Difference between revisions of "When a Creditor Wants to Take Money From Your Wages or Bank Account"

Revision as of 22:41, 17 February 2019

Dial-A-Law features free information on the law in British Columbia in over 130 topic areas. A service of People's Law School, Dial-A-Law is available on Clicklaw Wikibooks, its own website at dialalaw.ca, and on the telephone at 1-800-565-5297.

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

Garnishment is a way to collect a debt

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.

If a creditor wants to take some of a debtor’s wages

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.

If a creditor wants to draw money from a debtor’s bank account

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.

Some types of benefits are protected

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.

If spousal or child support payments are involved

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.)

A debtor can apply to court to set aside a garnishing 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.

Tip People’s Law School’s information on garnishment provides step-by-step guidance on applying to set aside a garnishing order.

Common questions

I owe money to a creditor. Can they take my entire pay cheque to satisfy the debt?

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.)

What happens to money paid into court?

A creditor must apply to court to get access to any money that has been paid into court under a garnishing order.

I’ve been served with a garnishing order. What should I do?

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.

Get help

With managing your finances

The Credit Counselling Society of BC is a non-profit society that helps people better manage their money and debt.

Toll-free: 1-888-527-8999

Web: nomoredebts.org

[updated July 2018]

The above was last reviewed for legal accuracy by Rachel Lammers, Morelli Chertkow LLP.

Dial-A-Law © People's Law School is licensed under a Creative Commons Attribution - NonCommercial - ShareAlike 4.0 International Licence.

@@ Line 2: / Line 2: @@
 {{Dial-A-Law TOC|expanded = credit}}
-This script discusses a legal proceeding called “garnishment,” used to collect money on a judgment or debt.
+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.
-==What is garnishment?==
+==Understand your legal rights==
-Garnishment is a drastic way to collect a debt, under Part 1 of ''[http://www.bclaws.ca/civix/document/id/complete/statreg/96078_01 The Court Order Enforcement Act]''. It lets a creditor attach (intercept and take) money owed to a debtor by others—before that money is paid to the debtor.
-For example, say you (the '''debtor''') owe someone (a '''creditor''') money. The creditor sues you and gets a court judgment against you. You must pay the creditor back. But if someone else owes you money, the creditor can intercept the money owed to you by requiring the money be paid into court, instead of to you.
+===Garnishment is a way to collect a debt===
+Under the [http://canlii.ca/t/84h5 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).
-Often the money garnished (or intercepted) is money in the debtor’s bank account (money the bank owes the debtor) or wages an employer owes to the debtor. In either case, a garnishing order can require the bank or employer to pay the money into court.
+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.
-Bank accounts and wages are the most common targets for garnishments, but other things like RRSPs, estate proceeds (inheritances), and insurance settlements can also be targets.
+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.
-Money owing from a family court order for child or spousal support can also be garnished under the Family Maintenance Enforcement Program ('''[https://www.fmep.gov.bc.ca/ FMEP]''')—but garnishment under this program is handled differently from other kinds of debts (explained later in this script). Another case with different rules of garnishment involves the Canada Revenue Agency ('''CRA''').
+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'''.
-==Who is involved in garnishment?==
+===If a creditor wants to take some of a debtor’s wages===
-Garnishment involves three parties:
+Several steps are involved if a creditor seeks to garnish a debtor’s wages.
-*A '''creditor''' who seeks payment of a debt
-*A '''debtor''' who owes money to the creditor
-*A '''third party''' (the '''garnishee''') who owes money to the debtor
-A garnishment action is taken by the creditor against the debtor, who is the defendant, and the third party, who is the garnishee. The garnishee is often the debtor’s employer (when wages are garnished) or a bank where the debtor keeps their money.
+====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.
-==Two forms of garnishment—pre-judgment and post-judgement==
+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.
-A judgment is a court order saying that a debtor owes a certain amount to a creditor. A judgment is obtained only after a trial or with the consent of the debtor. It is not automatically obtained just by filing a claim in court. A judge must still decide the claim and issue a judgment. (This section does not apply to garnishments for child or spousal support payments or taxes—they are explained further below.)
-==Pre-judgment garnishment==
+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.
-Pre-judgment garnishment can occur even before a creditor gets a judgment against a debtor. But the creditor does not get the money right away—it is paid into court. The creditor cannot get the money until they prove their case in court and get a judgment against the debtor (it can be more or less than the garnished amount).
-The purpose of pre-judgment garnishment is to preserve the money during the legal proceedings until the creditor gets judgment. A creditor needs a court order to get pre-judgment garnishment. And there are restrictions on what kind of debts can be garnished before judgment. It can be expensive for a creditor to obtain a pre-judgment garnishment order, and there is no guarantee that the debtor has any funds available to garnish. For these reasons, pre-judgment garnishment is not very common.
+The creditor must then apply to the court to have the money paid out.
-To get a pre-judgment garnishment order, a creditor must prove that they claim for a fixed value—a specific amount of money owed. For example, if a creditor has a claim against you for damages for personal injury or negligence, they cannot obtain a pre-judgment garnishment order because the amount of the damages hasn’t yet been decided.
+====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%.
-Getting an order for pre-judgment garnishment is very technical. You should see a lawyer if you want this.
+If garnishing a debtor’s wages causes serious financial hardship, the debtor can apply to court for relief.
-==Post-judgment garnishment==
+Under the [https://www.canlii.org/en/bc/laws/stat/rsbc-1996-c-78/latest/rsbc-1996-c-78.html#sec27_smooth 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 [[Low Cost and Free Legal Services (Script 430)|seek legal advice]].
-Once a creditor obtains a judgment against a debtor, they can take steps to force the debtor to pay the judgment. Post-judgment garnishment is one way to do this. Bank accounts and wages are the most common things that creditors garnish, although they can also garnish other things, such as RRSPs.
-The first step for a creditor to garnish any of a debtor’s money is to get a garnishment order that directs a specific third party (for example, an employer or bank) to pay money they owe to the debtor to the court instead.
+===If a creditor wants to draw money from a debtor’s bank account===
+To recover a debt, a creditor may seek to garnish money from the debtor’s bank account.
-If a creditor wants to garnish wages, they must serve the employer with a garnishment order. Part of a debtor’s wages is protected and cannot be garnished. Generally, 70% of wages is protected. But if a creditor’s claim is for spousal or child support payments, only 50% of wages is protected.
+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.
-If a creditor wants to garnish a bank account, they must serve the bank with a garnishment order. Unlike with wages, there is no limit on how much can be garnished from a bank account. All the money in an account (up to the value of the judgment) can be garnished.
+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.
-With any post-judgment garnishment, the money must be paid into court, not to the creditor. Then the creditor must apply to court to have the money paid out to them to satisfy the judgment.
+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.
-Because there are several steps in the post-judgment process and there is no guarantee it will produce any money, garnishment can be an expensive and risky process for creditors.
+A creditor '''can not''' garnish money from a joint bank account unless they have a court judgment against both account holders.
-==Important facts about garnishment==
+===Some types of benefits are protected===
-*Garnishment is done only by court order.
+Under the [https://www.canlii.org/en/bc/laws/stat/sbc-2002-c-40/latest/sbc-2002-c-40.html#sec29_smooth law in BC], income assistance received by a debtor cannot be garnished (except where spousal or child support payments are involved; see below).
-*A garnishing order always requires money be paid to court. It’s never paid directly to the creditor (unless the creditor is FMEP or CRA). The money (or some of it) is paid from the court to the creditor only after the creditor has a court order for the money to be paid to them.
-*The money owing to the debtor by the garnishee must be owed at the time the garnishing order is delivered to the garnishee. Some garnishing orders don’t attach—collect any money at all—because at that moment, no money is owed to the debtor.
-*FMEP and CRA have special and more powerful rules of garnishment to collect family support and taxes owing. The usual garnishment rules do not apply to them. They are explained more below.
-==Common questions about garnishment==
+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
-===What happens if there’s a garnishing order to intercept your wages?===
+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.
-If you’re employed, the creditor can garnish your wages only after first getting a court judgment against you and a garnishing order against your employer.
-A garnishing order to intercept wages must be given to your employer within a week before your payday, or it won’t attach any money. Also, to garnish wages, a new garnishing order must be issued and given to your employer every pay period. The need to get a new court order for each pay period can make garnishment a slow and expensive process for creditors.
+===If spousal or child support payments are involved===
+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 [https://www.fmep.gov.bc.ca/ Family Maintenance Enforcement Program], a government program that enforces court orders for support.
-But garnishment orders for child and spousal support do not need to be renewed each pay period. They last until you have paid all the support you owe. And if CRA issues a ''Requirement to Pay'' to your bank or your employer, it can last for up to 90 days without having to be re-issued.
+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.)
-FMEP and CRA can also garnish other income sources including employment insurance, Canada Pension Plan, Old Age Pension Plan, private disability insurance, and lottery winnings. Money that FMEP and CRA garnish does not have to be paid into court.
+===A debtor can apply to court to set aside a garnishing 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.
-===What if garnishing your wages creates serious financial hardship for you or your family?===
+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.
-The law generally restricts garnishing orders to only 30% of wages (up to 50% for child or spousal support, depending on the debtor’s income and the number of dependents). But that can still create serious financial hardship for you and your family. If it does, you can ask a registrar of the court that issues the garnishing order to reduce the percentage of your wages that can be garnished, or to release the funds held in court back to you, or to let you pay the judgment by installments. Ask the court registry where the order was issued for a hearing appointment with the registrar. This is called a payment hearing in small claims court and it may be before a judge.
-But at the same time, the creditor can ask the court to increase the percentage of wages that can be garnished.
+{| class="wikitable"
+|align="left"|'''Tip'''
+People’s Law School’s information on [https://www.peopleslawschool.ca/everyday-legal-problems/money-debt/dealing-debt/creditor-wants-take-money-your-wages-or-bank-account garnishment] provides step-by-step guidance on applying to set aside a garnishing order.
+|}
+==Common questions==
-If you ask to pay the judgment by installments, and the court agrees, it will set a monthly payment that you can manage. There is no cost for this procedure. The creditor can ask questions about your financial situation, and so can the court. If you’re in serious financial trouble, the court can order that you don’t need to pay anything for a certain time.
+===I owe money to a creditor. Can they take my entire pay cheque to satisfy the debt?===
+No. The [https://www.canlii.org/en/bc/laws/stat/rsbc-1996-c-78/latest/rsbc-1996-c-78.html#sec3_smooth 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.
-An employer cannot dismiss or demote an employee simply because the employer is given a garnishing order for the employee’s wages.
+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.
-===What if you think you don’t owe any money (or owe less)?===
+(Special rules apply if a creditor’s claim is for spousal or child support payments; see above.)
-If an order has already been made against you, you must apply to the court to set it aside or change it. This is hard to do unless you can prove that you never got notice of the court proceeding that led to the order. If the order was granted recently, you might also be able to appeal it, but there are strict time limits to appeal. You should see a lawyer about how to change or set aside a judgment after it’s been granted.
-In child or spousal support cases, you need to apply to the court to change the support order. You may be able to claim that the support payment is too high, or that some part of any accumulated missed payments be reduced. Again, you should see a family-law lawyer to see if this can work in your case.
-Tax debts can also be reviewed or appealed in some situations. You should see a lawyer in those cases.
-===What should you do if you are a garnishee?===
-Never ignore a garnishing order if you’re the garnishee (for example, a debtor’s employer). Garnishment involves a court order—it’s important and has serious consequences for not complying with it. You must pay the court whatever you owe the debtor (your employee, in this example) at the time you get the order, up to the amount claimed in the order. Then you don’t have to pay that amount (what you paid to court) to the debtor. But if you ignore a garnishing order and pay the debtor instead, you may end up having to pay the money twice—to the debtor and then to the court.
-If you, as garnishee, believe you don’t owe the debtor anything, you should contact the court registry and submit a Dispute Note. The Dispute Note explains why you don’t owe the debtor anything. The Dispute Note doesn’t have to be on a particular form—it can be a letter on your letterhead. If the creditor disagrees with you, then a judge will decide the matter.
-It’s illegal to dismiss or demote an employee who is a debtor because you’ve received a garnishing order, and there may be harsh penalties if you do.
-===What cannot be garnished?===
-If you receive BC Income Assistance, the ''Employment and Assistance Act'' says it cannot be garnished. Similarly, Canada Pension Plan (CPP), Old Age Pension (OAP) and Guaranteed Income Support (GIS) payments (by cheque or direct deposit) cannot be garnished by '''non-government creditors'''. But most government benefits like Employment Insurance and CPP '''can''' be garnished to pay other government bodies such as CRA or FMEP. These government garnishments are not paid into court—they go directly to the government agency.
-Joint bank accounts cannot normally be garnished by private creditors. But they can be garnished by government creditors like FMEP and CRA.
-Special rules apply to garnishing money in designated banks on reserve lands, under the ''Indian Act''.
 ===What happens to money paid into court?===
-A creditor must get a court order to get the money that has been paid into court under a garnishing order.
+A creditor must apply to court to get access to any money that has been paid into court under a garnishing order.
-===How does garnishment by the Family Maintenance Enforcement Program (FMEP) differ?===
+===I’ve been served with a garnishing order. What should I do?===
-The [https://www.fmep.gov.bc.ca/ FMEP] is a BC government program that enforces court orders and agreements for child and spousal support. It can also enforce court orders and agreements from other provinces. FMEP has special, wide-ranging powers to garnish bank accounts, tax returns, and wages of people who must pay support.
+Never ignore a garnishing order served on you. There are serious consequences for not complying with a court order.
-Many rules that apply to normal garnishment don’t apply to garnishment by the FMEP. If you owe money under a support order by the FMEP, you can ask the court to suspend enforcement, in some cases. But it may be better to negotiate a payment arrangement directly with the FMEP or consult a family lawyer about changing the court order that caused you to go into debt in the first place.
+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.
-For more on the FMEP, check script [[Enforcing Orders and Agreements for Support (Script 132)|132]] on “Enforcing Orders and Agreements for Support”.
+==Get help==
-==More information==
+===With managing your finances===
-*If you’re having trouble paying your bills, contact the [http://www.nomoredebts.org/ Credit Counselling Society of BC], a non-profit debt counselling service. They can help set up a debt-management program for you. Call 1.888.527.8999 (toll-free).
+The '''Credit Counselling Society of BC''' is a non-profit society that helps people better manage their money and debt.
-*Check Dial-A-Law script [[When You Can't Pay Your Debts (Script 253)|253]] on “When You Can’t Pay Your Debts”.
+:Toll-free: 1-888-527-8999
+:Web: [http://www.nomoredebts.org/ nomoredebts.org]
@@ Line 113: / Line 100: @@
 [updated July 2018]
-'''The above was last reviewed for accuracy by Rachel Lammers and edited by John Blois.'''
+'''The above was last reviewed for legal accuracy by [https://www.morellichertkow.com/rachel-r-lammers.htm Rachel Lammers], Morelli Chertkow LLP.'''
 ----
 ----
 {{Dial-A-Law Copyright}}
 {{Dial-A-Law_Navbox|type=credit}}

Difference between revisions of "When a Creditor Wants to Take Money From Your Wages or Bank Account"

Revision as of 22:41, 17 February 2019

Contents

Understand your legal rights

Garnishment is a way to collect a debt

If a creditor wants to take some of a debtor’s wages

The creditor needs to get two court orders

There are laws to protect the debtor

If a creditor wants to draw money from a debtor’s bank account

Some types of benefits are protected

If spousal or child support payments are involved

A debtor can apply to court to set aside a garnishing order

Common questions

I owe money to a creditor. Can they take my entire pay cheque to satisfy the debt?

What happens to money paid into court?

I’ve been served with a garnishing order. What should I do?

Get help

With managing your finances

Navigation menu

Difference between revisions of "When a Creditor Wants to Take Money From Your Wages or Bank Account"

Revision as of 22:41, 17 February 2019

Understand your legal rights

Garnishment is a way to collect a debt

If a creditor wants to take some of a debtor’s wages

The creditor needs to get two court orders

There are laws to protect the debtor

If a creditor wants to draw money from a debtor’s bank account

Some types of benefits are protected

If spousal or child support payments are involved

A debtor can apply to court to set aside a garnishing order

Common questions

I owe money to a creditor. Can they take my entire pay cheque to satisfy the debt?

What happens to money paid into court?

I’ve been served with a garnishing order. What should I do?

Get help

With managing your finances

Navigation menu

Search