When a Creditor Wants to Take Money From Your Wages or Bank Account

This script discusses a legal proceeding called “garnishment,” used to collect money on a judgment or debt.

What is garnishment?

Garnishment is a drastic measure for collecting a debt, governed by Part 1 of The Court Order Enforcement Act. It allows a creditor to “attach” (intercept and take) the wages and debts owed to a debtor by others, before that property is paid to the debtor.

For example, say you (as the debtor) owe someone money and that person (the creditor) is suing you. You’re expected to pay the creditor back. Now, if someone else is indebted to you, the creditor can intercept the money owing to you by requiring the money be paid into court, instead of to you.

Often the money garnished or intercepted is money in the debtor’s bank account (money “owed” by the bank to the debtor) or wages owed to the debtor by an employer. In either case, a garnishing order can require the bank or employer to pay the money into court.

Money owing from a family court order for child or spousal support can also be garnished under the Family Maintenance Enforcement Program (FMEP) – but garnishment under this program is handled in a completely different way than other kinds of debts (discussed later in this script).

There are two forms of garnishment

These are:

• Pre-judgment garnishment
• Post-judgment garnishment

What is pre-judgment garnishment?

Pre-judgment garnishment allows debts, obligations and liabilities (but not wages) owed to a debtor by others to be attached before the creditor gets a court judgment against the debtor. It helps to preserve these assets of the debtor until the creditor gets judgment. Property or money garnished before a judgment has been obtained is paid into court and held until after the creditor wins their court case and gets judgment against the debtor.

What is post-judgment garnishment?

Post-judgment garnishment allows debts, obligations and liabilities (including wages) owed to a debtor by others to be intercepted after the creditor obtains a court judgment against the debtor.

For wages, a portion of the debtor’s wages are protected and cannot be attached. In general, 70% of wages are protected. This is reduced to 50% if the creditor’s claim is for alimony or child support payments.

The law about garnishing orders (especially pre-judgment orders) is very technical

It’s best to get legal advice if you’re faced with this situation. Through the Lawyer Referral Service, you can get some general advice for a small initial fee. Sometimes, you may be able to get the information you need over the phone.

Who is involved in garnishment?

Garnishment involves three parties:

• A creditor who seeks payment of a debt
• A debtor who owes money to the creditor
• A third party (called the “garnishee”) who owes money to the debtor.

A garnishment action is taken by the creditor against the debtor, as defendant, and the third party, as garnishee. The garnishee is often the debtor’s employer (when wages are garnished) or a bank where the debtor keeps their funds.

What three important facts should you know about garnishment?

• Garnishment is only made by court order.
• A garnishing order always requires that money is paid to the court. It’s never paid directly to the creditor. The money (or some of it) is only paid from the court to the creditor after the creditor has judgment.
• 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” or collect any money at all because at that particular point in time, no money is owed to the debtor.)

What are some examples of garnishment?

Say you work for a warehouse company and your wages are payable every two weeks. You owe money on your Visa card, which you’re not dealing with. The Visa credit card company can intercept your wages and have those wages paid to the court, if it starts a court claim against you and gets a garnishing order.

Or say you are divorced and have been ordered to pay maintenance or financial support to your ex-spouse and/or children. If you’re behind in your support payments, your ex-spouse can apply for a garnishing order to have money taken from your bank account. (Usually, however, garnishment for money owed as child or spousal support is made by the FMEP.)

Most often, garnishing orders are made against employers who owe wages to employees or against banks and financial institutions that hold deposits for customers.

How does a creditor get a garnishing order?

The creditor would first start a lawsuit against you for the debt you owe, and may then ask the court for a garnishing order to take money from your bank or financial institution. If the creditor gets a court judgment against you, the garnishing order can require your employer to pay a portion of your wages into court.

However, to obtain a garnishing order, the creditor must establish what’s called a “liquidated” claim. This means that the creditor must be able to show exactly what is owed. If, for example, a creditor has a claim against you for damages, such as damages for personal injury or negligence, they cannot obtain a garnishing order, because the exact amount of the damages hasn’t been decided. Once the exact amount has been decided, then a garnishing order can be made.

What happens to the money intercepted by a garnishing order?

A creditor can obtain a garnishing order even if there is no judgment against you, and even before you’ve been given the court documents starting the lawsuit against you. But the money that is taken from your bank account or employer isn’t automatically paid to the creditor. It’s only paid to the creditor if the creditor carries through with the lawsuit and gets a judgment against you. If you disagree with the claim against you, you can defend the lawsuit. If you’re successful or prove that you don’t owe as much as the creditor claims, then the appropriate amount of money will be paid back out of the court to you.

What happens if there’s a garnishing order to intercept your wages?

If you’re employed, the creditor can only garnish your wages after obtaining a court judgment against you. While a judgment in a lawsuit can be obtained after a trial in court, judgment can also be obtained by default if you, the debtor, don’t defend the lawsuit.

A garnishing order to intercept wages must be given to your employer within a week of your payday, or it won’t attach any money. Also, when garnishing wages, a new garnishing order has to be issued and given to your employer every pay period. A creditor cannot give the garnishing order once, and hope to intercept your wages every payday. This can make garnishment a slow and expensive process for creditors in collecting a debt.

But there are exceptions. Some types of garnishing orders can follow your assets and wages for a long time and don’t need to be reissued every payday. If you owe child or spousal support under a court order, then your spouse or partner who is owed the support payment can register with the Family Maintenance Enforcement Program to have your wages continuously garnished. Also, if you owe money to the Canada Revenue Agency for taxes, they can issue a Requirement to Pay to your bank or your employer. A Requirement to Pay can be effective for up to 90 days without having to be re-issued.

If you’re an independent contractor, your creditor can serve a garnishing order on the person with whom you contract. Even if no money is attached or intercepted, you might find this garnishing order causes you embarrassment.

What can you do if garnishing your wages creates a serious hardship for you?

First, it’s important to note that an employer cannot dismiss or demote an employee simply because the employer is given a garnishing order for the employee’s wages.

Second, as mentioned, the law generally restricts garnishing orders to attaching only 30% of wages (though up to 50% can be garnished for obligations such as child or spousal support, depending on the debtor’s income and the number of dependents).

But you may be able to reduce the amount of wages garnished by applying to the court.

If the garnishing order creates a serious hardship for you and your family, you can ask a judge or registrar of the court to reduce the percentage of your wages that can be garnished, or to release the garnishment, or to allow you to pay the judgment by installments. Contact the court registry where the order was issued, and make an appointment to have a hearing in front of the registrar. For a Small Claims Court judgment, you’ll probably appear in front of a judge.

Keep in mind, however, that the creditor can also ask the court to increase the percentage of wages that can be garnished.

If you apply to the court to pay the judgment by installments, and the court believes this is appropriate, a monthly payment will be set which is manageable for you. There are no court administration costs for this procedure. The creditor will have the right to ask questions about your financial situation, and the judge or registrar may also ask you some questions. If you’re in real financial difficulty, the judge or registrar has the power to order that nothing need be paid for the time being.

What should you do if you are a garnishee?

Garnishment involves an order of the court, so if you’re the garnishee (for example, the debtor’s employer), don’t ignore the garnishing order. You must pay the appropriate money to the court. Pay the court whatever you owe the debtor at the time you get the order, up to the amount claimed in the order. Any money that you pay into court doesn’t have to be paid to the person you owe money to (for example, your employee). However if you ignore a garnishing order and pay the debtor instead, you may end up having to pay the money twice – the second time to the creditor.

If you as the garnishee believe you don’t owe the debtor anything, then you should contact the court registry and submit what is called a Dispute Note. The Dispute Note explains your reasons why you believe you don’t owe the debtor anything. The Dispute Note doesn’t have to be on a particular form – it can be a letter printed on the garnishee’s letterhead. If the creditor disagrees with you, then a judge will have to decide the matter.

Note again that 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 happens to any money paid into court?

If a garnishing order is successful in attaching money, and if money is paid to the court, the creditor cannot have the money paid out to them without a court order or the debtor’s consent.

What about garnishment by the Family Maintenance Enforcement Program (FMEP)?

The FMEP is a free government program in BC that enforces court orders and agreements for child and spousal support. It can also enforce court orders and agreements from other provinces in some circumstances as well. It has special and wide-ranging powers to garnish bank accounts, tax returns and wages of people obligated to pay support. Many of the rules that apply to normal garnishment don’t apply to garnishment by the FMEP. If you owe money under a support order which is being garnished by the FMEP, you can ask the court to “suspend enforcement” in some cases. But it’s usually better in the long run to negotiate a payment arrangement directly with the FMEP or consult a family lawyer about changing the terms of the court order which caused you to go into debt in the first place.

For more on the FMEP, refer to script 132 on “Enforcing Orders and Agreements for Support”.

Where can you get help or find more information?

• If you’re having trouble paying your bills, contact the 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) or see their website at www.nomoredebts.org.
• Refer to Dial-A-Law script 253 on “When You Can’t Pay Your Debts”.
• See the manual Consumer Law and Credit/Debt Law published by the Legal Services Society, BC and available for free on their website at www.legalaid.bc.ca. To find it, click “Our Publications” then under “I want to find a publication by subject,” click “Debt”. This manual is for paralegals, legal information counsellors, and lawyers with clients who have consumer/debt problems.

[updated July 2014]

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