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Category: Wages garnished by a creditor

  • Wage Garnishment 101 – Know Your Rights and Options

    If you’ve received a wage garnishment, you might be feeling scared and confused. You need to know how to stop it — and fast.

    But that’s not always easy to do. There are different types of wage garnishments — and each one has different options to deal with it.

    To stay protected and even stop wage garnishments, you need to know your rights and options.

    What is a Wage Garnishment?

    Collection agencies, the Canada Revenue Agency (CRA), and other government bodies use wage garnishments to collect money they claim a person owes. The garnishments come directly from your paycheque. If you own your own business, your clients might receive a requirement to pay notice instead.

    The garnishment takes a percentage of your regular paycheque to pay the debt owed. If you’ve received a wage garnishment, you’ll be bringing home a lot less income.

    Types of Wage Garnishments

    There are different types of wage garnishments. The type you are issued depends on the agency involved.

    The type of garnishment you receive can affect how much money comes off your paycheque, how you’re notified about the garnishment, what kinds of income are garnished, and more.

    These are the most common types of garnishments:

    1. Collection Agency/Creditor

    If you owe a debt to a creditor, like a credit card provider, they can get a court order to have your wages garnished.

    Under the Ontario Wages Act, a collection agency or credit can garnish up to 50% of a person’s wages. The exact amount depends on the situation and the organization collecting the debt.

    In most cases, wage garnishments in Ontario take 20% of a person’s paycheque.

    The good news about this type of wage garnishment is that you will see it coming. Because it involves a court order, the creditor will have to take you to court. This might still be overwhelming, but it gives you time to prepare and make a plan.

    A typical creditor cannot garnish social assistance income.

    1. Ontario Small Claims Court

    If you have gone to the Ontario Small Claims Court for another legal matter and now owe money, a wage garnishment might be ordered to collect the payment. These conditions will look similar to a garnishment from a creditor or collection agency.

    1. Canada Revenue Agency

    Unlike creditors, the Canada Revenue Agency (CRA) does not need a court order to garnish your wages. In fact, they don’t even have to tell you they are doing so.

    This can be a particularly difficult wage garnishment to deal with. CRA collections are swift, and in some cases, you might not even get a warning. They can simply send a letter to your employer, your bank, or the Income Security Program office.

    They can also garnish more types of income, including Canada Pension Plan and Old Age Security funds. There is no limit to the amount they can take.

    This is why you should always take owing money to the CRA seriously.

    1. Family Responsibility Office (FRO)

    The Family Responsibility Office (FRO) deals with child support and spousal support payments. If you owe support money, there will be swift consequences.

    Not only can FRO garnish your paycheque, but they can also take other income, including sales commissions, Employment Insurance (EI), Workers’ Compensation, income tax refunds, severance pay, and pensions. Beyond that, they can take money from your bank account, register liens, and even suspend driver’s licenses and cancel passports.

    FRO can deduct up to 50% of any income-type funds, including EI and CPP, and 100% of tax refunds and interest on Bank of Canada savings bonds. If you have a bank account in your name only, FRO can take 100% of the amount owing to pay arrears.

    1. Canada Student Loans

    If you miss payments on your Canada Student Loan for 270 days (nine months) or more, your loan goes into default and is sent to the CRA for collection. The CRA can then proceed with their usual collection action.

    How to Stop Wage Garnishments

    Stopping a wage garnishment depends on the agency and type of debt. In every case, paying off the debt owed will stop your wage garnishment immediately. If you can’t pay, there are other options.

    • Consider debt consolidation to free up funds to pay what you owe.
    • Negotiate a voluntary arrangement with a creditor if possible. This may be harder to do if they already have a court order for the payment in full.
    • Go to court and petition to stop the collection action. This can be expensive and isn’t guaranteed, especially if it’s from a court order.
    • Work with a debt counsellor to file for bankruptcy or a consumer proposal. This will immediately stop most collection action, but there are exceptions.

    Exceptions

    • You can’t stop FRO payments by filing for bankruptcy.
    • You can’t include student loans in a consumer proposal or bankruptcy for the first seven years after finishing your studies.

    While getting a wage garnishment is overwhelming, a good debt counsellor will cut through the confusion. They will assess your situation, type of garnishment, rights, and options to find the right solution for you.

    If you’re dealing with a wage garnishment, contact DebtCare Canada today. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Unexpected Wage Garnishment During the Holidays – What You Can Do Now

    debtcare2When you owe a creditor, but are behind with payments, or not making payments at all, you may be facing harassing collection calls, or worse, collection action, which may come in the form of an unexpected wage garnishment. This time of year, the last thing someone wants before the holidays is a wage garnishment.

    Any creditor can begin garnishment proceedings against someone for unpaid debts. Collection agencies, the Canada Revenue Agency, credit card companies, payday loan lenders, or any creditor can enforce collection through a wage garnishment – although these proceedings may differ depending on the creditor.

    There are 2 common types of garnishments – those that require a court order, and those that do not.

    Court imposed garnishments are generally issued when a creditor sues you and is awarded judgement. This happens when you default on a loan, and after several attempts to obtain what is owed, your creditor will head to court. Family responsibility payments are also an example of court imposed wage garnishments.

    Non court-imposed garnishments are generally issued by the Canada Revenue Agency or other government bodies when a debt is owed – and for these organizations, no court approval is necessary.

    What happens when wages are garnished? Once your employer receives notice of the order, they are required by law to withhold a certain amount (sometimes up to 50%) and submit it to be used to pay your creditor.

    What can you do if your wages are already being garnished? There are only 3 ways to stop any garnishment:

    • Negotiate an arrangement with the person who placed the garnishment – this may include paying the debt in full
    • Go to court and ask a judge to remove or reduce the garnishment
    • File a consumer proposal or bankruptcy

    Let’s look at each one.

    Negotiate an arrangement with the person who placed the garnishment – this one is dangerous because your creditor may request further financial disclosure in exchange for temporary voluntary payment arrangements. This information may be used against you later or the creditor may demand an arrangementthat they know you can’t meet so they can go after other things and prove that they showed ‘good faith’ negotiating with you. Be very careful.

    Go to court and ask a judge to remove or reduce the garnishment – you will have to prove why you deserve to have the garnishment removed, and you may need legal representation. This can be an expensive option and there are no guarantees.

    File a consumer proposal or bankruptcy – this could have some temporary impacts to your credit, but will immediately stop a garnishment, interest, and penalties, as well as provide for a single monthly payment and sometimes a debt reduction.

    Often the path of least resistance is the cheapest and the least stressful.

    If you are facing an unexpected wage garnishment as a late holiday gift, call DebtCare Canada today. We can help get it lifted. 1-888-890-0888.

     

  • Can a Collection Agency Issue a Wage Garnishment?

    deb1It is a very common scenario: you’re aware of the existence of a bad debt, but with no means to pay the debt, you instead choose to ignore the calls and notices and hope that you can eventually amass the funds to pay it in full – or just hope that it will eventually go away. Then payday rolls around, and with the intention of taking even just a little bit aside to pay the debt, you find that the creditors have already taken matters into their own hands and issued a wage garnishment – and the amount on your paycheque is far lower than expected.

    If this is the position in which you’ve found yourself, you might be wondering how it even came about. Can a collection agency even issue a wage garnishment – how do they have this power? The ugly truth is that yes, although a collection agency is a third party, it does have the power to secure a wage garnishment when going through the proper channels.

    When you have a debt that you can’t pay, and a creditor assigns the account to a collection agency, that agency may just choose to pursue the matter in court – in order for a garnishment to be leveraged against you, obtaining a judgement in court is first required.

    Does this mean you are being sued? No, the only people who can sue in Ontario courts are lawyers, paralegals, and people representing themselves – meaning, if a creditor has the time and resources, they could choose to sue you. Many don’t, but will pass the matter along to a collection agency, one who will then seek a judgement.

    A collection agency can apply on a creditor’s behalf to court to seek a “garnishment” against you. If granted, this legally allows them to seize your salary, money in your bank account, or other money you own to repay your debt.

    Often when collection agencies threaten to sue on behalf of the creditor, it is to scare you into paying – but there are many instances where it is not an empty threat and a wage garnishment may be imminent.

    If collectors are calling and delivering these threats, a wage garnishment may be headed your way. It is best to deal with the debt before a garnishment is issued, thereby mitigating further damage to your already bruised credit.

    These are your options:

    • Pay the debt in full – although if this really was an option we hope most would have already done it.
    • Make a settlement with the collection agency – sometimes this works, other times it is easier said than done.
    • Look at other options to settle the debt and stop collection action, such as filing a consumer proposal.

    Once a debt goes to collections it won’t just go away – your creditor will just keep assigning it to different agencies and using different tactics to force you to pay.

    If you are standing on a ledge with seemingly no resources at your disposal, don’t despair. DebtCare Canada can help you find a solution to your financial problem and get a wage garnishment lifted before it does more damage. Call us today at 1-888-890-0888.

     

  • Financial Focus: Wage Garnishments in Ontario

    debtcare1Nothing is worse than getting your wages garnished, and it seems as though this is happening with increased frequency – many Canadian individuals are facing wage garnishments in Ontario as a result of debts in collections, CRA tax debts, or Family Responsibility.

    No matter how you slice it, wage garnishments are brutal, and carry with them various personal and professional consequences. For example, not only will this type of collection action cause personal financial hardship, making bill payments incredibly difficult, it can also impact your professional life. Since wage garnishments are sent to employers, once your employer learns of your financial troubles, your reputation will be impacted, and this could have important and costly ramifications. Additionally, if you own your own business, it will be your clients that receive notice to garnish receivables, thereby impacting your reputation.

    Facts about wage garnishments in Ontario:

    • If you don’t pay your debts, your creditors can take you to court and obtain a court order to have your wages garnished. However, some creditors, the CRA as the most common one, don’t need a court order and can simply send out a Requirement To Pay notice and the deed is done.
    • Under the Ontario Wages Act, a creditor can garnish up to 50% of your gross wages, depending on the organization owed. The actual amount is determined by the court, but typically garnishments in Ontario are around 20%. That being said, if you are self-employed, and owe money to the CRA, a garnishment can get as high as 100% of your receivables.
    • Wage garnishments can be stopped. Some people assume that once a garnishment is in place, it will remain in place until a debt is paid in full. While this is one way to remove a garnishment, it is not the only one.
      • Negotiating a voluntary arrangement with a creditor is an option, although once a creditor has gone through the trouble of garnishing you they are not going to easily let go and may still demand payment in full.
      • Going to court is another option. Keep in mind that this can get expensive, especially if it is tax court. This is because in small claims court you may represent yourself, whereas in tax court you usually need a lawyer.
      • A third option is working with a debt counsellor on a consumer proposal. For many Canadians, this is the option that makes the most sense, often because it will not only stop a wage garnishment in its tracks, it will also freeze interest, consolidate all unsecured debts into one monthly payment, and will often result in a much smaller balance to be paid off.

    Wage garnishments in Ontario can quickly turn a financial issue into a financial nightmare. Once a creditor has leveraged this form of collection action, removal may be difficult, but it is not impossible.  You have options.

    For more about having a wage garnishment lifted, please contact DebtCare Canada today by calling 1-888-890-0888.

     

  • Can a Collection Agency Garnish my Wages?

    Can a Collection Agency Garnish my Wages?

    collection agency, garnish my wagesNo 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.

  • Wage Garnishment Blog Series Part 2: Wages Garnished by a Creditor

    Wage GarnishmentMany people run into financial problems and can’t pay their creditors. Often these debts end in a wage garnishment. Last week we looked at Canada Revenue Agency wage garnishments, so this week we thought we’d explore what it means when you are faced with having wages garnished by a creditor other than the CRA.

    When you have a debt that you have continually had trouble paying down, failing to meet even the monthly minimum payments month in and month out, your creditors will quickly tire of this and will eventually take enforcement action in an attempt to get their money. Sure, if you can’t pay, you can’t pay – your creditors can’t draw blood from a stone – but that doesn’t mean they won’t try!

    If your creditor has no security on your loan, they can do one of two things to try and get what they are owed:

    • Sue you in Small Claims Court
    • Send your file to a 3rd party collection agency for collection – they can in turn sue you in Small Claims Court.

    Remember – aside from the CRA, a creditor cannot garnish your wages without a court order, so Small Claims Court is a necessary first step.

    If you are sued in the Ontario Small Claims court, your creditor has to serve the papers on you. Once you have received the papers, you have 2 options as far as filing a Defense (and only 40 days to do so):

    a)     If you file a Defense a date is scheduled for you to make a settlement and repayment terms with your creditor. If a settlement is reached, as long as you don’t breach the terms, the matter is settled. If you breach the terms the creditor can get a default judgment against you. If you don’t make a settlement the matter will proceed to trial; it should be said that most disputes are settled at the pre-trial settlement conference.

    b)     If you don’t file a Defense, the creditor can obtain Default Judgment against you. Once they have this, they can file a Notice of Garnishment with the Ontario Small Claims Court and also send it to your employer. The maximum wage garnishment from the Ontario Small Claims Court is 20% of your earnings. Your employer must then begin remitting the specified percentage of your income to the court. The court holds the money for 30 days and then sends the money to your creditor.

    If your wages are being garnished because of a Small Claims Court wage garnishment, and you can’t make ends meet, there are only 2 ways to reduce or stop a Small Claims Court wage garnishment.

    1. File a motion with the Ontario Small Claims Court – include and present your financial information and ask the judge to reduce the percentage of the garnishment or mediate a voluntary payment plan that you can afford with the other side. You may need a paralegal to do this as it will involve completing court forms and attending a court date.
    2. Speak to a financial restructuring professional – this could involve discussing options such as a consumer proposal, which will immediately stop a wage garnishment imposed through the Ontario Small Claims Court.

    If your wages are being garnished and you don’t know what to do, DebtCare can help. We have the resources to help you pay off those debts and get you back on strong financial footing. Call us today at 1-888-890-0888.