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 court to seek a “garnishment” against you. This allows them to seize part of your salary, funds in your bank account, or other money and savings you own to repay your debt. Garnishment cannot be stopped by credit counselling or debt settlement solutions companies.
However there are creditors who do not need a court order to enforce a garnishment. Canada Revenue Agency (the “CRA”) may collect your unpaid tax liabilities by sending your employer or your bank a “Requirement to Pay.” If you get a call from a CRA collection agent, who threatens you with an income garnishment, you normally have the following options:
- Contact the CRA collection agent and attempt to make arrangements with them by yourself. However a CRA collection agent has no authority to reduce the principle amount for you, and many times they will just request you make the payment in full including the interest and penalties. You probably will end up paying the monthly installments until you realize that you cannot carry on any more.
- Contact a tax professional 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 CRA to the negotiation table. Like any other unsecured creditors, a consumer proposal is binding on CRA once it is accepted by the majority of creditors.
- File a bankruptcy which will also stop CRA wage garnishment. But bankruptcy is usually the last resort when all else fails.