Contact you on a holiday
- Use threatening, profane, intimidating or coercive language
- Use undue, excessive or unreasonable pressure or harass you
- Charge you any fees
If a collection agency crosses the line you can file a complaint against them here: https://www.ontario.ca/home-and-community/collection-agency-your-rights.

Getting back to collection agencies and wage garnishments: in order for your creditors to be able to garnish your wages in Ontario, they must first sue you in small claims court, obtain a judgement against you and then gain permission from the court to garnish your wages.

In small claims court your creditor can represent itself or hire a third party agent as its representative. A paid agent must be a paralegal licensed by the LSUC.

The only way that a collection agency can garnish your wages on behalf of a client is if they have a division that includes licensed paralegals who may administer small claims court documents and filings and if:
- The company has been engaged to represent the creditor to sue you in small claims court.
- The file was assigned after the creditor already had a judgement and it simply hasn’t been enforced.
- They are representing an arm of the government that doesn’t require a court order to garnish – but in this instance it is more likely that the government would directly garnish your wages.
If a collection agency threatens to garnish your wages:
- Ask them to put their threat in writing.
- Ask for written evidence that they have been engaged by the client to take legal action or enforce a judgement against you.
- Contact the small claims court to confirm if there has been a judgement filed against you.
While you have some leverage as far as asking for transparency and standing up to the collection agencies, eventually you are going to have to look at ways to address the root cause of your challenges -which is the debt that you can’t pay. The cycle will only continue because, after a certain amount of time, the creditor may assign your account to another collection agency and then another. Some collection agencies do have legal departments and paralegals on staff, so while most won’t garnish your wages on behalf of a creditor and may merely threaten, others do have the power to do so.

Know your rights about what collection agencies can and cannot do – but don’t ever ignore a debt that has gone to collections. Call DebtCare Canada today – we will help you get the relief you need: 1-888-890-0888.
June 17, 2015
Self Employed? Is a CRA Garnishment Going to Your Clients?
Anyone who is self-employed knows the many challenges that come with owning a business – and one of the greatest is dealing with the many complexities that come with the intricate tax process in Canada. Because of these complexities, many self-employed individuals find themselves owing money to the Canada Revenue Agency (CRA), for numerous reasons, and if unable to pay, face strict enforcement actions as a result. One of the most common of these is a CRA garnishment of your receivables.

Here are some numerical facts when it comes to a CRA garnishment:

The CRA can garnish up to:
- 100% of subcontracted income
- 100% of other income like pension
- 100% of self-employed income
If you are self-employed, the CRA can send a notice to your clients to direct your receivables to the CRA. This can cause significant financial hardship and stress, as well as the negative impact it can have on your client relationships.

So, can you stop a CRA garnishment? It is difficult, but you do have options.

1.     You can try to get the CRA to agree to stop, but know that the chances of this happening are slim to none. As far as the CRA is concerned, you owe the money and their job is to retrieve it. Also important to remember, in the process of trying to cooperate, many who attempt to negotiate divulge information to the CRA that can cause even more problems; providing financial disclosure can prompt further enforcement action, a frozen bank account or a property lien for example. This option should be avoided at all costs!

2.     Consumer proposal. By entering into a consumer proposal you can immediately stop a garnishment – with the added benefits of stopping interest and likely reducing the size of your overall debt. However, there are a few caveats:

o   If you have other creditors they will be included in the proposal too.

o   If the CRA is your majority creditor, they have to agree to the proposal (if they don’t respond within 45 days they are deemed to have agreed).

o   If you own a home and the CRA has a lien on it, this greatly complicates things.

3.     Bankruptcy. Like a consumer proposal, this would immediately stop a garnishment, and is likely to stop interest and perhaps reduce the size of your overall debt. Things to keep in mind:

o   You have to report income and your financial circumstances to a trustee every month – if your financial situation improves you will have extra repayment added which has to be paid before you can get discharged.

o   Your payment to the trustee depends on your income and can change if there is an increase in income.

o   If you own a home and the CRA has a lien on it, this greatly complicates things.

If you are suffering from a CRA garnishment of your receivables, there are options to have the garnishment lifted while keeping yourself protected from further enforcement action. DebtCare has the tools and experience to help. Contact us today by calling 1-888-890-0888.
June 17, 2014
Wages Garnished by CRA – Blog Series Part 1
Wage Garnishment Blog Series Part 1 – Wages Garnished by CRA

With the advent of May, the personal tax filing deadline is now well behind us, and for many, a sigh of relief can be had. For others however, the passing of the deadline brings with it a whole new set of issues.

If, after filing your taxes, you find yourself with a tax debt that has led to your wages garnished by CRA (the Canada Revenue Agency), this first blog in our wage garnishment blog series might be a smart place to start as far as finding relief.

If you have yet to have your wages garnished by CRA, but are concerned that this might be a reality in the very near future, here are some things to think about:
- If you are an employee on payroll with taxes deducted at the source, the CRA can garnish up to 50% of your wages. They simply need to send notice to your employer and your employer is legally required to submit a portion of your pay to them to pay off your tax debt.
- If you are a sub-contractor, or receive a different form of income, such as a pension, the CRA can garnish up to 100%.
- If you are self-employed, the CRA will send a notice to your customers to redirect your receivables directly to the CRA.
- A court order is not required for wage garnishments initiated by the CRA.
- If the person who receives the requirement to garnish your wages does not comply, the CRA can then pursue them (so don’t assume that just because your employer likes you that they will ignore a requirement to pay).
How does the CRA know where to turn to garnish your wages?

There are a number of different sources, including the T4 filed by your employer, an audit done on a client or supplier, a call to the CRA tip line, or personal disclosure.

A garnishment can cause serious financial hardship, not to mention embarrassment or negative impacts to your personal business. Knowing this, what can you do to prepare yourself, or deal with a wage garnishment by CRA that is already in place?

Remember that dealing directly with the CRA is never a good idea – unless you can pay the debt in full, your chances of getting an agent to even entertain a reasonable payment plan are slim to none.

And, if you attempt to deal with them directly, providing additional information in the hopes of reaching an amicable agreement, a frozen bank account or property lien may be the only result.

There are programs that offer immediate protection. Are your wages garnished by CRA? These programs also offer protection from other enforcement action, and finding out about these is the best place to start. If you are facing a tax debt or a CRA wage garnishment, DebtCare can help. Call us today at 1-888-890-0888.
May 5, 2014
Garnishment of Wages Blog Series Part 1 of 3 – What is a Wage Garnishment?
A garnishment of wages is one of the most common and effective enforcement methods used to collect money through the Small Claims Court by the Canada Revenue Agency, O.S.A.P, and Family Responsibility.

A garnishment of wages occurs when you have defaulted on a debt and the party you owe money to serves your employer with a legal notice to garnish your wages (i.e. pay some portion of them to that party). Only the government, like the Canada Revenue Agency, Ministry of Finance, Provincial and Federal Student Loans, etc… have the power to garnish your wages without a court order.

For a private company to garnish your wages they must sue you in court, obtain a judgement against you and have an order from the court to garnish your wages. So, if a private company is trying to collect money from you, the garnishment must be sent to your employer in the form of an order from the court that issued the judgement.

A garnishment of wages from Family Responsibility will not occur unless the court has ordered you to pay child support and you go into arrears and the Family Responsibility office enforces the court order through a wage garnishment.

The amount of a garnishment of wages can vary depending on the type of debt you have and who is issuing the wage garnishment. Here are some Canadian examples:
1. A wage garnishment issued through the Ontario Small Claims Court will require that your employer remit 20% of your net earnings to the Small Claims Court to then be distributed to your creditor.
2. A wage garnishment from Family Responsibility could involve a garnishment of up to 50% of your earnings.
3. A wage garnishment from the Canada Revenue Agency could involve a garnishment of up to 100% of your earnings depending on the type of income that you have.
Most people find themselves wondering “what is a wage garnishment” once they have been threatened with one.

Once a wage garnishment is sent to your employer it can be humiliating and leave you feeling powerless. Your employer must garnish your wages or they can find themselves in trouble. If you have a job that requires you to demonstrate financial responsibility this could pose challenges to your employability.

If you have been threatened with a garnishment of wages the question should not be “what is a wage garnishment” but rather “what can you do to avoid a wage garnishment”. This will likely require professional counsel, and not that of a lawyer but of a financial professional who has experience working with people who have had wage garnishments and who is capable of helping you through your financial problem.

Wage garnishments that are the result of unpaid child support will leave you little in the way of options, other than to return to court and request that a judge reduce the amount of the garnishment. If you are being threatened with a wage garnishment from the CRA or a creditor, you definitely have more options, even if your wages are already being garnished.

Now that we have answered the question “what is a wage garnishment”, the next thing you will want to do is learn how you can stop one. This question is answered in our next blog “how to stop a wage garnishment”.

If your wages are being garnished or you are being threatened with a wage garnishment, time is of the essence. Contact DebtCare Canada today by calling 416-907-2582 or visit www.debtcare.ca to find out your options.
October 1, 2012