A garnishment is a lawful process whereby the creditor requires your employer or other third party to turn over to them a portion of your earnings – before you get paid – until all your debt is cleared.
A creditor may attempt to seize money directly from your wages if you fail to pay what you owe them, causing the creditor to apply to court for a “garnishment” against you. This means that they can seize money in your bank accounts, your salary, or other money you own until you settle the debt.
Although wage garnishments are legal in Canada, with the exception of New Brunswick where it is prohibited, a creditor has to go through a process to initiate the garnishments. These steps include:
- The creditor must obtain a judgement from the court. The creditor presents proof of their claim against the debtor so the court can justify a garnishment.
- The court then grants the creditor seizure summons that allows them to search for assets of the value of the debt to seize.
- In the absence of any physical assets for the creditor to legally seize, the creditor will serve a ‘writ of seizure’ to your employer to start garnishing your salary before you get paid.
- The wage garnishing will continue until the debt gets paid in full
This essentially means that wage garnishment only affects debtors who don’t have any assets or equity that can be seized to pay off the debts.
How much can be seized?
Both federal and provincial laws dictate the percentage of your earnings that can be garnished and the type of assets that can be seized. The laws are somewhat similar across the country. Here’s what to expect:
- Creditors can seize any physical assets including household items and appliances – there are limitations in B.C. regarding what can be seized
- Your line of credit cannot be seized because there is no physical money to take
Going through court to obtain wage garnishment is a rather tedious process that creditors would only pursue if they felt that they were unable to reach out to the debtor. So it’s best that you don’t hide from your creditors. If you have trouble making the payments, contact a licensed insolvency trustee to discuss how you will settle the debt.
And if a wage garnishment is initiated, consider bankruptcy counselling to learn about how you can stop it by either filing a consumer proposal or filing for bankruptcy.