Wage Garnishment: Rules & Regulations

Finding out your wages are being garnished can hit you like a ton of bricks. You work hard for your paycheque, and now a chunk of it is being taken away before you even see it.

Maybe you have fallen behind on bills, taxes, or child support payments. Maybe you have picked up a habit of overspending. Or maybe you are trying to dig yourself out of credit card debt that just kept piling up. No matter how you got into this debt trap, wage garnishment is a reality for many people, and it is not something that should make you feel hopeless.

The good news? There are ways to manage it and get your finances back on track. This guide will walk you through everything you need to know about wage garnishment—what it is, why it happens, and what you can do about it. We will also explore some practical options to help you get some debt relief, so you are not constantly looking over your shoulder.

Understanding Wage Garnishment

What Is Wage Garnishment?

So, what exactly is it? In simple terms, it is when a portion of your paycheque is withheld by your employer to pay off a debt you owe. This could happen because of unpaid taxes, overdue child support, or debt collection efforts from credit card companies.

It is often not a choice—it is a legal process that kicks in after a court order is issued or, in some cases, when the Canada Revenue Agency (CRA) steps in for unpaid taxes.

It is different from something like a voluntary wage assignment, where you agree to have a part of your paycheque or employee’s wages go toward debt repayment. With wage garnishments, you do not get much say in the matter. Once the process begins, the judge will issue legal paperwork ordering your employer to turn over a portion of each paycheque to the creditor you owe money to.

Payments will keep coming out of your paycheque until the debt is fully paid off. You will get an official notification before the garnishment begins, so you will not be blindsided, but it is important to act quickly once you are notified.

Common Reasons for Wage Garnishment Happen

There are a few common reasons why wage garnishments might happen:

1. Unpaid taxes: If you owe taxes to the CRA, they can garnish your wages without needing to go through the courts.
2. Child support payments: If you have fallen behind on child support, the court may set it up to ensure payments are made.
3. Credit card or other debts: Creditors, such as credit card companies, can seek a court order to garnish your wages if your payments are long overdue.
4. Student loans: Government-backed student loans that are in default can also lead to wage garnishment.

In short, it is a legal way for creditors to collect money you owe. It can be sometimes called wage garnishment order. When they are unable to collect an amount owing or make an appropriate arrangement with you, then they may request funds from a third party. A third party could include a person or organization, such as an employer, financial institution, or another source of income you may have.

It is not ideal, but if you are facing wage garnishment, the key is understanding your options and finding ways to manage it.

The Legal Side of Wage Garnishment

Legislation on Wage Garnishment

Wage garnishment in Canada is regulated by provincial legislation. For example, there is the Consumer Protection Act of Ontario and similar ones in other provinces. This legislation protects you before, during, and after you make a purchase or sign up for a membership or contract. It protects you from unfair practices.

There is also the Limitations Act of Ontario and similar other provincial legislation. This provides two years from the date of the loss for actions to be commenced.

We recommend you reach out and speak with a professional, such as a Licensed Insolvency Trustee, if you are not sure of your rights.

Limits and Protections for Employees

Maximum Garnishment Limits

In addition to the provincial legislation, each province in Canada has its own regulations on wage garnishment and how much they can take from your wages. But, each province has slightly different rules, so it is important to know the laws where you live.

Usually, they cannot take more than 20% of your weekly disposable income. But, for some types of debt, such as child support, that percentage might be higher, but the rules are designed to make sure that garnishment does not leave you without enough money to cover your basic living expenses.

Certain types of income are also protected from garnishment. In some provinces, disability payments, social security benefits, and other government assistance might be exempt from wage garnishment. Understanding what is exempt from garnishment in Canada can help you protect more of your income.

If you are unsure, talking to a Licensed Insolvency Trustee is a good idea. They can help you understand what is protected and how to deal with the wage garnishment process.

Employee Rights During Wage Garnishment

If your wages are being garnished, it is important to know that you have rights. First and foremost, you must be notified before any garnishment starts. This gives you time to prepare or, in some cases, dispute the garnishment if you believe it is unfair or incorrect.

If you are experiencing financial hardship, you may also be able to ask for a reduction in the amount being garnished. And if you feel the garnishment is causing more harm than good, it is worth talking to a Licensed Insolvency Trustee about your options.

Getting Out of Debt and Stopping Wage Garnishment

While wage garnishment is a serious situation, it is not the end of the road. There are ways to stop it and get your finances back on track.

Pay Off the Debt

This may seem obvious, but one of the most straightforward ways to stop wage garnishment is to pay off the debt in full. If you can find a way to do this—perhaps through savings or help from a family member—it will stop the garnishment immediately. But for most people, paying off the entire debt at once is not realistic.

Negotiate a Settlement

In some cases, you may be able to negotiate a settlement with your creditors. This means offering to pay a lump sum that is less than the full amount you owe. If the creditor accepts, they will stop the garnishment, and you will settle the debt for less than what was originally owed.

File a Consumer Proposal

A consumer proposal is a legal process that allows you to repay a portion of your debt over a set period of time, usually up to five years. One of the biggest benefits of filing a consumer proposal is that it stops wage garnishment as soon as it is filed. This can provide immediate relief and give you a structured plan to pay off your debt over time.

Consider Bankruptcy

While bankruptcy is typically a last resort, it is an option if you are in a situation where you simply cannot repay your debts. Filing for bankruptcy will stop wage garnishment and give you a fresh start, but it is important to understand the long-term consequences before choosing this path.

Speaking with a debt expert can help you figure out what your best option is.

How Farber Can Help

At Farber, we understand how stressful it can be to deal with wage garnishment and overwhelming debt. The good news is that you do not have to face it alone. Our team of experts can help you explore all your options, from negotiating with creditors to filing a consumer proposal or even bankruptcy if necessary.

The goal is to help you stop wage garnishments and find a solution that works for your financial situation. Whether you are dealing with tax debt, child support payments, or credit card debt, there is a way out—and we are here to help you find it.

If you are ready to take the next step and stop wage garnishment, contact us today for a free consultation. We will walk you through your options and help you get back on solid financial ground.

Wrapping It Up

Dealing with wage garnishment can feel like you are stuck in a financial hole with no way out. But it is important to remember that you do have rights and options. Whether it is paying off the debt, negotiating a settlement, or filing a consumer proposal, there are ways to stop wage garnishment and regain control of your paycheck.

It is also essential to have a plan for managing debt in the future, so you do not find yourself in this situation again. Take control of your finances, educate yourself about your options, try to stick to a budget, and reach out for help when you need it.

If you are ready to stop garnishment payments and get out of debt, Farber is here to help. Do not wait—contact us today for a free consultation and start taking back control of your financial future.