Bankruptcy – Wage Garnishment
Question: I have been told that even when one files for bankruptcy, up to 20% of my wages could be garnisheed (by the bankruptcy trustee?) during the 21-month period before discharge. Is this correct?
Answer: When you file bankruptcy in Canada you are required to make a payment to the trustee for the benefit of your creditors based on your surplus income. In a first bankruptcy if you have excessive surplus income you will be bankrupt for 21 months.
However, that doesn’t mean the trustee will be garnisheeing your wages. When you file bankruptcy the trustee will arrange a payment plan with you, and you will simply make the required payments each month, so no wage garnishment should be required. If you don’t make the required payments the trustee does have the power to go to court to get a garnishment order, but that would be a very unusual circumstance. Obviously you filed bankruptcy to deal with your debts, so it would not make sense to not fulfill your obligations while bankrupt so that you can receive your discharge.