Tariff Job Loss: How to Protect Your Severance and Wages From Garnishment

If you work in a tariff-exposed industry, filing a consumer proposal before or immediately after a layoff is the most effective way to stop wage garnishment and protect your severance. Canada lost approximately 40,800 jobs in July 2025, mainly permanent employees in tariff-exposed sectors, with manufacturing alone losing nearly 10,000 positions year-over-year. Ontario faces 68,100 fewer jobs in 2025 and 119,200 fewer jobs in 2026 due to U.S. tariffs, with manufacturing accounting for 57,700 lost positions.

If you carry unsecured debt and work in automotive, steel, aluminum, lumber, or related supply chains, understanding wage garnishment mechanics before termination determines whether you lose 20 to 50 percent of your severance and future wages to creditors. Filing a consumer proposal before severance is paid protects the full amount and eliminates 60 to 80 percent of unsecured debt.

How are tariffs causing job losses in Canada in 2025-2026?

Statistics Canada reported that employment fell by 40,800 jobs in July 2025, with the labor market facing headwinds in part due to economic uncertainty introduced by the threat or imposition of tariffs on exports. Manufacturing lost nearly 10,000 positions year-over-year, with the decline concentrated in automotive assembly and parts, steel and aluminum processing, and supply chain services including warehousing, transportation, and logistics.

Ontario’s Financial Accountability Office projects that U.S. tariffs will eliminate 119,200 jobs in the province in 2026 alone. Manufacturing accounts for 57,700 of those losses. Primary metals, motor vehicle parts, and machinery and electronics are the hardest-hit sectors. Beyond manufacturing, construction lost 22,000 jobs in July 2025 due to building materials cost increases from lumber tariffs and commercial development slowdowns.

Energy, transportation, and information sectors are also shedding jobs. Transportation and warehousing have experienced six consecutive months of declines as pipeline and infrastructure projects are delayed due to steel cost increases. Information, culture, and recreation lost 29,000 jobs in July 2025, the largest single-month sector decline on record. Business services lost 19,000 jobs as tariff-exposed companies cut corporate spending on consulting and professional services.

High-risk employment indicators include working for a company with more than 50 percent U.S. export revenue, companies that have announced hiring freezes or cost reduction initiatives, competitors in your industry that have announced layoffs, roles in non-revenue-generating functions such as HR, administration, or back-office support, and companies that have delayed capital investments or expansion projects.

GM Oshawa laid off 1,200 workers on January 30, 2026, the largest single-day mass layoff in Ontario’s auto sector since 2009. This is the first major domino. Automotive suppliers in Windsor, Hamilton, London, and the Greater Toronto Area are expected to follow with layoffs throughout 2026. If you work in any of these sectors or regions, you are in the epicenter of Canada’s 2026 financial crisis.

What happens to your debts and garnishments when your income drops?

Wage garnishment requires a court judgment, which creditors obtain by suing you for unpaid debt. The process takes three to six months from lawsuit filing to garnishment order. If you miss payments starting today, garnishment could begin before you secure new employment. Understanding this timeline is critical because job loss and garnishment often intersect during the most vulnerable months.

The garnishment timeline unfolds as follows. Months one to two involve creditor demand letters, collection calls, and final notices. Months three to four involve the creditor filing a lawsuit known as a Statement of Claim. Month five involves a court judgment being granted if you do not defend the lawsuit. Month six involves the creditor applying for a garnishment order, which is sent to your employer.

The critical vulnerability window occurs if you are laid off in months four to six. You will be unemployed when garnishment activates, but your severance package is subject to immediate seizure. For example, if you miss payments in October 2025, a garnishment order may be issued in March 2026. If you are laid off in January or February 2026, your severance paid in February or March will be garnished even though you no longer have employment income.

While unemployed, creditors cannot garnish wages you do not earn, but they can garnish your bank account, tax refunds, and future employment income. Bank account freezes allow one-time seizure of your available balance. CRA tax refund interception diverts annual refunds to creditors. Employment Insurance garnishment is federally protected from private creditors, but CRA can garnish EI for tax debt, child support, or spousal support. Future employment garnishment orders remain active when you find work, and your new employer receives the order automatically.

Unemployment vulnerability amplifies risk because you cannot make minimum payments while unemployed, triggering lawsuits from multiple creditors. By the time you secure new employment, two to three garnishment orders may be active simultaneously. In a multiple garnishment scenario, credit card one may garnish 800 dollars per month, credit card two may garnish 600 dollars, and a line of credit may garnish 400 dollars, totaling 1,800 dollars per month seized from a 3,500 dollar new job, representing 51 percent income loss.

Provincial maximums apply per creditor in some jurisdictions and per total garnishments in others, creating complexity that often favors creditors. For detailed strategies to stop garnishment, see how to stop wage garnishment in Canada.

Can creditors garnish your severance or EI after a tariff-related layoff?

Termination and severance payments qualify as wages under provincial garnishment legislation. If a garnishment order exists when you receive severance, creditors can seize the provincially allowed maximum immediately. The amount seized depends on your province’s wage protection rules.

In Ontario, the Wages Act protects 80 percent of wages, allowing garnishment of up to 20 percent. For a 15,000 dollar severance, creditors can seize 3,000 dollars, leaving you with 12,000 dollars. In Alberta, only 50 percent of wages are protected, allowing garnishment of up to 50 percent. For a 15,000 dollar severance, creditors can seize 7,500 dollars, leaving you with only 7,500 dollars.

Alberta workers face 2.5 times higher garnishment than Ontario residents. A 50,000 dollar annual salary can lose 25,000 dollars annually to garnishment in Alberta versus 10,000 dollars in Ontario. Garnishment continues until the debt is paid in full and can be renewed indefinitely every one to two years depending on province. A 25,000 dollar debt garnished at 800 dollars per month takes 31 months to repay. At 2,000 dollars per month in Alberta, the same debt clears in 12.5 months but leaves you with only 2,000 dollars in monthly income.

Employment Insurance benefits are protected from garnishment by private creditors under federal law. If you owe only credit cards, lines of credit, or personal loans, your EI cannot be garnished. However, the Canada Revenue Agency can garnish EI for tax debts, child support arrears, or spousal support arrears. Most laid-off workers in tariff-exposed industries owe private creditors, meaning their EI is safe from garnishment.

The garnishment order is sent to your employer, who is legally required to comply. Employers cannot refuse, delay, or warn you in advance. They must withhold the funds and remit them to the creditor. Use the wage garnishment calculator to check your provincial maximum and calculate your exposure based on expected severance and future income.

How do consumer proposals and bankruptcy stop wage garnishment?

Consumer proposals under the Bankruptcy and Insolvency Act trigger an immediate stay of proceedings that stops all collection activity, including wage garnishment, lawsuits, collection calls, and bank account freezes. The stay activates the same day your proposal is filed electronically with the Office of the Superintendent of Bankruptcy. Your employer receives notice to stop the garnishment within days.

Filing timeline constraints are important to understand. Gathering documentation including pay stubs, tax returns, and debt statements typically takes 7 to 14 days. The Licensed Insolvency Trustee consultation is a free 30 to 60 minute meeting. Proposal preparation takes 3 to 7 days. Filing with the government is same-day electronic submission. The stay of proceedings activates immediately upon filing. Optimal filing window is 30 to 60 days before anticipated layoff for maximum protection.

Consumer proposals allow you to keep all assets, including vehicles, home equity, RRSPs, and tax refunds. You repay a reduced amount, typically 60 to 80 percent less than your total debt, over up to 60 months. Monthly payments are fixed and do not increase if your income rises. Creditors vote on whether to accept the proposal, but acceptance rates are high when the proposal offers more than creditors would receive in bankruptcy.

Bankruptcy is a lower-cost option if your income is very low and you have few assets. In bankruptcy, you may be required to surrender non-exempt assets such as RRSP contributions from the past 12 months, tax refunds, and vehicles with equity above the provincial exemption. However, if you are unemployed or earning only Employment Insurance, your surplus income may be zero or very low, making bankruptcy cheaper in total cost.

Filing while employed allows your Licensed Insolvency Trustee to calculate your consumer proposal payment based on current salary. This typically results in higher monthly payments but a shorter repayment period, often 36 to 48 months instead of 60 months. Filing while unemployed results in lower monthly payments based on Employment Insurance income, often as low as 200 to 300 dollars per month, but extends the repayment period to the full 60 months.

Both consumer proposals and bankruptcy are compatible with Employment Insurance. EI is treated as income for payment calculations, but most laid-off workers find that their EI-based payments are manageable. If you filed a proposal before your layoff and payments become unaffordable during unemployment, you can request an amendment to reduce your payment amount or utilize the three missed payments provision before proposal annulment.

Is it better to file before or after you lose your job?

Filing before layoff or before severance is paid offers the strongest protection for your severance and allows you to negotiate debt relief from a position of greater income stability. The stay of proceedings activates immediately upon filing, preventing creditors from obtaining new garnishment orders or seizing funds. If you file before severance is paid, that lump sum is protected because the stay prevents creditors from accessing it.

If you wait until after you receive severance, creditors who already have judgments may garnish your bank account or seize a portion of the severance under provincial garnishment rules. Once severance is deposited, it becomes vulnerable. This is especially critical in provinces like Alberta where 50 percent of severance can be seized compared to only 20 percent in Ontario.

Filing while employed also allows your Licensed Insolvency Trustee to calculate your consumer proposal payment based on your current salary. Higher payments while employed result in faster debt elimination and may make your proposal more attractive to creditors, increasing the likelihood of acceptance. Typical proposal payments while employed range from 500 to 700 dollars per month for 36 to 48 months, eliminating 60 to 80 percent of debt.

Filing after your layoff may result in lower monthly payments based on Employment Insurance or unemployment. However, you lose the opportunity to protect severance if it has already been paid and exposed to creditors. Typical proposal payments while unemployed range from 200 to 300 dollars per month for 60 months, eliminating 85 to 95 percent of debt because creditors accept lower payments when the alternative is receiving nothing in bankruptcy. If you’re unsure whether your situation warrants a consumer proposal, review the signs you need a consumer proposal to help you decide.

For workers in tariff-exposed industries carrying debt above 15,000 dollars in provinces with weak wage protection like Alberta, a pre-emptive consumer proposal filed 30 to 60 days before anticipated layoff is ideal. Execution involves contacting a Licensed Insolvency Trustee this week, gathering three pay stubs, your 2024 tax return, and creditor statements, obtaining a surplus income calculation, filing the proposal before layoff notice, and locking in proposal payments based on current employment income while eliminating 70 percent of debt and stopping all interest.

For workers with debt between 5,000 and 15,000 dollars in moderate risk sectors with strong provincial wage protection like Ontario, a wait-and-file-upon-notice strategy is viable. Gather all documentation now and store it in a secure cloud folder. Research two to three Licensed Insolvency Trustees in your area. Monitor employer financial health for layoff announcements or hiring freezes. Upon receiving layoff notice, file a consumer proposal within 7 days. Most employers provide two to four weeks of notice or pay in lieu, and filing within the first week ensures severance arrives after the stay of proceedings activates.

Real-world scenario comparison illustrates the difference. A worker with 30,000 dollars in unsecured debt, living in Ontario, earning 55,000 dollars, and laid off in month four faces two options. Option A is do nothing and face garnishment. Months one to three involve missing payments and accumulating late fees. Month four involves layoff and receiving 12,000 dollars severance. Months five to six involve creditors obtaining judgments. Month seven involves securing a new job at 48,000 dollars or 4,000 dollars per month. Month eight involves garnishment activating at 800 dollars per month seized due to Ontario’s 20 percent maximum. Months eight to nine involve a second creditor garnishment activating with an additional 800 dollars per month, totaling 1,600 dollars or 40 percent of gross income seized. Debt payoff takes 18 to 24 months with 4,500 dollars in interest accumulation and a total cost of 34,500 dollars plus 18 months of 40 percent income reduction.

Option B is filing a consumer proposal in month one before layoff. Month one involves filing the proposal and paying 550 dollars per month based on 55,000 dollar income. Month four involves layoff with 12,000 dollar severance protected by the stay of proceedings. Months five to 12 involve proposal continuing at 550 dollars per month from EI or part-time work. Debt is reduced from 30,000 dollars to 9,000 dollars, representing 70 percent elimination. Payment period is 36 months with a total cost of 9,000 dollars and an average of 250 dollars per month. Savings are 25,500 dollars with severance protected and no garnishment.

For federal workers and GM Oshawa employees, real-world examples show that early filing consistently delivers better financial outcomes than reactive filing after job loss.

What practical steps can you take this month to protect yourself?

This weekend, spend two hours documenting everything. Hour one involves photographing or scanning all credit card statements from the last three months, downloading all loan account statements, listing every creditor with company name, account number, balance, and minimum payment, locating your 2024 tax return including T4 slips and Notice of Assessment, gathering your three most recent pay stubs, and calculating your total unsecured debt including credit cards, personal loans, and lines of credit.

Hour two involves calculating exposure. Use the wage garnishment calculator to determine your provincial maximum garnishment amount. Multiply that amount by the number of creditors you are behind with to model a potential multi-garnishment scenario. Calculate your severance entitlement based on years of service, typically two to four weeks per year depending on jurisdiction and employer. Estimate your severance garnishment exposure by multiplying your expected severance amount by your provincial garnishment percentage.

On Sunday, spend two hours researching Licensed Insolvency Trustees. Visit the federal government’s insolvency directory to find trustees in your city. Identify three trustees and check their reviews on Google, Better Business Bureau, and Yelp. Confirm that free consultations are offered and note office hours and video consultation availability. Run a consumer proposal estimate using the consumer proposal calculator, inputting your current income rather than potential unemployment income. Compare the estimated payment and debt reduction to your garnishment scenario and save the results as a PDF.

On Monday morning, spend 30 minutes calling or emailing your top two Licensed Insolvency Trustees. Request free consultation appointments and explain that you work in a tariff-exposed sector, are concerned about layoffs, and want to understand consumer proposal timelines and protection strategies. Book appointments for this week, with video consultations available if in-person meetings are not convenient.

At the first hint of layoffs such as company announcements, hiring freezes, or industry news, accelerate your timeline. File a consumer proposal within two weeks if you have significant debt and want to lock in severance protection. Upon receiving a layoff notice, file within seven days to ensure the stay of proceedings is active before severance is paid.

Coordinate with family members if you share household income or debts. Discuss your layoff risk openly and agree on a household budget that assumes unemployment for three to six months. If your spouse or partner also carries debt, encourage them to assess their own garnishment risk and consider joint or separate filings depending on individual circumstances.

If you are a union member, contact your union representative to understand your severance entitlement, recall rights, and any negotiated protections. Unions often have relationships with Licensed Insolvency Trustees and can provide referrals or group information sessions for members facing layoffs.

For city-specific resources including local trustees, legal aid, and employment counseling, see guides for your region. Ottawa-area federal workers can access tailored support, and Oshawa-area manufacturing workers have resources designed for autoworkers and suppliers.

Bottom Line

Tariffs are already costing tens of thousands of Canadian jobs, and wage garnishment can take 20 to 50 percent of wages and severance in high-risk provinces like Alberta. Ontario manufacturing alone will lose 57,700 jobs in 2026, and if you carry unsecured debt while working in tariff-exposed sectors, early filing for consumer proposals or bankruptcy is the main way to stop existing and future garnishments and lock in protection before severance is paid.

Filing a consumer proposal before layoff protects your severance from creditor seizure and eliminates 60 to 80 percent of unsecured debt. Filing after layoff can still stop garnishment and reduce debt, but severance may already be exposed if you wait too long. Employment Insurance is protected from private creditors, making it compatible with both consumer proposals and bankruptcy.

The 30-day documentation and filing window before layoff notice protects both severance and eliminates most debt. If you work in automotive, steel, aluminum, construction, or related supply chains and carry more than 10,000 dollars in unsecured debt, start by speaking with a Licensed Insolvency Trustee now and use the consumer proposal calculator to see how much of your debt could disappear.

This article provides general information and should not be considered legal or financial advice. Garnishment rules and debt relief options vary by province and individual circumstances. Consult a Licensed Insolvency Trustee for personalized advice based on your specific situation.

Last updated: February 2, 2026