Ontario Debt Collection Laws 2026 - Wage Garnishment, Exemptions & Limitations

Ontario offers some of the strongest consumer protections in Canada when dealing with debt collection. The province’s 2-year limitation period and 80% wage garnishment exemption provide significant safeguards, while federal debt relief options like consumer proposals and bankruptcy give residents practical paths to resolve overwhelming debt.

Your Debt Collection Rights in Ontario

Ontario law protects consumers through clear rules about when creditors can sue and what collectors can do. Understanding these rights is essential whether you’re dealing with credit card debt, medical bills, or tax arrears. Under the Limitations Act, 2002, creditors have exactly 2 years to commence legal action to collect a debt from the date of your last payment or written acknowledgment.

After 2 years without a lawsuit being filed, the debt becomes statute-barred. This means collectors can still call and send letters, and the debt technically still exists, but they cannot sue you or get a court judgment. Without a judgment, collectors cannot garnish your wages or freeze your bank account.

The 2-year clock restarts if you make any payment or acknowledge the debt in writing. This includes partial payments, post-dated cheques, or signing new payment agreements. Be extremely careful about making goodwill payments on old debts, as this gives creditors another 2 years to sue you.

When Debts Become Statute-Barred in Ontario

The 2-year limitation period applies to most unsecured debts including credit cards, personal loans, lines of credit, payday loans, and medical bills. However, some debts have different rules:

If you’re sued within the limitation period, you have limited time to respond. Ignoring a lawsuit leads to a default judgment, which then allows wage garnishment and bank account seizures. Always respond to legal documents promptly or consult a paralegal or lawyer about your options.

How Much of Your Pay Is Protected in Ontario

If a creditor obtains a court judgment against you, they can apply to garnish your wages. Ontario provides the strongest wage protection in Canada with 80% of wages exempt from garnishment. This means creditors can only take 20% of your gross pay. For support payments like child support or alimony, 50% of wages are exempt.

A worker earning $4,000 per month in Ontario could only lose $800 to wage garnishment, while an Alberta worker could lose $2,000 from the same income. This protection applies to regular employment income but not to support payments, which have separate rules. If you’re facing wage garnishment or want to calculate your exposure, use the wage garnishment calculator to verify whether your garnishment is legal.

Rules Collectors Must Follow in Ontario

Ontario collection agencies are regulated under the Collection and Debt Settlement Services Act. All agencies must be registered, and directors and officers must pass a mandatory written exam. Key protections include strict limits on when and how collectors can contact you.

Collectors can contact you Monday to Saturday from 7 a.m. to 9 p.m., and Sundays from 1 p.m. to 5 p.m. They cannot call on statutory holidays. They can make a maximum of 3 contacts per week including calls, emails, and letters unless you consent to more.

Collectors are prohibited from contacting your employer except to verify employment or enforce a court judgment. They cannot discuss your debt with coworkers, supervisors, or HR unless you give written consent. They also cannot contact family members, neighbors, or friends about your debt except to get your contact information.

Other prohibited conduct includes using threatening, abusive, or profane language; misrepresenting themselves as lawyers, police, or court officials; claiming they will take actions they cannot legally take; and applying excessive pressure or harassment. You have the right to demand that a collection agency only contact you in writing by sending a registered letter stating this request and providing an address for correspondence.

Options for Dealing With Debt in Ontario

When debt becomes unmanageable, Ontario residents have several options beyond waiting out the limitation period. The most effective solutions are federally administered programs that stop collection activity immediately and provide legal protection from creditors.

Consumer proposals and bankruptcy are both administered by Licensed Insolvency Trustees and governed by the Bankruptcy and Insolvency Act. These are not provincial programs but federal solutions available across Canada. Both trigger an automatic stay of proceedings that stops all collection calls, wage garnishments, lawsuits, and legal action the moment you file.

Other options include negotiating directly with creditors for reduced settlements, consolidating debts through a personal loan or line of credit, or working with non-profit credit counselling agencies to set up a debt management plan. Each option has different impacts on your credit, assets, and monthly payments.

How Consumer Proposals Work in Ontario

Ontario has the highest number of consumer proposal filings in Canada. A consumer proposal allows you to reduce your total unsecured debt by 60 to 80 percent typically, make fixed monthly payments for up to 5 years, and keep all your assets including your home, car, and RRSPs.

Average consumer proposal statistics for Ontario show total debt around $52,000, proposal payments of 35 cents per dollar owed, monthly payments between $350 and $450, and completion rates above 85%. These numbers vary based on income, assets, and total debt, but demonstrate that proposals offer significant debt reduction while remaining affordable.

The consumer proposal process begins with a free consultation with a Licensed Insolvency Trustee who reviews your financial situation and calculates what creditors would receive in a bankruptcy. Your proposal must offer creditors more than they would get if you declared bankruptcy. Once filed, you have immediate protection from creditors through the stay of proceedings.

Creditors have 45 days to vote on your proposal. If creditors holding the majority of the dollar value vote to accept, the proposal is approved and binds all unsecured creditors. You then make your agreed monthly payments for the term of the proposal. Once you complete all payments, you receive a Certificate of Full Performance and your remaining unsecured debt is legally eliminated.

Consumer proposals result in an R7 rating on your credit report. This rating remains for 3 years after you complete your final payment or 6 years from the filing date, whichever comes first. Use the consumer proposal calculator to estimate what you might pay based on your income and assets.

Personal Bankruptcy in Ontario

Bankruptcy is another option for Ontario residents with overwhelming debt. While bankruptcy has a more significant impact on your credit than a consumer proposal, it provides immediate debt relief for people with little income or assets. First-time bankruptcy typically lasts 9 months if you have no surplus income, or 21 months if you do.

In bankruptcy, a Licensed Insolvency Trustee takes control of your non-exempt assets and distributes proceeds to creditors. Ontario bankruptcy exemptions include home equity up to a certain amount, one vehicle, RRSPs except contributions in the last 12 months, household furnishings and clothing, and tools of the trade up to prescribed values.

Most unsecured debts are eliminated in bankruptcy including credit cards, personal loans, lines of credit, payday loans, tax debt, and medical bills. Student loans are only discharged if you’ve been out of school for at least 7 years. Secured debts, support payments, and court fines are not eliminated.

Bankruptcy results in an R9 rating on your credit report which remains for 6 years after discharge for first-time bankruptcy. This is more severe than the R7 rating from a consumer proposal. Many people prefer consumer proposals when they have stable income and want to avoid the stigma and credit impact of bankruptcy. Compare the options using the debt relief comparison tool to see which makes sense for your situation.

How to Find an LIT in Ontario

Licensed Insolvency Trustees are the only professionals authorized to administer consumer proposals and bankruptcies in Canada. They are federally regulated by the Office of the Superintendent of Bankruptcy and must act in the interests of both debtors and creditors.

In Toronto, Ottawa, and other major cities across Ontario, LITs are widely available with offices in the GTA, National Capital Region, and throughout Southwestern, Eastern, and Northern Ontario. Most trustees offer free initial consultations to review your options by phone, video, or in person.

Use the Office of the Superintendent of Bankruptcy directory to find a Licensed Insolvency Trustee near you. During your consultation, the trustee will review your income, expenses, assets, and debts to determine which option provides the best outcome. They will also explain how each option affects your credit, what you’ll pay monthly, and how long the process takes.

How to Report a Debt Collector in Ontario

If a collection agency violates Ontario’s rules, you can file a complaint with the Ministry of Public and Business Service Delivery. Document all interactions including dates, times, names, and the content of communications. Save voicemails, letters, emails, and text messages as evidence.

Common violations worth reporting include calling outside permitted hours, threatening arrest or criminal charges, contacting your employer about the debt, using abusive language, misrepresenting the amount owed, and continuing to call after you’ve sent a written cease-contact request. The ministry investigates complaints and can impose penalties on collection agencies that violate the Collection and Debt Settlement Services Act.

File a complaint online at ontario.ca/page/filing-consumer-complaint or call 1-800-889-9768. While filing a complaint doesn’t stop the debt collection, it holds agencies accountable and can lead to enforcement action if violations are confirmed.

Next Steps for Ontario Residents: How to Get Debt Help

If you’re facing debt collection in Ontario, understanding your rights is the first step, but exploring debt relief options is how you move forward. Consumer proposals offer legal protection and significant debt reduction while keeping your assets. Bankruptcy provides immediate relief for those who qualify.

Calculate your potential consumer proposal payment to see what you might pay monthly. Check whether your wage garnishment exceeds legal limits. Learn about the statute of limitations on debt in Canada to understand when debts become unenforceable. Review how to stop wage garnishment if you’re already facing deductions from your pay. Compare all debt relief options to find the best path for your situation.

Ontario’s strong consumer protections give you leverage when dealing with creditors, and federal debt relief programs provide proven solutions for eliminating debt legally while rebuilding your financial future.