What is a Wage Levy and How Does It Work?

Posted by: Krista McDonald on 01/03/2012

 

“Wage levy” and “wage garnishment” are two terms that may have puzzled you after encountering them in your research about debt relief and the effect of late payments on your finances. When it comes to how a levy or garnishment can affect your finances, these two are essentially the same. Once your employer receives notice of a garnishment order on your income, he or she is legally obligated to withhold a percentage of it to be used for the payment of debts. A wage levy or wage garnishment order is legally binding and our employer must comply.

 

Levies are usually associated with government applications and in the case of your personal finances, are initiated by bodies like the Canada Revenue Agency as a method for the collection of unpaid taxes.

 

The CRA may be able to affect wage garnishment orders on its own authority, as long as the debt is valid and the debtor has been delinquent in his or her debt payments for a certain period of time. In comparison, regular creditors have to go through legal proceedings to establish the validity of a certain debt owed by an individual and again for a garnishment order on the same debtor.

 

Many debtors have gotten to the point of having their wages garnished because they ignore the usual actions undertaken by creditors to demand debt payment. These debtors may pay the demands no heed, especially if they see no concrete steps on the parts of the creditors to take what they are owed – numerous calls and letters regarding debt payment notwithstanding. A garnishment order may take some time, as regular creditors have to go through legal channels to do so. Also, these creditors would rather exhaust more conventional means for demanding debt payment, as a garnishment can take a lot of effort and financial resources to apply for. The CRA, on the other hand, may take some time before affecting a garnishment order because of the nature of the system it employs. However, both the CRA and regular creditors will eventually get around to obtaining approval for the implementation of a garnishment order for unpaid debts.

 

Wage garnishments or levies are orders obtained via legal means. As such, the only way to eliminate these concerns is via legal methods of debt relief. A person who expects wage garnishments or already has such levies on his or her monthly wages may do any of these: file for bankruptcy, apply for a consumer proposal, or apply for the Orderly Payment of Debts program.

 

Those applying for consumer proposals or filing for bankruptcy may enlist the aid of licensed bankruptcy trustees. Saskatchewan, Prince Edward Island, Alberta, and Nova Scotia residents may apply for the Orderly Payment of Debts with the help of an approved non-profit counselor to avoid a wage levy.