Difference between revisions of "Garnishment and Set-offs"

'''Set-off''' is a remedy that is similar to garnishment but does not require a court order. It is often used by banks when a client has savings on deposit with the bank while having an overdue loan with the same bank (but not necessarily the same branch). In such cases, the bank may be able to set-off the amount of the overdue loan against the amount in the savings account. For example, if the client has an overdue credit card account of $7,000, but also has $5,000 in a savings account, the bank may apply the funds in the savings account toward the credit card debt, thus reducing the savings account to zero, and reducing the overdue credit card account to $2,000. Many credit card and loan contracts have terms allowing banks to use set-off.

Some private pension benefits and many types of government income benefits, such as welfare payments, are exempt from being seized by creditors. (For example, see [https://www.canlii.org/en/bc/laws/stat/sbc-2002-c-40/latest/sbc-2002-c-40.html#sec29_smooth section 29] of the ''Employment and Assistance Act''.) This means that a creditor cannot use a garnishing order to make the government or pension plan administrator pay the benefits, or any portion of them, to the creditor. Also, there is some case law indicating that such benefits may be exempt from garnishment or set-off even after they have been deposited in a bank account, especially if the purpose of the account is to receive the benefit. (See [http://canlii.ca/t/1vt5n ''Metropolitan Toronto (Municipality) v. O’Brien''] and ''McIntosh v. Laronde''.) However, this area of the law is not fully developed. Government can give itself a statutory right to set-off payment of some government benefits against debts owed to the government — one example being that the Canada Revenue Agency can take at least a portion of a person’s Canada Pension Plan benefits in payment of arrears of taxes.