What You Need to Know About Wage Garnishment

Soaring gas prices, staggering grocery bills, and sky-high interest rates are front and centre in our daily news.  According to Statistics Canada, the annual inflation rate hit 7.7% in May, the highest it’s been in almost forty years.  Albertans are struggling to make the metaphorical ends meet.  Those with children are even more concerned.  Certainly, the increased costs are taking a serious toll on people’s financial health.  

And if you find yourself faced with a wage garnishment, trust me—you’re not alone.

But what is wage garnishment?

It’s what happens when a creditor wins a court judgement to directly garnish (or seize) a percentage of the debtor’s monthly pay cheque.  This means that the court has recognized that the creditor does, in fact, have a valid claim against the debtor.  It also grants the creditor the right to look for physical assets to seize (a car, boat, etc).  If no physical assets exist, typically the creditor serves the debtor’s employer and can immediately start garnishing a portion of his or her monthly wages.  

The amount that can be garnished depends on the pay cheque total.  The rules of wage garnishment vary from province to province, so we’ll focus on the rules here in Alberta.

  • The first $800 of the paycheque is protected from garnishment.  It is the debtor’s to keep regardless.
  • For any monthly wage that earned between $800 and $2400, the creditor can garnish 50% of that amount.
  • And finally, if the monthly paycheque is more than $2400, 100% of that amount can be garnished outright.

This typically continues until the debt in question is completely paid off.  If there are dependents (children) involved, the exemptions are slightly different and each bracket is increased accordingly.  For every dependent, the exemption limit is increased by $200.  For example, if you have two dependents, then the first $1200 of your pay cheque would be yours to keep ($800 + $200 + $200).  Any wage amount you earn between $1200 and $2800 could be garnished up to 50%, and any amount above $2800 could be entirely garnished.

But, what kind of debts are applicable for wage garnishment?

A variety of debts exist under the wage garnishment umbrella, including child support payments, student loans, unpaid bills, back taxes, defaulted loans, alimony, and credit card debt.

Let’s face it, the realities of wage garnishment are frightening.  The mere idea of a creditor (or the government) taking the majority of someone’s paycheque would strike fear in the heart of any warm-blooded wage earner.  And often, a wage garnishment comes without warning.

Take Chris’ story, for example.  Chris worked for an oil and gas company for 15 years.  He and his wife worked long hours to pay their sizable monthly bills.  Chris had an old debt that he had been ignoring for years; he kept hoping it would just disappear.  But the day before payroll, he found that most of his pay cheque that month had been garnished.  It caught him by surprise—he had no advance notice of the application, and had no idea that it was coming.  Chris was frustrated.  All of those hours spent working overtime, wasted.

Chris and his wife were understandably stressed.  They were doing everything they could to make ends meet.  Suddenly, they were left with no means to pay their mortgage bill, or to buy food and gas for the month.  

He called The Fryzuk Group, and they listened to Chris’ situation.  They started an insolvency filing for Chris the next day.  When The Fryzuk Group is appointed as Licensed Insolvency Trustees, a “stay of proceedings” takes place; this acts like a protective bubble from the creditor as they are unable to commence or continue any action against the debtor (Chris).

And the garnishment was stopped in its tracks.

The Fryzuk Group is committed to improving your financial wellness.  If you’d like to learn more about wage garnishment or solutions for eliminating debt, contact us today for a free, private consultation.

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