Keeping up with your debts can be difficult, especially if you’re experiencing financial hardships such as job loss. While missing a payment or two can result in late payment penalty fees and added interest, continually missing payments can lead to more severe consequences such as wage garnishment. Typically, creditors resort to wage garnishment when other attempts at negotiation and arrangements to repay your debt have fallen through.
Wage garnishment allows your creditor to obtain a portion of your earnings directly from your paycheque, which is then used to pay back the debt you owe.
In Canada, creditors must apply to the courts for a wage garnishment order. To obtain the right to garnish your wages, a creditor must first file a lawsuit and obtain a judgement (where the court agrees you owe money to the creditor). Once the creditor obtains a judgement, they can choose to seize your assets or garnish your wages.
Generally, they will first look for any assets they can seize for repayment. If you have no physical assets or your assets fall short of repaying your full amount owed, then wage garnishment is a common option for your creditors.
Most creditors can file for wage garnishments. This process requires creditors to file a lawsuit and obtain a judgement from the court. The money taken from your paycheck is not paid directly to the creditor, but to the court.
Your wages may be garnished if you owe money to the following institutions:
Keep in mind that the CRA can garnish your wages without a garnishment order from the courts. On the other hand, payday lenders may garnish your wages if you signed a voluntary wage assignment with them on your application.
If you’re employed, the amount creditors are allowed to garnish on your wages has a limit. Wage garnishment limits in Canada are fairly consistent, with some variation depending on the province you live in.
| Ontario | In Ontario, creditors are allowed to garnish your wages up to 50%, with some exceptions. |
| British Columbia | In British Columbia, the limit is 30% of wages. |
| Alberta | Provinces like Alberta are a little more nuanced. In Alberta, you retain the first $800 of your monthly net income. Creditors are then able to garnish a maximum of 50% of your monthly net income between that first $800 to $2400, and then 100% of anything above that. |
| Saskatchewan | In Saskatchewan, the creditor can garnish 100% of your income, so long as you’re left with $1,500 a month. If you have a dependant, add $300 per month per dependant. |
The amount that can be garnished can also be affected by your employment status (i.e., if you’re self-employed), the type of income you receive and whether you owe money to the CRA.
The CRA can garnish a maximum of 50% of your earnings, and 100% of other earnings, including pensions and income through contractual work. Again, you can instruct your employer to garnish your wages without a court order by voluntarily signing a wage assignment. This applies across provinces.
As noted above, collection agencies and creditors are required to obtain a court order to garnish your wages. They then serve that order to your employer, or person owing you your earnings if you’re self-employed. Wage garnishment limits depend on the province, but are typically 20% of your gross earnings, up to a maximum of 50%.
For creditors and commercial creditors (for debts like credit cards or bank loans), they can request to garnish up to 20% of your wages, and a maximum of 50% of your child support payments. The actual amount will depend on your individual circumstances and financial standing, as decided by the courts.
Payday lenders can garnish your wages based on a voluntary wage assignment, which they sometimes require you to sign with your loan application. Signing a voluntary wage assignment means you’ve agreed to let them deduct a specified amount from your wages to repay the loan if you’re unable to. Payday lenders send the agreement to your employer or client and request a withhold of the specified amount, which is then remitted to them.
However, these agreements are typically not legally binding. It’s enforceable if you consent to your employer garnishing your wages based on the agreement. Otherwise, you can ask your employer to cancel the agreement.
Wage garnishment works a little differently if you’re self-employed. The money you earn while self-employed isn’t classified as wages, so a creditor could actually garnish up to 100% of your earnings.
Though this is unlikely if they want to sustain payment. Moreover, as a self-employed individual, the creditor would serve the garnishment order to anyone who owes you your earnings (like a client). However, such orders are only valid for only a short period of time.
Dealing with wage garnishment can be tricky and disadvantageous when dealing with debt. Fortunately, there are a couple of ways to stop wage garnishment.
Managing your debt and making regular payments according to your terms can be demanding. The threat of wage garnishment can be daunting and unfavourable, but there are ways to avoid or resolve the possibility. Loans Canada can help you find the right fit for your debt needs.
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Yu is an Economics graduate of Wilfrid Laurier University and has been an avid writer about personal finance and accounting. She enjoys being able to share her experience and knowledge on financing and accounting practices. Yu has been writing blog posts since she was young and is an advocate for financial literacy in formal education. In between, she loves to hike, watch sci-fi series, travel, and is currently in the process of writing her own novel.
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