Sometimes, despite their best efforts to follow our debt payment plan, people find themselves unable to keep up. Collection agencies may inform us that if we cannot or will not come to an arrangement, they can take legal action to have our wages garnished, taking money out of our hands before we even see it. Can they really do it, though?
Yes, collection agencies can garnish your wages. All creditors are legally entitled to sue a debtor to collect unpaid debts, and if they succeed, the court can order the funds collected directly from your wages or bank account. Some creditors, like banks and the Canadian government, are even allowed to remove money from your bank account.
Who Can Garnish Your Wages?
Legally, any creditor, or their agent, may sue a debtor to collect an outstanding debt. Collection agencies are empowered under Alberta law to locate debtors and collect outstanding debts on behalf of creditors. This includes taking legal action to allow the creditor to garnish a debtor’s wages.
Certain entities are not required to secure court judgements before garnishing wages. The Canadian government may redirect some funds it owes you to pay off outstanding income tax or repay Employment Insurance benefits and even student loans. Banks may use the “right of set off” to take money from your bank account in order to offset debts you owe them, such as outstanding account fees or overdue payments on loans, lines of credit, or credit cards.
How Do Collection Agencies Garnish Your Wages?
In Alberta, collection agencies other than banks and the Canadian government file lawsuits in one of two courts: the Civil Division of the Alberta Court of Justice (also known as small claims court) if the debt is worth $100,000 or less, or the Alberta Court of King’s Bench for debts over $100,000. If the judge in the lawsuit finds in the creditor’s favour, they will issue a judgment requiring you to pay.
For banks and the Canadian government, the process works differently. A bank collecting money you owe them under their “right of set-off” may simply collect the outstanding balance from any funds deposited into your account. The bank is not required to ask your permission or provide notice to you before collecting those funds.
If you owe money to the Canadian government, such as outstanding taxes or employment Insurance benefit repayments, the government may issue a requirement for payment notice to you or your employer or someone who holds money for you. Like a court order, requirement for payment notices is legally binding, requiring the recipient to pay the specified amount or face legal penalties.
How Much of My Wages Can Debt Collectors Garnish?
In Alberta, the following rules apply to wage garnishments:
- The first $800 of a person’s paycheque cannot be garnished.
- Up to 50% of the amount between $800 and $2400 can be garnished.
- If you have dependents, the exemption amount increases by $200 per dependent.
- If you are unemployed, creditors may collect the payments directly from your bank account.
- If you are self-employed, a creditor may attempt to collect 100% of your self-employment income.
These exemptions do not apply in all cases. For example, any money already in your bank account is considered separate from money you receive from being paid your wages by an employer. These rules also do not apply to money owed to the Canada Revenue Agency.
Some forms of income, such as Canada Pension Plan and Old Age Security payments, some other pension benefits, and some disability benefits, cannot be garnished. The nuances of the rules about how much of your wages a creditor can garnish can quickly become confusing, so we suggest contacting a professional to guide you through the details.
How Do I Stop Collection Agencies From Garnishing My Wages?
The most reliable way to stop collection agencies from garnishing your wages is to prevent the garnishment from happening in the first place. This might involve speaking with the creditor or collection agency to make payment arrangements..
If a court has already ordered a judgment, the only way to prevent it is by seeking another court application. This will probably require you to find a lawyer.
In cases where a creditor can collect money you owe directly from your bank account or funds they owe you, such as banks and the Canadian government, it’s not possible to prevent these amounts from being collected.
We Can Help You Navigate Your Debt
Debt can often be a challenging and stressful situation and one which people find difficult to handle without help. A.C.Waring and Associates understands how difficult handling debt can be, and we can guide you through the process to reach the best possible outcome for everyone. Contact us for more information on how we can help you.
