When a person in Canada owes money and doesn’t pay, a creditor may try to collect by taking funds directly from their bank account. This process is called garnishment, and it gets more complicated when the account is shared with someone else. Joint accounts (common among spouses, family members, or business partners) can be affected, depending on where you live and who owes the debt. The rules for garnishing joint accounts differ across provinces and between government and private creditors. It’s also different from garnishing a solely owned account.
Garnishment rules in Canada
Garnishment is a court-ordered process that lets a creditor take money directly from a debtor’s wages or bank account after winning a judgment. The basic legal principle is that a creditor who proves a debt in court can collect it from the debtor’s available funds. However, garnishment orders vary across provinces and territories.
Most creditors must first get a court judgment confirming the debt before garnishing anything. The bank or employer is then legally obligated to hold or send the required funds to the court. Once funds are in court, they may be released to the creditor, depending on the outcome of any objections.
An important exception is the Canada Revenue Agency (CRA). The CRA can garnish wages or bank accounts without a court order, under the Income Tax Act and Excise Tax Act. This power allows the CRA to issue a “requirement to pay” directly to a bank or employer if a taxpayer owes back taxes or other government debts.
Typically, garnishment targets either:
- Money in the debtor’s name at a specific financial institution, or
- A portion of wages paid by a debtor’s employer.
Each province also has exemptions. Certain income sources, such as child benefits, employment insurance, or disability payments, may be protected from garnishment. However, these exemptions must often be proven by the debtor.
Regular (solely owned) bank accounts and garnishment
When a debtor holds a sole bank account, garnishment is straightforward. If the account is in the debtor’s name only, creditors may garnish up to the full balance, after accounting for any exempt funds.
For example, if a court orders $4,000 in garnishment and the debtor has $5,000 in the account, the bank may freeze or release up to $4,000. After receiving the garnishment order, the financial institution must identify the debtor’s account and transfer the requested funds into court, or directly to the creditor if it’s a government order like one from the CRA. The debtor can still argue that some or all of the money is exempt (for example, social benefits), but they need to provide proof. Here as well, provincial differences exist.
Can joint accounts be garnished?
The short answer is yes, they can. However, the key question is determining what portion of the funds legally belongs to the debtor.
This depends on provincial law. For example, in BC, a non-government / private creditor is generally not allowed to garnish money in a joint account. They prefer to rely on evidence of fund contribution. The exception here is if the garnishing judgment is against both of the account holders.
On the other hand, places like Alberta and Ontario allow non-government creditors to garnish a joint account. This is allowed to the extent of the debtor’s presumed share. In case of two owners, the law usually presumes it to be a 50-50 split and proceeds accordingly. An exception is made if evidence or a court order proves otherwise.
Another notable exception is the CRA. The Canada Revenue Agency can frequently act without going to court. They can directly require a bank to pay money from any sole or joint accounts if it believes the funds belong to the debtor. Also, CRA has their own rules and requirements with banks, which may take precedence over any provincial procedures. CRA actions can be challenged by filing an objection or a taxpayer relief request. However, this is not the same as a normal court garnishment dispute.
Effects of garnishment on the non-debtor co-owner
When one owner’s debt triggers garnishment, the non-debtor co-owner may face serious complications. Banks often freeze the entire joint account at first, including funds that belong entirely to the co-owner, to ensure compliance with the garnishment order. The co-owner may then need to prove ownership of their portion by showing evidence such as pay stubs, benefit statements, or deposit records.
The amount the creditor can take is often limited to the debtor’s presumed share (usually 50%), but courts can adjust this after reviewing the facts. Ontario’s Rules of Civil Procedure require creditors to notify all account holders when a joint account is garnished. This gives the non-debtor co-owner a chance to file an objection or claim exemption.
Courts may also look at why the joint account exists. For example, adult children are often added to their older parents’ accounts to help with bill payments. In such cases, the court may find that all the money belongs to the parent, not the indebted child. Each case depends on evidence and intent.
Tips for protecting joint account funds from garnishment
If you share an account with someone who has significant debt, you can take preventive steps:
- Separate your funds. Keep your salary or income in a personal, single-name account. Only the debtor’s accounts are legally open to garnishment.
- Use different banks. If possible, the non-debtor should bank at a different institution altogether, since garnishment orders target specific banks. You can also keep your debt instruments at a separate bank from your deposit accounts.
- Keep clear records. Maintain documentation showing who deposits what into the joint account, like paycheques or benefits. This can help you prove ownership if funds are frozen.
- Seek legal advice. A local lawyer familiar with your provincial laws can guide you on exemptions or objections.
- Get ahead of the debt. If you or your joint account holder is not facing garnishment yet, take action. Make a payment plan, see what you can do to prevent garnishment in the first place. You can work out a plan with your bank, negotiate payments, or get guidance and support from a credit counselling agency. You could even contact the CRA to explain your situation.
Key takeaways
Joint accounts come with shared access but also shared risk. If one owner has unpaid debts, a portion of the account can be frozen or seized even if the other owner owes nothing. This applies differently by province, by creditor type, and by who is named in the judgment. Government bodies like the CRA have broader powers and can bypass the courts, while private creditors must follow strict provincial procedures.
Rules about ownership shares and exemptions vary. It’s vital to understand your province’s system before assuming your funds are safe. Whichever province or territory you’re in, the key is documentation and legal awareness. When in doubt, consult a local lawyer or legal aid clinic. Small differences in local law can make a big difference in outcome. If you think you might face garnishment, it’s better to take action sooner rather than later. Get ahead of your debt payments and avoid garnishment altogether. If you’re currently dealing with debt, you can contact one of our trained credit counsellors for advice – they can help you figure out which debt solution could be the right fit for your specific situation.
