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Garnishment refers to a court-issued order that enables a creditor to recover owed funds from an individual or entity that owes money to the debtor. The individual or business owing money to the debtor is commonly referred to as the garnishee. Typically, there are three primary categories of garnishment:
- Wage garnishment
- Bank account garnishment
- Rent garnishment (where the landlord is also the debtor).
In each of these scenarios, payments are directed to the court, and it is the responsibility of the creditors to petition the court for the release of these payments to them.
Key Points
Wage Garnishment
Wage garnishments involve court-authorized deductions from an employee’s paycheck to fulfil a debt or legal obligation. They are often implemented to address various types of financial responsibilities such as:
- Child support
- Unpaid taxes
- Credit card debt
- Defaulted student loans
- Medical bills
- Outstanding court fees.
Rather than a fixed dollar amount, wage garnishments are typically calculated as a percentage of the employee’s earnings.
When employers have people on the payroll who are subject to garnishments, they will receive a legal document called a “writ of garnishment” from a court or government agency.
Subsequently, it becomes the employer’s duty to consistently calculate the appropriate amount, withhold it from the employee’s wages, and promptly remit the garnished funds to the designated creditor or agency.
Non-compliance with garnishment orders can lead to significant penalties and financial repercussions for employers. Therefore, it is crucial for employers to fulfil their obligations diligently to avoid costly consequences.
Bank Account Garnishment
When garnishing a bank account, it is essential to identify the specific branch where the debtor holds the account. This information enables you to serve the garnishment order directly at that branch. Unlike wage garnishment, there is no predetermined limit on the amount that can be garnished from a bank account. However, it is important to note that only the debtor’s funds within the account can be garnished, excluding any funds held in a joint account with another individual. As well as any government funds received like pension or old age security.
Read our guide – What does a garnishee order mean in Canada?
Rent Garnishment
Rent garnishment is a specific type of garnishment where a portion of a tenant’s rental payment is directed towards satisfying a debt owed by the landlord.
In this case, the landlord, who is also the debtor, becomes the garnishee. Rent garnishment typically occurs when the landlord owes a debt, such as unpaid rent, to a creditor. The creditor seeks a court order to garnish a portion of the rental payments made by the tenant, diverting it directly to the creditor to fulfil the outstanding debt.
This process allows the creditor to recover the owed funds without relying solely on the debtor’s voluntary repayment. Rent garnishment is a mechanism often employed to ensure that the landlord’s debts are addressed using the rental income received.
Garnishment Exemptions
Garnishment exemptions in Canada refer to specific protections that exist to safeguard certain types of income or assets from being subject to garnishment. While exemptions may vary depending on the province or territory, here are some common garnishment exemptions in Canada:
- Employment Insurance (EI) and Social Assistance: EI benefits, including regular and special benefits, are generally exempt from garnishment. Social assistance payments, such as welfare or disability benefits, are typically protected as well.
- Pension Plans: In many cases, pension income, including government-sponsored pension plans, private pension plans, and registered retirement savings plans (RRSPs), enjoy protection from garnishment. However, there may be exceptions for specific types of debts, such as child support or spousal support arrears.
- Child Support and Spousal Support: In most jurisdictions, child support and spousal support payments have priority over other debts and are not subject to garnishment.
- Employment-related Earnings: Some provinces have exemptions that protect a certain portion of an individual’s wages from garnishment. This is often based on a percentage or threshold of the individual’s income.
- Essential Personal Property: Certain essential assets, such as basic furniture, clothing, and tools required for work, may be exempt from garnishment.
- Publicly Funded Benefits: Various government benefits, such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), are typically protected from garnishment.
- It’s important to note that garnishment exemptions can vary between provinces and territories, and some exemptions may have specific criteria or limitations. Consulting with a legal professional or a licensed insolvency trustee is recommended to understand the specific garnishment exemptions applicable to your situation and jurisdiction.
If you are at all concerned about garnishment, speak to a LIT at Harris & Partners Inc. about your options today at 1-800-268-8093. We can help answer any further questions that you may have, and help you tackle garnishment in a way that works for you. If you live in Barrie, Brampton, Brantford, Hamilton, Markham, Kitchener, North York, Oshawa, Pickering, St. Catharines, or Toronto, our Licensed Insolvency Trustee’s /bankruptcy trustees are just a phone call away.
