In a successful lawsuit, garnishment of wages and bank accounts may be awarded in the judgment. Since income assistance isn’t considered a wage, it cannot be garnished by regular creditors.
The Government Can Garnish Federal Payments
If you owe the government money, you may see deductions from your usual government income. Federal creditors are usually either the Canada Revenue Agency, Canada Student Loans, or Maintenance Enforcement, and they may collect for items such as unpaid income taxes, a return of overpaid benefits, child support arrears, or overdue student loans.
The Department of Justice will receive a garnishing document from the federal creditor, and after 35 days, deductions from the source will begin. The processing behind the deductions will also delay your receipt of remaining amounts by about 10 days.
Government employee wages aren’t social assistance. Contractors or formal employees of any branch of government can have their wages garnished by non-federal creditors upon court judgment.
What Counts as Income Assistance
The list is extensive, and a full account can be found at Service Canada. In general, that includes:
- Employment insurance payments
- GST/HST credits
- Working income tax benefits
- Canada pension plan payments
- Income for seniors, such as old age security pension and the guaranteed income supplement
- Veteran’s government assistance
- Social assistance for families, residents, new immigrants, and people with disabilities
Although income tax refunds aren’t considered income assistance, they are protected from non-government creditors as well.
In Ontario, monies paid by your employer can be garnished up to 20% of wages. Sick leave, holiday, and vacation pay is eligible for deduction, as are disability and pension benefits received from your employer; however, the employer’s contribution to pension, insurance, or social welfare funds are fully exempt.
Garnishment of a Bank Account
In a civil suit between a creditor and debtor, it’s possible for the judge to award bank account seizure to the creditor. If you believe that you may be served with a lawsuit, any monies deposited at your bank can be seized by the creditor, including cheques from the government.
How to Stop Federal Garnishment
You can try to contact the creditor to negotiate a payment schedule. Voluntary payments from the debtor is a replacement for garnishing, however the government usually won’t settle for long term repayment. Funds in transit from the source to the creditor might not be redirected back to you, but you should speak directly to the appropriate federal office to settle the matter. In addition, both bankruptcies and debt consolidation proposals done though a trustee provide an immediate stay of proceedings. This means that almost all forms of garnishment are stopped when you file a proposal or a bankruptcy.
How to File for Bankruptcy
When you file for bankruptcy, a ‘stay on payment schedule’ proceedings is immediately put in place. This ensures you have the time to complete the bankruptcy process and protect your assets from further penalties. Below is a step-by-step guide to completing the bankruptcy filing process.
Step 1: Contact a Trustee
When considering bankruptcy in Canada, you should first contact a trustee to examine the potential debt dissolution options available. It’s important the trustee has experience within the bankruptcy field, and has a proven reputation within the marketplace.
Step 2: Bankruptcy Administration
If you decide to file for bankruptcy, your trustee then becomes responsible for the administration of all aspects of the process. The trustee will go over all documents with you and explain the various elements involved in the bankruptcy process. They will then ask that you sign the documents to begin the filing process.
Step 3: Filing Bankruptcy
Once all the documents have been signed, your trustee will then file for bankruptcy for you with the Office of the Superintendent of Bankruptcy. Your bankruptcy will then begin immediately after the paperwork has been filed. All creditors in your bankruptcy case will be notified within five days of the filing. Creditors are then directed to the trustee to file their own claim on the amount you owe.
What Steps Do I Need to Take During the Bankruptcy?
When you’ve filed for bankruptcy, the federal government will then ask that you complete the following duties to ensure the process is negotiated successfully:
- Provide the trustee with your tax information to file outstanding tax returns and the return for the year of filing.
- Make required contributions to your bankruptcy estate
- Attend credit counseling sessions
- Surrender non-exempt assets
What Happens when the Bankruptcy is Discharged?
Your bankruptcy will be discharged within nine months if this is your first bankruptcy filing and you do not have any surplus income. Once the bankruptcy is discharged, you’re then released from the obligation to pay the debts covered under the bankruptcy. However, you may find that your ability to gain credit is impacted in the immediate timeframe after the bankruptcy is discharged.
It’s important to understand the challenges faced when a creditor lays claim to your government income. To discuss this process and the bankruptcy filing stages in greater detail, contact our office today. Specialists with years of debt management and bankruptcy filing experience are ready to answer your call.