A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.
The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, and a lien on the debtor’s property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.
Iowa Wage Garnishment
The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor’s employer and require the employer to deduct a certain portion of the debtor’s wages each pay period and send the money to the creditor.
In Iowa, wage garnishment is allowed under Iowa Title XV Subtitle 5 Chapter 642, 537.5105 and federal law 15 U.S.C. 1673(a). If the judgment-creditor is aware of the debtor's place of employment, it may seek wage garnishment. Under federal law, the garnishment applies to 25% of the debtor's net take home pay, (i.e. gross pay less statutorily mandated deductions). Garnishment can occur only after the person being garnished has received a 10-day’s notice.
However, under Iowa 642.21, the maximum amount of employee’s earnings that may be garnished during one calendar year is $250 for each judgment creditor (regardless of the number of judgments) except as provided in 252D and 598.22, 598.23, and 627.12 (involve collecting delinquent court-ordered support, which are not subject to annual restrictions), or if earnings are greater than $12,000 for the calendar year, or if the garnishment is for a tax lien:
|$50,000 or more||Not more than 10% of earnings|
Iowa Bank Account Levy
A levy means that the creditor has the right to take whatever money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied. In some states levy is called attachment or account garnishment. The names may vary but the concept is the same.
Levy is allowed under Iowa Title XV Subtitle 3 Chapter 626, and specifically 626.22, 626.24, and 626.50. General exemptions for bankruptcy, garnishment, attachment, and execution can be found in Chapter 627. Under section 522(n) the maximum aggregate value of assets in individual retirement accounts that is exempted is $1,095,000 ($1,171,650 after April 1, 2010).
If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.
Lien in Iowa
A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.
Under Iowa Code 648.1, “Lien; means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.” Iowa allows judgment-creditors to place a lien on property, as per Iowa Code 626.33.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Iowa Statute of Limitations
Each state or commonwealth has its own statute of limitations on civil matters. Here are some of Iowa’s statutes of limitations for consumer-related issues:
|Credit card||5 or 10*||Gemini Capital Group v. New, No. 1-521/10-1096 (Iowa Ct. App. Sep. 8, 2011)|
|Spoken contract||5||Iowa Code § 614.1(4)|
|Written contract||10||Iowa Code § 614.1(5)|
|Judgment Lien||10||Iowa Code § 624.23|
|Judgment||9||Iowa Code § 614.3|
|* Credit card contracts are considered non-written. The Gemini court implied it would find a credit card contract as written if the plaintiff produced a contract signed by the defendant/consumer.|
When the statute of limitations clock starts depends on the circumstances and the particular statute. Generally, it starts when the action accrues, which means the date of breach. For credit card debt, this means the date the payment was missed.
Iowa Payday Loan Law
Payday loans are legal in Iowa. It is not a crime to default on a payday loan. See the Iowa Attorney General’s office Informal Advisory # 87 dated February 18, 1999 (PDF) to learn how the attorney general views Iowa Title XIII Subtitle 3 Chapters 535 and 537.7103.
See the Bills.com Payday Loan Laws resource to learn more about payday loans in all states.
Iowa Small Claims Court
To learn how to file a small claims case in Iowa, please see the Iowa Legal Aid Society's Small Claims Court Legal Information page and the Iowa Judicial Branch's Representing Yourself Web page. Consult with a lawyer if your case is complex, or the Iowa civil procedure rules don't make sense to you.
Iowa Debt Collection Practices Act (DCPA) and the Iowa Consumer Credit Code (ICCC)
Collection agents must file a notification with the Iowa attorney general to collect debt in the state. Iowa Debt Collection Practices Act (DCPA) mirrors the federal FDCPA in most respects. It applies to original creditors and collection agents. Like the FDCPA, the DCPA gives consumers a legal remedy (a reason to file a lawsuit) against collection agents and original creditors. However, you cannot be awarded double damages by proving a violation of both the FDCPA and the DCPA.
The Iowa Consumer Credit Code prohibits extortionate and unconscionable debt collection practices by creditors in credit transactions less than $25,000. A credit agreement is unconscionable when:
- The creditor knew there was no reasonable probability of repayment in full by the debtor
- The creditor knew the consumer would be unable to receive substantial benefits from the property or services
- There is a gross disparity between the price paid and the price at which the property or services could be obtained by similarly situated customers
- The creditor takes advantage of a debtor's inability to understand the language of the agreement
Violation of the DCPA and ICCC are not criminal matters. If you have been victimized by a collection agency, file a report of the violation with the Iowa attorney general and FTC. Consult with a lawyer to discuss filing a civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you.
Learn more about the Iowa Debt Collection Practices Act at Iowa Code § 537.7101 to 537.7103, and the Iowa Consumer Credit Code at Iowa Code § 537.5107 to 537.5108.
Consult with an Iowa attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Iowa.
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