Garnishing wages. Creditors taking legal action?
by Don Antle, President, Options Credit Services Canada
Creditors can’t garnish your wages without taking you to Small Claims or to the Supreme Court of your Province. It’s that simple. Debts over $25,000 most often go to Supreme Court. It can take a year just to get in front of a Judge there. Before anything comes up for actual trial at either level, there’s a mandatory mediation conference for the plaintiff and defendant. If no pretrial settlement is reached, it then goes to an actual trial. Then – and only then – if the creditor gets a judgment, and you default on the payment order, can they make an application to have your wages garnished for up to about 20% of your gross wages on average. But if that’s too much for you to afford you can also apply for a garnishment hearing to have the terms reduced. As you can see, all that would take at least 6 months to 12 months depending on where you live.
But most creditors would be pretty stupid to waste money doing any of that. Creditors didn’t get to be creditors by being stupid or wasting money. If you show the court you are labouring under difficult financial circumstances, payment orders of $10 to $20 dollars a month are common with no interest while not in default. I’m not saying you’ll necessarily get something that low, but if you can show the court your circumstances are onerous, the chance of creditors getting the money a month they are looking for is small. Creditors know this.
What they are looking for and counting on is for you to ignore the process. They are hoping you don’t respond to a Claim so they can get a Default Judgment. Don’t ever, ever do that. File what you are directed to file within the timelines given in the documents you receive. The forms are usually available at counter at the appropriate courthouse and/or online. They are meant to be simple and self serve. Do that; engage in the process and let your Credit Counsellor do his or her job in the meantime and you’ll be fine.
So what the heck; if your credit rating is already bad basically they can sue away all they want. You will probably only come out ahead and they know that. The collection agency will have already done several credit searches on you, and if they see your financial situation is not good, it is quite likely they are only bluffing.
Remember there’s always a lot of pressure on the collectors within collection agencies to meet bonus and revenue targets. Obviously, we have no exact way of knowing if they are really bluffing but experience tells us they probably are. We do know, if they sue, you would almost certainly come out with more favourable terms than they will. Courts and judges are most often sympathetic to the “little guy” in these scenarios. Again collectors and creditors know that. Don’t be afraid to have your day in court if it comes to that. Remember-threats and intimidation are the collectors standard stock in trade.