A garnishment is a court order directing that money or property of a third party (usually wages paid by an employer) be seized to satisfy a debt owed by a debtor to a creditor.
When you fail to pay creditors the money you owe them, they may apply to the provincial court to seek a “garnishment” against you. This allows them to grab a chunk of your salary, freeze and seize the funds in your bank account, or take other money and savings you hold to repay your debt to them. A garnishment cannot be stopped by credit counselling or by a debt settlement company.
However, there are creditors who do not need a court order to enforce a garnishment. The CRA (Canada Revenue Agency) may easily collect your unpaid tax liabilities by sending your employer or your bank a “Requirement to Pay” letter. No court order required. If you get a call from a CRA collection agent, who threatens you with an income garnishment, take that threat very seriously. You will need to move quickly and can consider the following options to protect yourself:
- Call back the CRA collection agent and attempt to make arrangements with the CRA by yourself. However, a CRA collection agent has no authority to reduce the principal amount for you, and many times they will just request you make the payment in full (including all interest and penalties). Many taxpayers end up paying the monthly installments until they realize they cannot carry the payment process on anymore.
- Contact a tax professional (such as Farber Tax Law) who can access your tax situation and provide you with suggestions on how to manage it.
- File a consumer proposal, which immediately stops the garnishment and brings the CRA to the table for a negotiation of your debt to them. Like any other unsecured creditors, a consumer proposal is binding on the CRA once it is accepted by the majority of your creditors.
- File a bankruptcy which will also stop the CRA wage garnishment. But bankruptcy is usually the last resort when all other options fail and is not your only option in most cases.
If you are facing a threat from the CRA and need help, please CLICK ON THE FREE CONSULTATION button, below, or give us a call today. We can help!