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: Answered by Mark Cappel

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.

Wise Advice 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.

Wise Advice 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

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Comments (90)


APRIL K.
Burlington, IA  |  April 10, 2014
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.
Bills.com
April 10, 2014
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.
Joanne C.
Keizer, OR  |  April 09, 2014
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?
Bills.com
April 09, 2014
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.
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Joanne C.
Keizer, OR  |  April 09, 2014
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?
Bills.com
April 10, 2014
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.
Cindy S.
Curlew, IA  |  April 07, 2014
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
Bills.com
April 08, 2014
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.
Jeff W.
Des Moines, IA  |  April 02, 2014
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!
Bills.com
April 04, 2014
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.

Aimee O.
Chicago, IL  |  March 24, 2014
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?
Bills.com
March 24, 2014
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.
Bre H.
Cedar Rapids, IA  |  November 06, 2013
My Husband just got a call today from Area Ambulance Services saying he owes $962 from an ambulance ride back in 2009. We have never received any mailings or phone calls regarding this medical bill at all. They haven't even sent it into Collections yet. Any suggestions on what to do?
Bills.com
November 11, 2013
I find a 60-day billing rule in public documents for some health plans offered by state and federal employers, and it may be in place for Medicare payments, too. However, I cannot find a federal or state law that sets a 60-day-you-snooze-you-lose rule for medical billing. Readers, if you know of such a law or regulation, please share it below.

It is likely your medical insurance company requires health care providers to submit claims within X days or face denial of their claim. However, it would surprise me if any private ambulance services were "in-network" for medical insurance. It's stunning to hear that an ambulance company would submit a bill 4 years after providing their services.

Check your state's statute of limitations for both written and unwritten contracts. If the statute of limitations on either is 4 years or less, then send the ambulance a company a letter indicating you have no legal obligation to pay the debt.
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Lori S.
Ottumwa, IA  |  November 27, 2013
I have Blue Cross and Blue Shield (BCBS) and they told me claims have to be filed within one year or (the provider) will not be able to receive any payment, and (the provider) is not allowed to come back on the patient/guarantor attached to the claim.
Gee J.
Waterloo, IA  |  July 30, 2013
I live in Iowa. I have 2 mortgages, one is a 80% and the other 20%. Last year my 80% organized a third-party refinance but it fell through because the agent that was handling my file left and we never were able to gain traction after that. In lieu of that, my 20% was informed that we were gonna pay them off, but obviously that never came. No, they have decided to file to have my wages garnished. I'm still trying to work with the 80% to get in a good permanent position, but it's been difficult. Can they do that since Iowa is not a "predatory" state?
Bills.com
July 30, 2013
I assume you are attempting a mortgage modification and are not current in your payments to the junior borrower. The junior can garnish your wages if it files a lawsuit against you, and you do not defend yourself adequately, which causes the court to rule in the lender's favor. If this occurred, the junior can use the Iowa court's judgment to ask the court to allow it to garnish your wages. Did this sequence of events happen here? Or did you sign an agreement granting the junior the right garnish your wages privately?

You mentioned the word "predatory." In this context, it refers to unscrupulous lenders who mislead borrowers with surprising or undisclosed loan terms that cause a loan to be much more expensive than the borrower expected. Most states, including Iowa, outlaw predatory lending. However, I don't see how that applies here, unless either your junior or senior loans include predatory terms and conditions that now surprise you.

Consult with an Iowa lawyer who has experience negotiating with mortgage lenders. It is possible the senior lender is in breach of contract with you when it dropped the ball on your modification. An Iowa lawyer who interviews you and reviews your loan contracts and the modification paperwork will advise you accordingly. He or she will also review the wage garnishment issue.
Beth W.
Hastings, NE  |  July 01, 2013
An Iowa company that is no longer doing business owes the State of Iowa back sales tax. I am one of the officers of that company but have sinced moved to another state and no longer work or own property in Iowa. There are two other owners of this company who are also listed as officers that still live, work and own property in Iowa. I have a written agreement with the other owners that I would pay other debts and they would pay the sales tax debt. They have defaulted on our agreement and the debt remains unpaid. Can the State of Iowa come after my property when I live and work in another state?
Bills.com
July 01, 2013
The agreement you made with your business partners is not binding on any third parties, including the State of Iowa. You can potentially take action against your former partners for harm you suffered due to their breaking the agreement you had. However, the State of Iowa can move to collect from you, via wage garnishment, bank levy, and coming after tax refunds you would otherwise receive. It is my opinion that there is little risk to a home you own being seized (although the risk does exist and rises with the size of the debt owed). It is likely however that a lien could be filed against you and encumber your property.
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Beth W.
Hastings, NE  |  July 01, 2013
Thank you for your comments, they are greatly appreciated. One more question, would the State of Iowa perhaps go after accounts, property, wages, etc. of the two other owners first since they are still residents of and own property in the State of Iowa? Or does that really ever come into play? I read a 2011 article that was in a local Iowa newspaper that said the Department of Revenue was hard-pressed when it came to collecting such debts from those who no longer live, work or own property in Iowa. Again, thank you so much for your thoughts.
Bills.com
July 01, 2013
The Iowa tax authorities could certainly pursue your former partners, but it is not so much about whom they choose to target first. They have a wide enough range to pursue all of you at the same time. They can't collect more than the total that is owed; if they get money from one party, it reduces the amount each party owes. Were I in your shoes, I would keep funds in a bank account to a minimum. Were I contacted by the collections department, I would work to set up a payment to protect myself from garnishment.

You may be able to figure out if Iowa is targeting you for collections, if you are ever due a tax refund from the IRS. If you receive a refund you're expecting, then it is a good indication Iowa is not after you at that point in time.
Michelle S.
Marion, IA  |  June 20, 2013
I currently live in Iowa and have for almost a year. Can a credit card company garnish my wages with a court order they received in Arizona 2 weeks ago?
Bills.com
June 21, 2013
Maybe. Before I answer your question, let me ask two of my own:
  1. Did the original creditor or collection agent give you notice of its lawsuit in Arizona? If not, then consult with an Arizona lawyer immediately about filing a motion to dismiss the judgment. Why? If you had no notice of the lawsuit, you could not defend yourself. This is unfair, and contrary to civil procedure laws.
  2. Did a collection agent file a lawsuit against you? If so, consult with a lawyer in Iowa or Arizona immediately who has consumer law experience. Under the Fair Debt Collection Practices Act (FDCPA), a collection agent must file an action against you in your state of residence. If the original creditor filed an action against you outside of your state of residence, then it did not violate the FDCPA.

On to your question: A judgment-creditor with a judgment against you from outside of your state has the right to domesticate that judgment in your state. Here, the judgment-creditor may domesticate the Arizona judgment in Iowa, and ask the Iowa court to garnish your wages, levy your bank account, seize the contents of your safe deposit box, place a lien on your real property, or seize your personal property. Consult with an Iowa lawyer to learn your options for objecting to a judgment domestication.

Randy R.
Waukee, IA  |  January 26, 2013
I have $600 a month taken out of my check for child support and I only make $1,500 a month after taxes. Can any more money be taken out of my check from a debt collector?
Bills.com
January 29, 2013
I assume you ask about a wage garnishment. You mentioned you have what I assume is a $600 wage garnishment for support. I assume your disposable earnings are $1,500. If my assumptions are correct, you are already at a 40% wage garnishment. The federal maximum judgment-creditors may garnish from a worker's wages are 25%. Therefore, the answer to your question is no, if my three assumptions are correct. If you are an Iowa resident, reread the original article above to learn more about Iowa's consumer-friendly laws for wage garnishment related to judgments. (Note that support-related garnishment rules are not the same as judgment garnishments.)
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