Iowa Collection Laws

What are the collection laws for wage garnishment, levy and lien in Iowa? What is the statute of limitations on Iowa judgments?

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Bill's Answer: Bills.com Resident Expert

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. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the "preferred" method of judgment enforcement because, although possible, it is a tedious and time consuming process for creditors.

In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state.

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under Iowa or federal law. (Chapter 627.6(8), 627.8, 97A.12, 411.13, 410.11) Garnishment may be allowed for child support. (Iowa Code sections 410.11, 97A.12, 411.13)

In Iowa, wage garnishment is allowed under Iowa 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:

  • $12,000-$15,999: $400 garnished
  • $16,000-$23,999: $800
  • $24,000-$34,999: $1500
  • $35,000-$49,999: $2000
  • $50,000 or more: Not more than 10% of earnings

If you reside in another state, see Advice on Judgment Garnishment to learn more about wage garnishment.

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.

In Iowa, levy is allowed under Iowa Code 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).

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.

Statute of Limitations on Iowa Judgment

Each state has is own statute of limitations on judgments. Under Iowa Code 614, the Statute of limitations on federal or state judgments in Iowa is 20 years.

Recommendation

Consult with an Iowa attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Iowa.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (62)


Barb G.
Queen Creek, AZ  |  April 15, 2012
I bought a van and the title wasnt clear. I didnt know this when I purchased the van and it broke down twice within 2 days causing it to be towed. I could not insure or get a title and could not get it after it was towed. I was granted a judgement in small claims and the Sheriff's Dept went to the business and tried to collect. They contacted me and said they have been there a number of times unsuccessfully and are going to stop. This place is selling vehicles etc. How do I get my money from them?
Angie V.
Des Moines, IA  |  February 11, 2012
I live in a small self-managed townhome association. We have several people who refuse to pay their dues and are over $7,000 delinquent. We have gotten judgments on a couple of them. How do we collect? One is retired on Social Security, one may be unemployed (was going thru foreclosure which has since been dismissed). I don't have socials, bank account or employment info. Any suggestions?
Bills.com
February 14, 2012
Consult with an attorney who specializes in debt collection. Most of these attorneys take a percentage of what is collected, as opposed to an up-front fee. It may be the case, however, that some of the debtors have income that can't be garnished, such as the Social Security income and the unemployment. It may be possible to levy a bank account or place a lien on the debtors' property.
Stacey H.
Guthrie Center, IA  |  January 17, 2012
I have a company that I was paying over $100 payments a month to that sent me to collections is this legal?
Stacey H.
Guthrie Center, IA  |  January 17, 2012
I have a judgement against my ex-husband for credit cards that he owes me for. I am still paying on these credit cards. He has not paid me since September of 2009. He is supposed to be paying me $150 a month. I have a wage garnishment but he jumps jobs and then quits if I find him. He also have child support from another woman. So when he does have a job I don't get anything because it all goes to child support. This judgement is from 2007 and he still owes me around half of the total. Is there any way that I can garnish his taxes or his bank account?
Bills.com
January 17, 2012
Collection laws vary from state to state. If you are not located in Iowa then read the Bills.com page collection laws. In general it is possible to obtain bank levies and liens on personal property, as well as wage garnishments. Consult with an attorney experienced in civil litigation to get precise instructions about liens, levies, and garnishment in Iowa.
Sharon O.
Spencer, IA  |  January 13, 2012
I am in Iowa. I was served garnishment papers yesterday at work for $777. I had no idea who creditor was so I called number listed on paperwork...was for a collection agency and they said I owed a past judgement against me from 1996 for a dentist bill. The amount for original judgement was $157 but now I owed other costs of $306 and interest for $252 plus court/sheriff's fees of $63 which brings up total to the $777. I have lived in same address and worked at same job the last 11 years and have received no notification of this bill or this collection agency. I know there is a 20 year limition on past judgements in Iowa. After 16 years do I have any rights ? This dentist office closed the same year of judgement and I have not heard one thing about this nor do I remember even a judgement being issued against me. I called courthouse and they had to spend an hour digging out this old file and said that just recently this collection agency notified them and the amount the collection agency told them it was for was $463 and they had no idea what the other "costs" listed were. I am fighting this but don't have money for attorney and only make around $400 week. This will kill me financially if they take $100 a week out of my checks. Any help would be appreciated. Thanks. Sharon
Bills.com
January 13, 2012
Civil procedure law is written to make sure the defendant is notified of a legal action against them. This, apparently, did not happen here. Consult with a lawyer about vacating this judgment.

Call your county bar association and ask for the names of the organizations that provide no-cost legal services to people with low or no income in your area. Make an appointment with one of the organizations, and bring all of the documents and letters you have regarding the debt to your meeting. The lawyer you meet will advise you accordingly.
Jessica V.
Davenport, IA  |  January 05, 2012
I recently received a judgement from a credit card company that I re-rearranged to make $100 a month payments for then my income took a drastic turn from making $3000 a month to now only making $1500 and $1000 of that goes to rent. i have NO $$ to make payments and I told them that- but now they are putting this judgement on me. What can I do and what does this mean??? I would like to pay it off in full this year when i get my taxes back.
Bills.com
January 08, 2012
A judgment against you means that you will be subject to wage garnishments, bank levies and liens on your personal property. It will also mean that you will have a court judgment registered on your credit report. Based on the information you provided, the garnishment will be limited to $800 per calendar year. Your bank accounts are subject to levies, including sums that are deposited from tax refunds and salary. If you receive a lump sum tax refund, then you can speak with the creditor and attempt to negotiate a settlement, including a pay for delete. At the very least, if you reach a settlement the judgment will show as 'satisfied' on your credit report.
Greg D.
Davenport, IA  |  November 01, 2011
A Judgement has been ordered against me for $39K+. What happens next? I also am sole proprietor of a bakery with a loss and bank accounts listed under the bakery name and my personal name as well. Can the plaintiff take the monies in that account? My home was purchased under contract by an investor...can the plaintiff attache a lien on this property? (Land records indicate me as owner).
Bills.com
November 02, 2011
I will share some share my thoughts with you, but please don't consider this legal advice.

After the issuance of the judgment the plaintiff will seek to place levies and liens on your property, including those of your business, which as you noted is a sole proprietorship. I believe that any bank account that has your Social Security number on it is at risk of garnishment.

I also believe that a lien can be placed on the property that has been sold under contract, while title is still in your name.

You may consider trying to reach a payment agreement with your creditor, in order to forestall the levy and lien. In any case, you should update your attorney regarding the judgment and discuss how to deal with the situation.
Sarah R.
Anamosa, IA  |  November 01, 2011
Just received a garnishment for past medical bills effective 11/2/11. My income falls into the $1500 max per year under Section 642.21 Subsection 1. Should my employer just garnish $28.85 per week to get to my per year maximum? On the paper work there is a section that outlines if paid over $386.67 per week they garnish 25%. This would only take 15 weeks to get to the maximun $1500. If that is the case, when would the garnishment start again?
Bills.com
November 01, 2011
Consult with a Iowa lawyer who has consumer law experience regarding your need for legal advice. If you cannot afford a lawyer, call your county bar association and ask for the names of the organizations in your area that provide no-cost legal services to people with low or no income. Make an appointment with one of those organizations, and bring all of the documents regarding the garnishment and debt to your meeting. The lawyer you meet will advise you accordingly.
Anna M.
Clinton, IA  |  October 31, 2011
I'm a daycare provider in Iowa. I took a mother to small claims and won my case. She was ordered to pay me a certain amount for a certain time period. After the 2nd month of paying me she didn't show up. I went back to the Clerks office and filed wage garnishment papers. Her employer was served and recently has been terminated of employment. What do I do now that she isn't working. I haven't seen a dime of the garnishment yet either after 4 weeks. HELP
Bills.com
November 01, 2011
There is no simple solution. You may have a legal right to levy her bank account, if you can locate it. Depending on the size of the judgment, you may want to consult with a law firm that specializes in collecting debt. You will pay a fee, but increase your chances of collecting. Some firms work on a contingency fee basis, where you don't pay a fee unless the firm collects on your debt.
Michelle K.
Waukee, IA  |  October 20, 2011
I have an order in place for child support that often takes 50% of my pay (i am commission-based). A recent small claims judgement was just submitted to my employer. In my paycheck this week, my employer deducted the full child support PLUS the new garnishment leaving me with less than 25% of my disposable income. Is this legal?
Bills.com
October 20, 2011
Based on my understanding of Iowa and federal wage garnishment law, your employer is garnishing too much from your net income. Consult with a lawyer in your state who has consumer law experience. He or she will review the particular facts in your case and advise you if you qualify for an exemption from the judgment-creditor's garnishment.
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