Worried About Being Garnished? What You Need to Know (in Alberta)

Wage garnishment is when money is taken directly from your paycheque, remitted by your employer to your creditor rather than paying you.

In Canada, the rules for wage garnishment are set provincially. In Alberta, the rules are governed by the Civil Enforcement Act and related regulations. The comments in this blog are specifically related to Alberta.

When Can A Creditor Garnish Wages?

A creditor usually cannot just garnish wages because you owe them money. Most creditors must first successfully sue you and obtain a judgment in Court before they can issue a garnishee summons to your employer.

An exception to this is Canada Revenue Agency (CRA), which does not need a court order to garnish wages for unpaid taxes or overpaid government benefits. - all they need to do is issue a collection notice (see related blog). Another exception is the Maintenance Enforcement Program (MEP) which enforces child support and spousal support orders/agreements – they do not require a Court order either.

Also, be careful not to confuse a wage garnishee with a wage assignment. A wage assignment is a voluntary agreement you make with a creditor, usually at the time you sign a loan or credit agreement, which gives the creditor permission to go directly to your employer (without a court order) and have payments taken from your paycheque if you fall behind on the loan. 

How Much Can Be Garnished?

For most creditors, not all of your income can be taken when garnishing wages. Pursuant to the Civil Enforcement Act:

• The first $800 of your income (after taxes and other deductions) is fully exempt. (If you support dependents, the exempt amount increases by $200 per dependent.)
• For income between $800 and $2,400, up to 50% can be garnished.
• Anything over $2,400 can be garnished in full.

A few things to note:

• Self-employed individuals do not benefit from these protections. Creditors can potentially garnish 100% of your business income.
• Certain types of income are fully exempt, such as CPP, EI, WCB, etc.
• The above exemptions do not necessarily apply to CRA and MEP.
• If you have cash in your bank account, creditors may try to garnish your bank account instead of or in addition to your wages. However, cash relating directly to exempt income may be protected.

A garnishment typically won’t stop until the debt is fully paid or until you take steps to halt it. Here are some ways to halt it:

1. Negotiate With the Creditor

Sometimes creditors agree to a voluntary payment plan or a lump-sum settlement if you approach them directly. If they accept, the garnishment may be withdrawn. It’s important that you get this in writing when negotiating with them.

2. Apply to Court for Relief

If the garnishment is causing severe hardship, you can apply to have the amount reduced. However, you may need the assistance of a lawyer to do this, and results can vary.

3. Get a stay of proceedings by making an insolvency filing

Depending on your situation, one of the following options may be your best option to stop the garnishment. All of these involve a stay of proceedings that immediately stops a garnishment:

• Apply for the Orderly Payment of Debts program through Money Mentors. This is a court-driven program that consolidates unsecured debts into one payment at 5% interest.
• File a Consumer Proposal with a Licensed Insolvency Trustee (LIT). This allows you to make a formal offer to settle your debts for (usually) less than the full amount.
• File for bankruptcy with an LIT. This allows you to have your debt discharged after you complete the bankruptcy requirements, usually within 9-21 months for a first time filer.

Which option is right depends on your situation. Things to consider:

• How much you owe, who you owe, and how many creditors you’re dealing with
• What assets you have that could be used to pay the debt
• Your ability to pay over time based on your income

Every situation is different, so it’s important to speak to a professional about your options. Acting quickly helps you regain control of the situation, reducing the stress on you and your family.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the Alberta region. We regularly help individuals consider their options when they are facing an ongoing or imminent wage garnishment If you'd like to explore the options, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.