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Licensed Insolvency & Bankruptcy Trustee

How To Stop CRA Wage Garnishment

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In a previous article, we explained why and how CRA can freeze your bank accounts. The Canada Revenue Agency (CRA) can take several steps to recover the money it is owed. Besides freezing bank accounts, the CRA can also garnish wages, which means directing some of the debtor’s income to the Agency and using the money to pay off what the debtor owes.

But how much can CRA garnish and how can you stop the wage garnishment process? Read on to find out.

Things To Know About CRA Garnishments

One of the most important things you should know about a CRA garnishment is that it can be enforced without a court order. The garnishment process is initiated when the CRA issues a Requirement to Pay notice to third parties such as the debtor’s employer. The notice requires the employer to deduct or withhold money from the debtor’s income and direct it to the CRA.

Requirements to Pay apply to different payments third parties could make to a debtor, including:

  • Wages, salaries, bonuses, or commissions
  • Rent or lease payments
  • Proceeds of an insurance claim
  • Reimbursement of expenses the third party owes to the debtor
  • Amounts held by the debtor’s financial institution
  • Loans made by the third party to a debtor, when the corporation is not handling the debtor at arm’s length

Will A Person Be Notified Officially By The CRA?

The CRA will first send the debtor notices of assessment and collection letters. Then, the CRA will send a copy of the Requirement to Pay notice sent to the third party to the debtor via mail.

But if the debtor doesn’t pay or doesn’t make payment arrangements with the CRA, the Agency can start the wage garnishment procedure.

Since the CRA sends the Requirement to Pay via regular mail and work directly with third parties to garnish wages, many debtors don’t realize this is happening until they’re unable withdraw money from their accounts.

How Much Of A Person’s Wage Can the CRA Garnish?

CRA has the right to garnish up to 50% of a debtor’s wages if the debtor is employed and up to 100% of the debtor’s income if the debtor is a contract worker. Self-employed debtors who bill their clients directly can have 100% of their income directed to the CRA in order to pay off their outstanding tax debts.

How To Stop a CRA Wage Garnishment

Debtors who cannot afford to pay their outstanding taxes can stop the CRA from garnishing their wages by contacting a Licensed Insolvency Trustee (LIT) and examining their options.

There are two ways to get tax debt relief. The first is filing a consumer proposal and the second is filing for bankruptcy. Both options are legally binding processes that can help you get out of debt. And both of these options provide a legal stay of proceedings that prevents wage garnishment or stops a garnishment that’s already in place.

When a Licensed Insolvency Trustee files a consumer proposal or a bankruptcy on the debtor’s behalf, the CRA, the court, and the third parties involved receive a notice and the wage garnishment stops. And if the debtor completes their proposal or finishes their bankruptcy, their income will not be garnished again.

The Fastest Way To Stop Wage Garnishment

  1. Contact a Licensed Insolvency Trustee and receive a free consultation. Tell the LIT about your situation and examine your options. Your LIT will examine your financial information and help you decide whether you should file for bankruptcy or file a consumer proposal.
  2. Your LIT collects the information and documents they need to prepare the paperwork.
  3. You sign the consumer proposal or bankruptcy documents and your LIT files them with the government on your behalf, effectively starting the stay of proceedings.
  4. Your LIT will immediately notify your employer that you filed the necessary documents and advise them to stop the garnishments.

Even though this might seem like a complicated process, our LITs can file the paperwork with the government and start the stay of proceedings in as little as one or two days.

Contacting us as soon as possible can enable us to stop your employer from taking money out of your pay. In some cases, we might be able to return the funds your employer has withdrawn from your paycheque if the person handling the paycheques at your workplace didn’t send the funds to the CRA.

Stop The CRA Wage Garnishment Today

Contact one of our LITs and find out how you can stop the CRA wage garnishment today. We offer free, no-obligation consultations. Contact us today and take the next steps toward tax debt relief

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