When a creditor garnishes your wages, looming debt can suddenly tailspin into a full-blown financial crisis. A garnish on your wages can quickly make you go bankrupt or fall behind on other debts. If you’re already struggling to make mortgage payments or pay alimony, child support, rent, car payments, or any other necessary expense, a garnish on your wages will quickly have you falling behind.
Unsecured creditors may take a number of legal actions against you if you have not been repaying your debt. They may move to seize physical assets, but with many exemptions in place to protect common assets, creditors may find it easier to collect with wage garnishment. With a seizure summons, a creditor can garnish up to 30 percent of your wages or if you’re self-employed, which a growing number of Canadians are, 100 percent.
A garnish on your wages could actually be a blessing in disguise. It sounds unlikely, but if your creditors are taking legal action against you to collect their debts, there may be a good chance that you’re insolvent. Insolvency means that you’re eligible for a number of debt relief options that can protect you against legal action and reduce the total debt that you owe.
If you have a garnish on your wages, these are the three steps you need to take right away.
#1 Talk to a Bankruptcy Trustee
In Ontario, bankruptcy trustees, today called Licensed Insolvency Trustees, are professionals who can help you with insolvency. Firms such as GTA-based David Sklar & Associates assess your debt and your financial situation to determine whether or not you’re insolvent. If you are, that means you can either a) declare bankruptcy or b) file a consumer proposal. According to David Sklar & Associates, consumer proposals are often preferable and clients are encouraged to explore this option before bankruptcy, as that can mean parting with hard-earned equity.
#2 File a Consumer Proposal
As soon as you file a consumer proposal, legal actions taken against you by your creditors are stopped. This includes wage garnishments as well as collection calls. With the help of a bankruptcy trustee, a consumer proposal involves proposing a reduced total debt to your unsecured creditors and a schedule for paying it. While unsecured creditors are not obligated to accept the proposal, according to David Sklar & Associates, it’s often a more appealing option for creditors than bankruptcy.
#3 Eliminate Your Debt
Once you’ve entered into a consumer proposal, eliminating your debt will be a lot easier than it sounds right now. Your debt will be reduced and you will have a clear, affordable payment schedule. A consumer proposal is a much better solution than garnished wages or legal action. If your income should increase while you are still paying your consumer proposal, paying back the debt sooner is entirely optional. Any increase in assets or income is protected. It’s up to you if you want to speed up your payment schedule.
A garnish on your wages should be a wake-up call about your debt. Now is your chance to do something about it. Talk to a bankruptcy trustee today about your options.