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Wage Garnishment Signal of Bigger Debt Problems

A wage garnishment is definitely a danger signal that you are having financial problems. While you have received notice of a garnishment from only one creditor, it is more than likely that you are having trouble paying more than just this one debt. Chances are you were struggling to make ends meet before, paying the ‘critical’ debts like your rent, perhaps making minimum payments on a credit card or two just to keep them ‘afloat’ and in use. You decided a while ago that some debts will just have to wait. Unfortunately your creditor chose not to wait any longer and now they have gone to court to obtain an order to garnishee your wages.

debt problems TorontoA wage garnishment can be even more devastating to a person’s finances than the situation they were already in. So while you were managing to keep all the balls in the air for a while, now your already stretched take-home pay is going to be reduced even further. I often see a person come in after they have been contacted by their employer about a wage garnishment. The court has ordered that a percentage of their net wages to be taken from their pay cheque until the debt amount is paid back in full. For example, the court could order 20% of the debtor’s net wages to be deducted prior to them receiving their pay cheque / direct deposit. It is worth noting, that the court can order up to 50% of net wages to be garnished.

It is understandable, that since your were already overextended and having debt problems prior to the wage garnishment, you are upset at this last straw. Now you are forced into a position where you need to deal with your debts immediately. The thing is, the wage garnishment can actually be the necessary trigger to force you to take action. In addition to stopping your wage garnishment, you have an opportunity to clear up your other financial problems.

If this sounds like you, it may be time to consider:

  1. Filing a consumer proposal or
  2. Declaring personal bankruptcy.

Remember, we are talking about dealing with all of your debts, not just the one subject to the garnishment order. If you only have this one debt then you can try contacting the creditor directly and making a payment arrangement that will satisfy each of you and have the order voluntarily lifted by your creditor. But like I said, more often than not wage garnishments are a sign of overwhelming debt problems — not just a late or missed payment.

If this is the case and you can’t make a deal directly with your creditor then only a legal stay of proceedings provided by filing for personal bankruptcy or a consumer proposal will stop it. Only a licensed trustee can file a proposal or bankruptcy on your behalf. That is why it is important that you call a bankruptcy trustee when your wages are being or are threatened to be garnished.

Upon filing a bankruptcy or proposal, all legal actions and most garnishments against you stop immediately on the date you declare bankruptcy or file a consumer proposal. No creditor can, without permission of the court, start or continue any legal action while a debtor is in a bankruptcy or a proposal. There are a few occasions where a wage garnishment may continue and these are usually when dealing with child support payments.

If your wages are currently being garnished, a creditor has started or is threatening to proceed with legal action against you, call or e-mail one of our Toronto bankruptcy trustees for a free consultation. We can help you determine if your situation is severe enough that bankruptcy or a consumer proposal is a necessary step to financial recovery. If it’s not, we can give you some advice on how to proceed to get you moving in a better direction.