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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?

I'm writing to find information regarding the laws in Iowa regarding garnishment. I recently went with a credit card consolidation company and all my accounts have gone into collections from no longer making the minimum payments and just paying this consolidation comp. I have been sued by one company and the total due is around $2700 and a judgment has been set. How can they collect that money?? I tried to set up arrangements with them thru the consolidation comp and they will not except any offer I'm able to make. If they garnish my wages how much can they take?? Will I know that they are going to do this? What is a bank levy? Can they do that in Iowa? How much can they take? Any information would be greatly appreciated. I'm just not sure what to do. Do I take all my money out of the bank for fear they'll take it. How long can they continue to try to collect?

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Updated: Oct 23, 2014

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Highlights

  • Iowa wage garnishment rules are intricate.
  • It is possible for a judgment-creditor to levy a bank account in Iowa.

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 most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal or Iowa law (Iowa Title XV Subtitle 3 Chapter 627.6(8), 627.8, 97A.12, 411.13, 410.11), but may be allowed for child support (Iowa Code sections 410.11, 97A.12, 411.13). See the Bills.com Wage Garnishment article to learn more.

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:

Income Amount Garnished
Source: Iowa Code § 642.21
$12,000-$15,999 $400
$16,000-$23,999 $800
$24,000-$34,999 $1,500
$35,000-$49,999 $2,000
$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:

Account/Type Years Statute
Iowa statutes of limitations. Source: Bills.com
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.

Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

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.

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

90 Comments

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  • AK
    Apr, 2014
    APRIL
    I have a judgment against me from a company, but it was sent through an attorney. I was never served papers or anything. The company I work for received this they claim on March 31st, 2014. The notice from the sheriff's office says they sent it 10/13/2013. Short story is my employer began garnishing 25% of my check on April 4, 2014. I am a part-time employee working 15-25 hours a week. I make 11.36 an hour. On the form the Human Resource lady filled out it states my ANTICIPATED WAGES WERE $23,633 ANNUALLY This is a COMPLETE LIE!!!! If she would have accurately stated my wages I would only be required to pay up to $400 a year instead I will have to pay much more than that. IS THERE ANYTHING THAT I CAN DO TO GET THEM FROM TAKING SO MUCH SINCE I DON'T EVEN MAKE WHAT THE H.R. LADY WROTE DOWN? I never even got served to papers to go to court to plead. I can't afford 25% of my wages to be garnished. Thank you for your help.
    0 Votes

    • BA
      Apr, 2014
      Bill
      Consult with an Iowa lawyer who has consumer law or civil litigation experience immediately. Discuss the defective service of process, and the idea of filing a motion to vacate the judgment. Also discuss the incorrect amount your employer disclosed to the court or judgment-creditor.

      If you cannot afford a lawyer, contact Iowa Legal Aid or another Iowa pro bono program to find no-cost legal services.
      0 Votes

  • JC
    Apr, 2014
    Joanne
    I live in Oregon. I have never been to Iowa. I sent a check to someone in Iowa and then stopped payment before they had received the check. They were notified by phone and email that I had stopped payment on the check and I asked that they return it when it was received. Instead, the person cashed the check at a payday loan place, on a holiday when they knew the bank could not be contacted. Now the Payday Loan place has filed a small claims against the person and me. I didn't cash the check so how can they go after me? Why isn't the person who knowingly cashed a stop-payment check charged with the crime of Fraud?
    0 Votes

    • BA
      Apr, 2014
      Bill
      Consult with an Oregon lawyer who has experience in consumer law or negotiable instruments law immediately to discuss filing a motion to dismiss the Iowa action.
      0 Votes

    • JC
      Apr, 2014
      Joanne
      I did that. He said he could not help since he is not licensed in Iowa. He suggested I retain an Iowa attorney but the amount involved is $750 so that would not be cost-effective. Would the payday loan business likely transcribe the small claims judgment to Oregon in an effort to collect?
      0 Votes

    • BA
      Apr, 2014
      Bill
      I can't comment intelligently on the likelihood of the creditor trying to collect in Oregon. I suppose it depends on the costs involved and the creditor's confidence in its ability to collect, as well as whether it could tack on any costs it incurred in collecting.
      0 Votes

  • CS
    Apr, 2014
    Cindy
    I'm being charged on a debt that I went to court to settle on an amount. We did and since Nov 1 I've made my payments every month yet now I owe 200 more than when I started. I thought that's y I went to court to settle an amount so I could get it paid off? This seems illegal. I've made payments on a civil debt before and was able to pay it until done. They didn't charge me more, because it was a debt amount we agreed upon! Help
    0 Votes

    • BA
      Apr, 2014
      Bill
      Consult with a lawyer in your state who has consumer law experience. He or she will review the facts in your case, and explain what's happening here.
      0 Votes

  • JW
    Apr, 2014
    Jeff
    I was contacted by a debt collector saying that I wrote a bad check to Casey's back in 2004. They said it was reported to the credit agency in Febuary also. They sent me a copy of the check and it's definitely my signature. This is the 1st time I've been notified of this. Can this be done legally? Also how can they report a debt that's almost 10 years old. Thanks!
    0 Votes

    • BA
      Apr, 2014
      Bill
      Two separate issues and sets of rules here:
      1. Under the Fair Credit Reporting Act, a derogatory report like yours here can appear on your Equifax, Experian, and TransUnion credit reports for 7 years from the date of first delinquency. Because this bad check was written (and presumably presented to your bank) 10 years ago, this cannot appear on your credit reports. Doing so would violate the FCRA.
      2. The Iowa statute of limitations for written contracts is 10 years, and I assume this is the rule Iowa courts would follow for a bad check case. If the check bounced more than 10 years ago, the collection agent may ask you to pay the debt, but violates the Fair Debt Collection Practices Act if it files a lawsuit against you. If the check bounced less than 10 years ago, then the collection agent can file a lawsuit against you to collect the debt. Read the original article above to understand this process, your rights under Iowa law, and potential liabilities.

      What to do? If you are a month or two away from the 10-year clock running out, drag your feet when negotiating a settlement to this matter. Collection agents buy bad checks and debts for pennies on the dollar, so be a sharp negotiator. Start at 10 or 15 cents on the dollar, if you choose to settle the debt.

      If the collection agent files a lawsuit against you, consult with a lawyer immediately.

      0 Votes

  • AO
    Mar, 2014
    Aimee
    I had a wage garnishment for $1,700 that was paid for an apartment I rented 14 years ago. Its paid-that's fine. There is now an "order condemning funds." Is this just the sheriff's office/lawyer trying to get the funds that were taken from my ADP payroll over to them?
    0 Votes

    • BA
      Mar, 2014
      Bill
      It's unclear to me if the Iowa court's Order Condemning Funds is a document you recently received, or something appearing on your credit report. If the order is something you received recently, then by all means consult with a lawyer in your state who has consumer law experience immediately.

      Typically, an Iowa Court will issue an Order Condemning Funds that allows the Sheriff to transfer money it or the Clerk of Court received so the Clerk can transfer the money to the judgment-creditor.
      0 Votes