If a creditor wants to take some of your wages
Under the law in BC, if a debtor doesn’t pay a debt, a creditor can tap into money the debtor is owed by a third party. That third party can be an employer.
For example, say you don’t pay back a loan. The creditor can seek a court order to get your employer to redirect a portion of your wages to the creditor. This process is called garnishment.
The creditor must get a court judgment before wages can be garnished
The garnishment process starts with a creditor bringing a legal action against the debtor. The creditor must get a judgment against the debtor. The judgment confirms that the debtor owes the debt.
The debtor will receive a document telling them about the claim and how to dispute it. If the debtor doesn’t agree that they owe the money, they can file a document with the court saying why they dispute the claim.
Once a judgment has been entered against the debtor, the creditor seeks what’s called a garnishing order. This is a court order requiring a third party who owes money to a debtor (in this case, an employer) to make payments to the creditor.
The creditor serves the garnishing order on the employer. The employer must then send a portion of the debtor’s wages to the court registry. They only have to send wages owing within seven days, up to the amount of the debt. So the creditor may issue multiple garnishing orders in order to garnish money owing in different pay periods. The creditor must then apply to the court to have the money paid out.
If a creditor wants to garnish your wages and you don’t dispute the debt, consider making a payment plan. That way, you may avoid having to pay the extra costs from multiple garnishing order applications.
There are laws to protect you if your wages are garnished
There’s a limit to how much of a debtor’s wages a creditor can garnish. Usually, that limit is 30% of the debtor’s net income. However, if the creditor is claiming spousal or child support payments, they can take up to 50%.
If garnishing your wages causes you serious financial hardship, you can apply to court for relief. See the “Deal with the problem” section below.
In some cases, it may be possible to have a debt judgment against you set aside. For example, you might dispute the amount of the debt, or think you don’t owe anything at all. If you believe there are grounds to have a judgment set aside, you should seek legal advice. See the options for free or low-cost legal advice.
If a creditor wants to draw from your bank account
A creditor has another option to recover a debt. They can try to get money from the debtor’s bank account. This is called garnishing the debtor’s bank account.
The garnishing process has several steps. It starts with a creditor bringing a legal action against the debtor. The creditor can seek a garnishing order for the debtor’s bank account at the same time as they start the lawsuit against the debtor. No court hearing is required, and no notice is owed the debtor. These types of garnishing orders often take debtors by surprise.
Money that’s garnished from a bank account is paid into court. The creditor can’t access it until they get a judgment against the debtor.
Unlike wage garnishments, there’s no limit on how much money can be garnished from a bank account. All the money in the account—up to the amount of the creditor’s judgment—can be taken.
A creditor can not garnish money from a joint bank account unless they have a judgment against both account holders.
Some types of benefits are protected
Under the law in BC, income assistance received by a debtor cannot be garnished. Other types of government benefits are also exempt from garnishment by non-government creditors, including:
- Canada Pension Plan payments
- Old Age Security pension payments
- Guaranteed Income Supplement payments
However, most government benefits can be garnished by government bodies such as the Canada Revenue Agency. Money garnished by the government doesn’t get paid into court. Instead, it goes directly to the government body.
In some cases, benefit payments may be exempt even after they’re deposited to your bank account. However, the law in this area is evolving. Consider seeking legal advice if this applies to you.