How Wage Garnishment Affects Your Family Finances

Wage garnishment has a very negative effect on your family and you as a worker. A reduced paycheck doesn't just diminish your financial motivation, it can also present a greater threat of serious financial instability for you if the judgment against you is enforced. However, if the court rules in an employee's favor, they must honor that order and pay a certain percentage of your salary to your creditor.

What is a Wage Garnishment?

The main purpose of wage garnishments is to help pay your debts as they become due, but when you are unable to make the minimum payments on your debt, creditors are permitted to begin taking money from your paycheck directly out of your income tax obligations. While many people assume that if they are ordered by a court to repay their debt, they have no options other than bankruptcy, this isn't always the case.

In most cases, you can repay any tax obligations that have been assessed against you, or at least make arrangements to repay them in full if those tax obligations are still being assessed. Most citizens have full legal rights to file bankruptcy as a solution to debts that are out of their control, and many employers won't enforce wage garnishments against their employees who have declared bankruptcy. A bankruptcy court judge can order your employer to take up to 12% of your monthly gross salary as wages to satisfy your debt. Although you may be able to repay your debts through work, you may find that you are unable to afford to meet your obligations, or are simply unable to pay your wage garnishments.

Credit Cards & Store Cards

You may find that some types of credit card or store cards are exempt from having your wages garnished, such as those that have pre-approved payment plans, balance transfers, overdraft protection, and cash advances. In these cases, the card company will only withhold amounts equal to a percentage of what your pay is, or not at all if your balance exceeds a certain level. If you have any questions about your wage garnishment in Canada or your particular locale, it is best to get in touch with a professional who can give you the right information.

For most low-income families, it is best to talk with your employer and discuss the option of a deferred deposit, which can usually cover all or a part of your bill, instead of using a credit card to pay all your debt. With a deferred deposit, your creditors must first be notified of the impending wage garnishment before the bill is due. Once the bill is due, the company deducts the amount from your income taxes as soon as you file your annual return.

Costs of Interest for Wage Garnishment

If you are unable to come up with the necessary money for your wage garnishment, your employer may try to arrange for a loan from a bank, or a credit union, as a last resort. This approach is not likely to result in a satisfactory outcome for either you or your employer. In some cases, the lender will attempt to collect more money than you have actually borrowed, and you'll end up having to pay it back to the bank or credit union, leaving you with nothing more than the original amount owing and the added costs of interest.

You may also qualify for financial institutions that are willing to assist you with making the necessary payments on your behalf. Many of these companies have financial advisors who can assist you in coming up with a plan for paying back the full amount due on your income tax obligations. In some cases, the company will also waive or reduce the amount you have to be paid, depending on your current financial situation.

Final Thoughts

Unfortunately, financial difficulties often result in the inability to keep up with all of the payments that are required, and that may be a reason why you cannot pay your debt off. If you find that you are unable to repay your debt, and you are unable to come up with a suitable plan for paying it off, contact your employer or the tax office to see if they have any options available to you to help you. In most cases, your employer will be able to help you with a deferment agreement, or a loan from a bank, where your employer will cover the remaining balance.