Updated October 16, 2019
When someone isn’t able to pay their debts off in a timely manner, the person or organization who is owed money may ask the courts to garnish the debtor’s wages. Wage garnishment can have serious ramifications for individuals already struggling to make ends meet.
Sometimes we take on more debt than we can handle effectively, or our financial circumstances change dramatically, causing us to slide further into debt. Fortunately, debt can be dealt with effectively in several ways, and you may be able to avoid having your wages garnished.
What is Wage Garnishment?
Wage garnishment is a legal proceeding that allows your creditor or creditors to seize money directly from your paycheque before you are paid. Most creditors will only resort to wage garnishment when a debtor has failed to make payments for quite some time, or after they have tried and failed to work out another repayment arrangement which both parties find acceptable.
How Does Wage Garnishment Happen?
In the event that it appears unlikely that you will be able to begin servicing your debt again on your own, your creditor may turn to the court for assistance and look to begin garnishing your wages. Once the court grants your creditor a judgment recognizing that the creditor has a claim against you for unpaid debts, they can begin the garnishment process.
Once the judgment is granted, the creditor must be granted a seizure summons by the court. This gives the creditor the approval to seize such as a car or house. However, if there are no assets that can be seized to repay your debts, your creditor may approach your employer with a writ of seizure and begin garnishing your wages. Some assets are protected from seizure.
Your wages will continue to be garnished until your debt is completely paid off or you are able to come to an alternate arrangement with your creditors.
Main Points Surrounding Alberta’s Wage Garnishment Laws
There are a few main points you should know about Alberta’s wage garnishment laws:
- Exempt amounts in Alberta: The first $800 of your monthly paycheque belongs to you alone, and cannot be garnished. If your paycheque is between $800 and $2400, your creditor may garnish up to 50% of your monthly income within this bracket. This means that a $1200 monthly paycheque would be broken down into the exempt $800, while the remaining $400 would be garnished at 50%, resulting in your creditor seizing $200 each month. Any net income above the $2400 mark can be garnished in its entirety.
- Dependents: For each dependent, the above exception limits are increased by $200. So, if you have one dependent the first $1000 are exempt from garnishment, and your creditor can only garnish 50% of your wages for monthly income between $1000 and $2600, while funds earned above $2600 can be garnished completely.
- When provincial exemptions do not apply: These provincial exemption limits do not apply to everyone in all cases. If you owe money to the Canada Revenue Agency (CRA), these limits do not apply. Self-employed individuals can have up to 100% of their wages garnished, but most creditors will only take a reasonable amount. This is because a more manageable garnishment amount means you are less likely to switch jobs, which will affect how much money they can legally take from you. In order to garnish the income of someone who is self-employed, a creditor must serve one of their clients. This means that many garnishee orders in these cases are only valid for a certain length of time. Your creditor also may be granted the right to contact your clients or anyone else who currently owes you money and request the funds directly from these people or organizations.
- Unemployment: If you are currently unemployed, your creditor may garnish funds directly from your bank account.
Wage Garnishment FAQ for Employees
What Are My Rights?
You have several rights when it comes to wage garnishment. A creditor cannot garnish your wages without a court order unless they are a credit union (which requires an assignment of wages, not a court order) or are the CRA. A court order is not legally required if your wages are being garnished for child support, back taxes, or student loans.
In Alberta, the first $800 of your paycheque is yours alone and cannot be garnished, and some pensions, including the Canada Pension Fund, cannot be garnished at all. Your collector is also not allowed to pursue a non-judgement debt where the last payment or written acknowledgment of the debt is more than six years old.
For a full list of what a collector can and cannot do, please visit the Government of Alberta website.
A collector may not :
- Call you between the hours of 10 pm and 7 am Alberta time
- Contact you or members of your household, relatives, friends, neighbours, or employer so frequently that the number of calls could be considered harassment
- Call you at work unless you specifically ask them not to, arrange for them to contact you at another time, and honour that arrangement.
- Use language that is threatening, profane, intimidating, or coercive
- Discuss your debt with anyone who is not you, the guarantor of the debt, the creditor, or someone you have identified in writing as your representative unless you give expressed permission for them to do so.
- Discuss your debt with a child who is a minor.
- Cancel or alter your repayment agreement once you have complied with the terms of the arrangement and your financial circumstances have not changed. The agreement can be cancelled or altered if you misrepresent your financial situation.
- Make more than three unsolicited contacts in any period of seven consecutive days. However, this does not include contacts with a third party to locate you, or mistaken contacts with a third party, or any contacts by traditional mail.
- Bring in the police or send you to jail. Police do not become involved in debt collection matters.
Your employer may not punish you for wage garnishment. They may not reduce your hours, fire you, or retaliate against you in any way.
For more information about your rights as a wage garnishee, please contact a Licensed Insolvency Trustee.
How Much of My Wage Can Be Garnished?
In Alberta, how much of your monthly wage can be garnished depends on how much you are earning. The first $800 you earn each month cannot be garnished. If you earn between $800 and $2400, your creditor can garnish 50% of your wage above $800. This means that if your monthly paycheque is $1200, then the garnishment only applies to $400 ($1200 minus the exempt $800). Since the remaining $400 can be garnished at 50%, your creditor will take $200 each month. Any wages earned above $2400 per month can be garnished at 100%.
For each dependent, you have these exemptions increase by $200. That means that if you have one dependent, the first $1000 is exempt and if you have two dependents, the first $1200 is exempt.
What Type of Debt is Applicable for Wage Garnishment?
Creditors can garnish your wages to force you to pay off a wide variety of debts including child support payments, unpaid bills, student loans, back taxes, defaulted loans, alimony, family support payments, and credit card debt.
Most creditors must successfully sue you in order to begin garnishing your wages, but credit unions and the CRA do not. Child support, alimony, and family support payments automatically include wage withholding orders, so your ex-spouse does not need to sue you in order to have your wages garnished.
To find out if wage garnishment can or cannot be used to force you to pay your debt, please speak to a Licensed Insolvency Trustee.
What is the Maximum Wage Garnishment Amount?
There is no maximum amount allowed in Alberta. However, your creditor can only garnish your wages until your debt is completely paid off, and the first $800 of your monthly paycheque cannot be garnished.
How Can I Stop My Wages From Being Garnished?
There are a few things you can do to stop your wages from being garnished:
- Seek professional financial advice from a Licensed Insolvency Trustee: Consultations are usually free and they deal with garnishments all the time.
- Contact your creditor: You may contact your creditor and try to negotiate a new payment plan and ask them to remove the garnishee.
- Take out a loan: You could apply for a personal loan, which would allow you to pay off your debts in full instead of having your wages garnished. However, the outstanding debt still remains, only the creditor changes.
- Quit your job: If you quit your job, then you have no wages to garnish. However, while this is a valid legal option, it is likely not the best choice for most people and may certainly make things more financially complicated for you very quickly.
- Consider filing a consumer proposal: A consumer proposal is an agreement made on your behalf by your Licensed Insolvency Trustee with your creditors to create a schedule to pay off your debts. However, in Alberta, your debt must be less than $250,000 (or $500,000 for married couples). You must also have an insufficient amount of assets to cover your debts. You cannot file a consumer proposal without hiring a Licensed Insolvency Trustee to act as an independent mediator between you and your creditors.
- Consider filing for personal bankruptcy.
Can My Assets & Bank Accounts Be Frozen?
Creditors typically only pursue wage garnishment if you have insufficient assets to cover your debts (some assets are exempt and cannot be seized to pay off debts). If you are currently unemployed, your creditors may garnish funds directly from your bank account. Your creditor may have your bank account frozen over unpaid debts, but they must first obtain a judgement against you and a court order to freeze your accounts.
The CRA can have your bank accounts frozen without a court order, and may do so to force you to deal with your outstanding tax debts.
Wage Garnishment FAQ for Employers
What to Do If You Are Told to Garnish Your Employee’s Wages
If you receive an official notice (either a court order, an assignment of wages agreement from a credit union, or a wage garnishment order for back taxes from the CRA) you are legally obligated to follow through with the demands outlined in the notice.
If your employee owes tax debt, you may also be held personally liable if you do not garnish the requested amounts, so it is in your best interest to comply with the terms laid out in the official notice.
What to Do If Your Employee Asks You to Stop
You must continue to garnish your employee’s wages in full either until their debt is completely paid off or they renegotiate the garnishment with their creditors. Employees may go to court and request that the amount garnished be reduced due to financial hardship. However, until you receive official notice directing you otherwise, you must continue to follow the garnishment instructions laid out in the official notice.
Employer Responsibilities & Obligations
The official notice will outline how much your employee owes, and give you directions regarding calculating how much you need to garnish from each paycheque and where to send the garnished funds. When it is time to do payroll, you should calculate how much your employee has earned as usual, but instead of writing them a cheque for the whole amount you should subtract the amount needed for garnishment and issue a cheque to your employee for the remaining amount. Then, you should send the garnished amount to the court of origination as instructed.
You are not allowed to fire an employee whose wages are being garnished, reduce their hours, or punish them in any way because of their wage garnishment status.
Looking for Help? Give Us a Call
Having your wages garnished can be frustrating and embarrassing, and can impact your quality of life and general wellbeing; a Licensed Insolvency Trustee, such as A. C. Waring & Associates Inc., can help you navigate wage garnishment, make sure you know your rights, and help you work with your creditors to find a less invasive debt solution that satisfies both parties.
We offer free consultations and do not require appointments for free consultations or financial advice. We provide services in a variety of languages, including English, French, Vietnamese, and Farsi at our office in Edmonton.
You don’t have to face wage garnishment alone. A. C. Waring & Associates Inc. is here to help. Please contact us today.