We previously discussed how to collect on a Small Claims Court judgment. In this post, we take a closer look at the process of garnishment, which is a common and one of the most effective ways to collect your money.
Here are the most common questions by creditors.
1. What is a garnishment?
A garnishment, as a concept, is when the creditor (plaintiff) directs some third party that owes money to the debtor (defendant) to pay it to the court instead of the judgment debtor. This means that the creditor can basically collect any money that anyone else owes to the debtor. It does not matter whether the money is owed to the debtor due to a court judgment, the return of a loan, or for another reason. The person who owes the debtor and receives the instruction to transfer money to the court instead of the debtor is the garnishee.
In practice, garnishments are most often used to garnish the debtor’s wages through his/her employer or garnish the debtor’s account through his/her bank. The employer owes the debtor a salary. The bank owes the debtor all funds in the debtor’s bank account(s).
The Rules of the Small Claims Court set out requirements and procedures for garnishment.
2. What information do I need to garnish a bank account?
To garnish a bank account, you need only to know the debtor’s name and the location of the bank branch where they have an account(s). You don’t need to know account numbers.
3. What information do I need to garnish wages?
To garnish wages, you need to know the name and contact information of the debtor’s employer. However, you do not need to know the debtor’s position with the employer, salary, etc.
4. What kinds of bank accounts can I garnish?
When you deliver a notice of garnishment to the debtor’s bank, it must garnish any debit accounts the debtor has at that branch. This includes checking and savings accounts, but does not include credit lines.
5. What if the debtor’s bank account is joint with his or her spouse?
When the debtor has a joint account, you can garnish only a portion (up to 50%) of the funds in that account. Therefore, garnishment is still possible, but not for the entire amount in the account.
6. Will it be a problem if the debtor has multiple middle names?
You need the proper spelling of the debtor’s first and last name to garnish an account. Also, the name on the judgment must match the name on the account.
7. What if the debtor receives money from his/her employer on contract instead of payroll?
The premise of garnishment is that you, as the creditor, can collect any money owed to the debtor. It means that you can collect money owed to the debtor on a contract, as well. First, however, you need to know the name and address of the contracting party.
8. Can I garnish the wages if the debtor receives her wages through her own corporation?
Legally, yes. If the debtor is on payroll or has a contract with their own corporation, you can name the corporation as the garnishee. Accordingly, you can instruct that corporation to transfer money owing to you to the court. However, remember that the garnishee and the debtor have a close relationship. For this reason, the garnishee may be less cooperative.
9. What if the garnishee refuses to pay?
If the garnishee refuses to pay a garnishment, he/she/it must provide a reason for failure to do so. Generally, the only legitimate grounds for the garnishee’s failure to pay on garnishment are that the garnishee no longer owes anything to the debtor. For example, the garnishee may no longer employ or contract with the debtor, or hold their chequing account, or the balance in the chequing account may be $0.00.
If the reason the garnishee provides is not satisfactory, then you can call the garnishee to a Garnishment Hearing, where you can challenge the garnishee’s excuse for failure to pay. If the court finds this reason unsatisfactory, it can oblige the garnishee to provide payments.
10. Does the garnishment continue until the debt is paid off?
The Notice of Garnishment is valid for six years. This means that the garnishee must provide payments to the court for a period of six years or until the debt is paid off, whichever comes first. If, after six years, the debt is still not paid off, you can renew the Notice of Garnishment for another six years. After that, you can renew it as often as needed until the debt is paid off.
11. How effective are garnishments in collecting money?
In our practice (which may not be applicable to every particular case), garnishments are generally effective. If the garnishee actually owes the debtor money, payments are usually diligently transferred to the court by the garnishee.
12. How long does collecting all the money owing on a garnishment take?
This depends on the amount of the debt and how much the garnishee owes the debtor. For example, if the debtor has $100,000 in a savings account, you can expect to receive your money quickly. Apart from that, the garnishee is under an obligation to garnish funds immediately and must transfer these funds to the court within ten days. So, for example, a bank would garnish funds as soon as they are deposited into an account. It would need to transfer the money garnished to the court within ten days.
