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Enforcement by Garnishment: Wages or Bank Accounts or Other Sources of Monies
Question: How can garnishment procedures help a Judgment Creditor recover owed money?
Answer: Garnishment procedures enable a Judgment Creditor to redirect funds owed by third parties, such as wages from an employer or money in bank accounts. By utilizing these procedures, you can effectively collect what is owed to you. Caruso Legal Services Paralegal can assist you in navigating these complex processes, ensuring you receive the funds you are entitled to.
Accessing Wages, Bank Accounts, Among Other Monies
After a Judgment or Order of payment of money is successfully obtained from a court or a tribunal, garnishment procedures provide powerful tools for the enforcement of the Judgment or Order. The person owed money, known as a Judgment Creditor, can use garnishment procedures to collect the money owed by redirecting a portion of the wages or bank accounts of the Judgment Debtor. A Judgment Creditor may also use garnishment procedures to redirect other sources of monies, such as accounts receivable, that would otherwise be due to the Judgment Debtor.
The Law
Garnishing of Wages Owed to Debtor
Garnishment procedures that aim to redirect wages owed by an employer to a employee serve as a widely utilized enforcement mechanism. In general, unless a court dictates otherwise, only a maximum of twenty (20%) percent of the wages due to an employee may be redirected through garnishment proceedings to a Judgment Creditor. Furthermore, the garnished amount is applied to net wages after income tax and Canadian Pension Plan contributions as statutory deductions. These limitations are outlined within the R.S.O. 1990, c. W.1, as follows:
Net wages subject to garnishment
7 (1) For the purposes of this section,
“wages” does not include an amount that an employer is required by law to deduct from wages.
...
Exemption from seizure or garnishment
(2) Subject to subsection (3), 80 per cent of a person’s wages are exempt from seizure or garnishment.
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.
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.
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.
Garnishing of Debts Owed to Debtor
In addition to the option to garnish wages owed to a Judgment Debtor, a Judgment Creditor may also seek to garnish other debts owed to a Judgment Debtor. For example, when a Judgment Debtor has monies held in a bank account, the bank owes such monies as a debt to the Judgment Debtor. A Judgment Creditor may use garnishment proceedings as a means to redirect to the Judgment Creditor the money in a bank account that is owed by the bank to the Judgment Debtor.
Jointly Held Bank Accounts
In circumstances where a Judgment Creditor seeks to garnish a joint bank account a Notice to Co-Owner of Debt (Form 20G) must be properly served upon the joint owner of the bank account; and then generally, subject to a court order otherwise, half of the debt owed by the bank, meaning fifty (50%) percent of the bank account, may be garnished unless ordered otherwise by a court. For the garnishment of a bank account via the Small Claims Court, this restriction is stated at Rule 20.08(2) of the Rules of the Small Claims Court, O. Reg. 258/98, where it is said:
Payment of Monies
When a Garnishee makes a payment into the Court in response to a Notice of Garnishment (Form 20E), the payment is considered a valid discharge of the debt between the Garnishee and Debtor, thereby protecting the Garnishee from any further claims by the Debtor or any Co-Owner of the Debt, to the extent of the payment. Under Rule 20.08(19) of the Rules of the Small Claims Court, this payment effectively resolves the Garnishee of any further obligations in relation to the garnished funds.
After a payment is received, the Court Clerk will distribute the funds to the Creditor, provided that proof of service of the Notice of Garnishment (Form 20E) on the Debtor was filed; however, distribution may be delayed under specific circumstances, such as if a Garnishment Hearing is requested, a Motion is filed, or a request for a Clerk’s Order on Consent was made. The first payment under a garnishment will be distributed thirty (30) days after it is received, while subsequent payments are distributed as the payments are received by the Clerk, according to Rule 20.08(20.1).
These Rules ensure that Creditors receive the funds to satisfy the Judgment, while safeguarding the Garnishee from further liability once a payment is made. Specifically, the Rules state:
Effect of Payment to Clerk
20.08 (19) Payment of a debt by a garnishee in accordance with a notice of garnishment is a valid discharge of the debt as between the garnishee and the debtor and any co-owner of the debt, to the extent of the payment.
Distribution of Payments
(20) When proof is filed that the notice of garnishment was served on the debtor, the clerk shall distribute a payment received under a notice of garnishment to a creditor in accordance with subrule (20.1), unless,
(a) a hearing has been requested under subrule (15);
(b) a notice of motion and supporting affidavit (Form 15A) has been filed under rule 8.10, 11.06 or 17.04; or
(c) a request for clerk’s order on consent (Form 11.2A) has been filed seeking the relief described in subparagraph 1 iii of subrule 11.2.01 (1).
(20.1) The clerk shall distribute the payment,
(a) in the case of the first payment under the notice of garnishment, 30 days after the date it is received; and
(b) in the case of every subsequent payment under the notice of garnishment, as they are received.
A Creditor, with the above said regarding payment of garnished funds by the Court Clerk, must keep in mind that where there is another Creditor as Co-Owner of Debt on file with the Court Clerk, the Court Clerk is obligated to distribute garnished funds equally – unless varied by an Order. This requirement is specifically stated in Rule 20.08(10) whereas it is said:
Equal Distribution Among Creditors
20.08 (10) If the clerk has issued notices of garnishment in respect of a debtor at the request of more than one creditor and receives payment under any of the notices of garnishment, he or she shall distribute the payment equally among the creditors who have filed a request for garnishment and have not been paid in full.
Conclusion
Garnishment proceedings involve the redirection of money. Simply put, money owed by a third party, known as a Garnishee, to a Judgment Debtor is instead redirected to a Judgment Creditor. For example, after a person wins an award of money in a lawsuit, that person becomes known as a Judgment Creditor. The person who lost the lawsuit, and now owes money, is known as a Judgment Debtor. The employer of the Judgment Debtor, although uninvolved in the lawsuit, may become a Garnishee and be required to redirect wages due to the employee as a Judgment Debtor to the Judgment Creditor.
