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Category: Wages Garnished by CRA

  • 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.

  • 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.

  • So You Have Filed Your Income Taxes and You Owe – Now What?

    wage garnishmentSo you’ve made it through income tax time but you know you are going to owe – now what?

    Your first step is going to be to take a good hard look at your budget. CRA will want to be paid in full so that should be your first goal. If this goal is unattainable, that means that some negotiation with CRA is going to be involved. This can be very tricky because when speaking with them, the first thing they will try to do is get you to share personal information with them that they can then use against you later when trying to collect the tax debt.

    Here are some examples:

    • Where do you work? = wage garnishment
    • Where do you bank? = frozen bank account
    • Where do you live? = property lien

    In fact, the most dangerous CRA agents are actually the nice ones! Through one casual conversation, during which you are just trying to be friendly and compliant, these agents can extract enough information from you to do some serious damage. Then, after you’ve made your disclosure, they will turn around and demand a monthly payment in excess of what you can afford to pay monthly or they suggest that you start liquidating assets to pay them.

    This is why negotiating with CRA directly is never recommended.

    Aside from trying to charm information out of you on the phone, agents will often appear to entertain the idea of a payment plan IF you complete their financial disclosure statement. This statement basically discloses every asset, investment and income/income source you have. This is, by far, one of the most dangerous CRA forms.

    If you have a tax debt that you know you can’t pay in full, your best bet is to obtain some professional guidance. Perhaps there is some way you can pay the debt and therefore negotiate, but perhaps there is not and you will require additional protection against the powerful CRA.

    Most action that CRA can take can be taken without warning you, nor do they need a court order. From the point when your return is assessed to the point when your account is assigned to a collection officer is only about 3-6 months, so time is of the essence. Waiting until you are on CRA’s radar to formulate a plan is not recommended.

    Get a jump start on finding a solution for your tax debt and see the light at the end of the tunnel sooner rather than later. DebtCare can help you negotiate with, and protect yourself from, CRA. Call us today at 1-888-890-0888.

  • Wages Garnished by CRA – Blog Series Part 1

    Wages Garnished by CRA – Blog Series Part 1

    Wages Garnished by CRAWage 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.