By Winston Mattis

Canadians are becoming more indebted.  A recent CBC News clip described the consumer debt levels of Canadians as “unsustainable”. The CBC credited the rating agency Fitch for the citation. In the same report CBC stated that Equifax also expressed concerns about Canadians level of indebtedness, pegged at $20, 891 on average.

A few macro economic trends are currently evident. Sluggish economic growth, massive layoffs, predictions for rising interest rates, roll back on housing values converge to create risks of future consumer default on debt in large proportions.

Upon default on one or more debt instrument(s) Ontarians will likely want to know what per cent of their pay is subject to garnishment in the event a judgment is obtained against them.   This question is answered in the provisions of the Wages Act.

“wages” does not include an amount that an employer is required by law to deduct from wages. R.S.O. 1990, c. W.1, s. 7 (1).

Disability payments included

(1.1)  For the purposes of this section, payments from an insurance or indemnity scheme that are intended to replace income lost because of disability shall be deemed to be wages, whether the scheme is administered by the employer or another person. 1999, c. 12, Sched. B, s. 18.

Exemption from seizure or garnishment

(2)  Subject to subsection (3), 80 per cent of a person’s wages are exempt from seizure or garnishment. R.S.O. 1990, c. W.1, s. 7 (2).

Idem, support or maintenance

(3)  Fifty per cent of a person’s wages are exempt from seizure or garnishment in the enforcement of an order for support or maintenance enforceable in Ontario. R.S.O. 1990, c. W.1, s. 7 (3).

Judge may decrease exemption

(4)  A judge of the court in which a writ of execution or notice of garnishment enforceable against a person’s wages is issued may, on motion by the creditor on notice to the person, order that the exemption set out in subsection (2) or (3) be decreased, if the judge is satisfied that it is just to do so, having regard to the nature of the debt owed to the creditor, the person’s financial circumstances and any other matter the judge considers relevant. R.S.O. 1990, c. W.1, s. 7 (4).

Judge may increase exemption

(5)  A judge of the court in which a writ of execution or notice of garnishment enforceable against a person’s wages is issued may, on motion by the person on notice to the creditor, order that the exemption set out in subsection (2) or (3) be increased, if the judge is satisfied that it is just to do so, having regard to the person’s financial circumstances and any other matter the judge considers relevant. R.S.O. 1990, c. W.1, s. 7 (5).

Employer may pay into court

(6)  Where an employer receives notice of a motion under subsection (4) or (5), the employer may pay into court the part of the person’s wages that is not exempt from seizure or garnishment under subsection (2) or (3), as the case may be, and the judge on the hearing of the motion may make such order for payment out of court as is just. R.S.O. 1990, c. W.1, s. 7 (6).

Wage assignments

(7)  Subject to subsection (8), an assignment of wages or any part of them to secure payment of a debt is invalid. R.S.O. 1990, c. W.1, s. 7 (7).

Ontarians who want to know the basis upon which a judge may increase or reduce the amount exempted from garnishment should consult a lawyer to discuss the particulars of their situation.

Based on the provisions of the Wages Act, only 20% of a person’s wages is subject to garnishment in the case of general indebtedness, and a maximum of 50% when the debt is on account of child support. The exempt portion cannot be garnished, unless a judge increases, or decrease the portion subject to garnishment.

Ontarians wanting to know the precise circumstances that might lead a judge to increase or decrease the portion subject to garnishment should consult a lawyer for advice and directions.