When a debtor doesn’t pay a debt, a creditor may try to access money owed to the debtor by someone else. The creditor can do this through a process called garnishment.
Understand your legal rights
Under the law in BC, if a debtor doesn’t pay a debt, a creditor can tap into money the debtor is owed by someone else (that is, a third party).
The creditor must go to court to do this. They can ask the court to “attach” (or “garnish”) money owed to the debtor and redirect it to the creditor.
The most common moneys attached are wages and bank accounts. Other sources of money owed to a debtor can also be targets, such as retirement savings funds, estate proceeds (inheritances), or insurance settlements.
For example, say you don’t pay back a loan. The creditor can seek a court order to get your employer to redirect a portion of your wages to the creditor. This process is called garnishment.
Several steps are involved if a creditor seeks to garnish a debtor’s wages.
The creditor needs to get two court orders
A creditor must first get a court judgment against the debtor. The judgment confirms the debtor owes the debt.
The creditor must then seek a second court order, called a garnishing order. This is an order requiring a third party who owes money to the debtor (in this case, an employer) to make payments to the creditor.
The creditor serves the garnishing order on the employer. The employer must then send a portion of the debtor’s wages to the court. The employer only has to send wages owing within seven days, up to the amount of the debt.
The creditor must then apply to the court to have the money paid out.
There are laws to protect the debtor
There’s a limit to how much of a debtor’s wages a creditor can garnish. Usually, that limit is 30% of the debtor’s net income. If the creditor is claiming spousal or child support payments, the limit goes up to 50%.
If garnishing a debtor’s wages causes serious financial hardship, the debtor can apply to court for relief.
Under the law in BC, an employer is not allowed to dismiss or demote an employee just because the employer receives a garnishing order. If that has happened to you, you should seek legal advice.
To recover a debt, a creditor may seek to garnish money from the debtor’s bank account.
To do so involves several steps. To begin, the creditor brings a legal action for the debt. At the same time as they start this lawsuit, the creditor can seek a garnishing order for the debtor’s bank account. No court hearing is required, and no notice is owed the debtor. For this reason, these types of garnishing orders often take debtors by surprise.
Money that’s garnished from a bank account is paid into court. The creditor can’t access it until they get a judgment against the debtor in their action on the debt.
Unlike wage garnishments, there’s no limit on how much money can be garnished from a bank account. All the money in the account — up to the amount of the creditor’s judgment — can be taken.
A creditor can not garnish money from a joint bank account unless they have a court judgment against both account holders.
Under the law in BC, income assistance received by a debtor cannot be garnished (except where spousal or child support payments are involved; see below).
Other types of government benefits are also exempt from garnishment by non-government creditors, including:
- Canada Pension Plan benefits
- Old Age Security benefits
- Guaranteed Income Supplement payments
However, most government benefits can be garnished by government bodies such as the Canada Revenue Agency. Money garnished by the government doesn’t get paid into court. Instead, it goes directly to the government body.
Special rules apply if the creditor seeking a garnishing order is owed spousal or child support payments. For example, income assistance received by a debtor cannot be garnished — except by the Family Maintenance Enforcement Program, a government program that enforces court orders for support.
As well, if support payments are involved, a garnishing order for wages does not need to be renewed each pay period. (In other cases, a garnishing order applies only to wages owing within seven days of the order.)
If a creditor obtains a garnishing order, a debtor can apply to court to set aside (or “release”) the order. The debtor might do this arguing that the order causes them serious financial hardship. Or that the order isn’t necessary to ensure they pay the creditor’s judgment for the debt.
In applying to release a garnishing order, the material must explain why it would be “just in all the circumstances” to release the order. For example, if you’re claiming a garnishing order causes you serious financial hardship, provide a snapshot of your financial situation. Include a statement of finances and any other information that backs up your position.
No. The law in BC says a creditor can garnish up to 30% of a debtor’s net income — that is, after statutory deductions for things like income tax, Canada Pension Plan, and Employment Insurance. This means you’d keep at least 70% of your pay cheque.
Note a garnishing order applies only to wages owing within seven days of the order. A new garnishing order must be issued and given to your employer every pay period.
(Special rules apply if a creditor’s claim is for spousal or child support payments; see above.)
A creditor must apply to court to get access to any money that has been paid into court under a garnishing order.
Never ignore a garnishing order served on you. There are serious consequences for not complying with a court order.
You have two options.
- You could pay into court whatever amount you owe the debtor (up to the amount claimed in the garnishing order). Whatever amount you pay into court you don’t have to pay to the debtor.
- Your second option, if you believe you don’t owe the debtor anything, is to file a “dispute note” in court. This note explains why you don’t owe the debtor anything. It doesn’t have to be on a particular form; it can be on your letterhead. If the creditor disagrees with you, then a judge will decide the matter.
This information applies to British Columbia, Canada
Reviewed in July 2018
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