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Difference between revisions of "When a Creditor Wants to Take Money From Your Wages or Bank Account"
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When a Creditor Wants to Take Money From Your Wages or Bank Account (view source)
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==What is garnishment?== | ==What is garnishment?== | ||
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 | 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. | 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. | ||
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. | 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. | ||
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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. | 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. | ||
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). | 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'''). | ||
==Who is involved in garnishment?== | ==Who is involved in garnishment?== | ||
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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. | 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. | ||
==Two forms of garnishment—pre-judgment and post-judgement== | |||
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== | ==Pre-judgment garnishment== | ||
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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 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. | ||
To get a pre-judgment garnishment order, a creditor must prove that they a 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 | To get a pre-judgment garnishment order, a creditor must prove that they a 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. | ||
Getting an order for pre-judgment garnishment is very technical. You should see a lawyer if you want this. | Getting an order for pre-judgment garnishment is very technical. You should see a lawyer if you want this. | ||
==Post-judgment garnishment== | ==Post-judgment garnishment== | ||
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. | 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 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. | |||
With | 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. | ||
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. | |||
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. | |||
==Important facts about garnishment== | ==Important facts about garnishment== | ||
*Garnishment is done only by court order. | *Garnishment is done only by court order. | ||
*A garnishing order always requires money be paid to court. It’s never paid directly to the creditor. 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. | *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. | *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. | *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== | ==Common questions about garnishment== | ||
===What happens if there’s a garnishing order to intercept your wages?=== | ===What happens if there’s a garnishing order to intercept your wages?=== | ||
If you’re employed, the creditor can garnish your wages only after | 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 | 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. | ||
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. | 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. | ||
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. | |||
===What if garnishing your wages creates serious financial hardship for you or your family?=== | ===What if garnishing your wages creates serious financial hardship for you or your family?=== | ||
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 | 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. | But at the same time, the creditor can ask the court to increase the percentage of wages that can be garnished. | ||
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===What if you think you don’t owe any money (or owe less)?=== | ===What if you think you don’t owe any money (or owe less)?=== | ||
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 | 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. | 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. | ||
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===What should you do if you are a garnishee?=== | ===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. 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. | 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. | 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. | ||
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===What cannot be garnished?=== | ===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. | 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?=== | ===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 get a court order to get the money that has been paid into court under a garnishing order. | ||
How does garnishment by the Family Maintenance Enforcement Program (FMEP) differ? | |||
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. | 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. | ||
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[updated | |||
[updated July 2018] | |||
'''The above was last reviewed for accuracy by Rachel Lammers and edited by John Blois.''' | '''The above was last reviewed for accuracy by Rachel Lammers and edited by John Blois.''' | ||
