As previously announced, and as mentioned in the Speech from the Throne, the Ontario government has proposed new regulations that indicate that the debt settlement rules are changing in Ontario.

Is this good news?

Probably, but of course it will depend on how the new rules are enforced.

Under the new rules debt settlement companies will not be permitted to charge large up front fees.  That’s good news, because it means consumers will only pay for value.

I like that idea, because that’s how it works now when you file a consumer proposal, which is an alternative to bankruptcy in Ontario.  If you file a consumer proposal (or a bankruptcy) your payments don’t start until you receive legal protection from your creditors.  That means that by the time you start paying, garnishments can be stopped; there’s no extensive waiting period.

That’s good news, and these new rules will be good news if they put all debt advisors on a level playing field.

Time will tell if they work as intended.

Question: Can they garnishee my pension?  If I go bankrupt in Ontario will that stop the garnishment?

Answer: Under the Ontario Pension Benefits Act it is not possible for a normal creditor (like a credit card company, or a bank) to garnishee your pension.  Garnishments are only possible under the Ontario Wages Act, and since a pension is not a wage, it’s not subject to garnishment.

However, if you are getting a government pension, like CPP or OAS, and you owe the government money, such as for back taxes, then yes, the government can “garnishee” your pension.  Technically they are not garnisheeing it; they are simply “offsetting” what you owe them, with what they owe you.

Also, once your pension is deposited into your bank account, it’s not a pension anymore; it’s cash, and yes, any creditor can attempt to get a court order to seize your bank account.  Even worse, if you owe money to Bank ABC, and you have cash in your Bank ABC bank account, the bank can “offset” what you owe them with what’s in your bank account.

If you owe money, and your only income is from a pension, you could simply open a new bank account at a new bank, where you don’t owe money, and it is highly unlikely any creditor will be able to seize it (since they don’t know where it is).

Alternatively, you could file bankruptcy in Ontario, which would eliminate the debt, so that is also an option.

See also our article on how to stop a wage garnishment in Ontario.

How Can I Stop a Wage Garnishment in Ontario?

April 5, 2011

There are six ways to stop a wage garnishment in Ontario. The first and most obvious way to stop a wage garnishment is to make a deal with the creditor to pay it.  Of course this isn’t easy, because presumably if you could have made a deal you would have done it before they went […]

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How Many People Go Bankrupt in Ontario?

March 28, 2011

Question: How many people went bankrupt in Ontario in 2010? Answer: In 2010, exactly 33,000 residents of Ontario filed personal bankruptcy.  That’s a decrease of 29% from the 46,521 that filed bankruptcy in 2009. In addition, there were 23,619 consumer proposal filings in Ontario in 2010, an increase of 16% over the 20,414 proposal filings […]

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How long will I be bankrupt in Ontario?

February 21, 2011

Question: I have heard that some bankruptcies last longer than others.  How do you know how long your bankruptcy will last?  I would be going bankrupt in Toronto, Ontario. Answer: The minimum bankruptcy period is nine months.  However, your bankruptcy will last longer under certain conditions.  There are three reasons for a bankruptcy to be […]

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How much does it cost to go bankrupt in Ontario?

February 7, 2011

Question: How much does it cost to go bankrupt in Ontario? Answer: The cost of bankruptcy in Ontario depends on a number of factors that are different in each situation. Here is an explanation of the different costs: 1 All trustees charge a minimum contribution for each month you are bankrupt.  The more complicated your […]

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