You might experience a wage garnishment in Ontario if you owe money to a creditor.
If this happens to you, there are several ways you can resolve the problem.
This guide will explain Ontario garnishment rules and how to stop a wage garnishment order in Ontario.
What is a wage garnishment?
If you don’t pay your debts, a creditor can ask the court to serve a wage garnishment order on your employer or your bank, who are legally bound to do so.
As a result, the creditor can deduct up to 50% of your wages to collect the money owed before it reaches your bank account. If you are self-employed, creditors can garnish up to 100% of your income.
How much can your wages be garnished in Ontario?
According to the Ontario Wages Act, the maximum wage garnishment percentage for consumer debt is 20% of your gross pay (before deductions). For child support, the maximum is 50%.
How a creditor garnishes wages in Ontario
The creditor applies to the court to garnish your wages, and it’s up to the court to decide based on your financial situation.
Once a creditor has obtained a garnishment order, they must supply written notice. You must respond within three weeks, or the creditor will be granted the court order.
In response, you may dispute the claim, repay the debt or use a Licensed Insolvency Trustee (LIT) to arrange a formal debt solution.
It’s important to note that if your employer receives a wage garnishment order, they can not fire you.
Who can garnish your wages in Ontario?
Any creditor can garnish your wages, including credit card companies, loan providers, debt collection agencies, and the Canada Revenue Agency.
CRA wage garnishment
CRA wage garnishment rules are different. The Canada Revenue Agency (CRA) doesn’t need to apply to the court to garnish your wages. They also don’t need to notify you of this action.
Credit unions and wage garnishment
If you signed a credit union wage assignment, a credit union could present this to your employer to collect what they are owed without going to court.
Payday loan companies and wage garnishment
A payday loan company doesn’t need to go to court for the amount owing if you have signed a voluntary wage assignment.
They may have included this clause in the contract when you first took out the payday loan. However, you have the right to withdraw your consent at any time to stop deductions from your pay.
Can a collection agency garnish your wages?
Under Ontario debt collection laws, a debt collection agency can obtain a court judgement against you if you ignore collection calls demanding payment. This can result in wage garnishment or other legal action.
Instead of paying the original creditor, you must pay the debt collection agency.
A statute of limitations governs how long a collection agency can pursue legal action, such as wage garnishments.
A two-year limitations period begins when you last acknowledged the debt or last made a payment.
What income cannot be garnished
While creditors cannot garnish income like pensions, employment insurance and social assistance directly from source, they can seize these funds once the money is in your bank account.
How to stop wage garnishment in Ontario
You have two options to stop wage garnishments by creditors and debt collection agents in Ontario.
Repay the debt
You can repay the total balance or try to arrange a payment plan to remove the garnishee order.
Consider a consumer proposal or bankruptcy
If you can’t afford to pay and want to stop a wage garnishment immediately, you can file for bankruptcy or enter into a consumer proposal.
Both solutions provide consumer protection against wage garnishments, known as a Stay of Proceedings.
A consumer proposal is an easy way to consolidate your unsecured debt into one simple monthly payment that never increases. You can stop debt collectors from calling you and garnishing your wages, and you won’t lose your home or retirement savings.
To file a consumer proposal or bankruptcy, you must consult a Licensed Insolvency Trustee, who can stop a wage garnishment within hours.
Quickly act before you lose a portion of your wages. If you want to stop wage garnishments in Ontario, reach out to a trustee for free advice.
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