Wisconsin Collection Laws

What are my rights as a consumer in Wisconsin regarding collections?

What are my rights as a consumer in Wisconsin regarding collections? Can my wages be garnished? Can my bank accounts be seized? Is my home safe?

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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.

Wisconsin Wage Garnishment

The most common method used by judgment-creditors to enforce judgments is wage garnishment. A judgment-creditor contacts your employer and requires the employer to deduct a certain portion of your wages each pay period and send the money to the creditor.

n 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 law, but may be allowed for child support. See the Bills.com Wage Garnishment article to learn more.

In Wisconsin, wage garnishment is allowed under Chapter 812 (PDF). Unless the court grants relief under s. 812.38 (2) or par. (b) or (c) applies, 80% of the debtor’s disposable earnings are exempt from garnishment under this subchapter. 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 20% of the debtor’s net take home pay also known as disposable income, (i.e. gross pay less statutorily mandated deductions). Under Chapter 812.35(4)(c), service on the debtor shall be made within seven business days after the date of service on the garnishee and at least three business days before the payday of the first pay period affected by the garnishment. Service by mail is complete upon mailing.

Under Wisconsin law, if the garnishment of 20% of the debtor’s disposable income under subchapter 812.34(2)(c) would result in the debtor’s household income being below the poverty line, the amount of the garnishment is limited to the debtor’s household income in excess of the poverty line before the garnishment is in effect. Also, under Chapter 812.01(4) no garnishment action shall be brought to recover the price or value of alcohol beverages sold at retail. (In other words, a Wisconsin resident cannot have their wages garnished for a delinquent bar tab.)

Wisconsin law permits earnings garnishment for child support and maintenance up to 25% of the debtor’s disposable income.

Levy Bank Accounts

A levy means that the creditor has the right to take whatever money is 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. Some states call levy attachment or garnishment.

In Wisconsin, attachment is allowed under Uniform Commercial Code-Secured Transactions Chapter 409 (PDF).

If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.

Lien

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 refinances 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 Wisconsin statute, Chapter 128 (PDF), Creditor's Actions, when a lien has been obtained by judgment against a debtor, the debtor may make an assignment of all non-exempt property for the benefit of all of creditors within 30 days of judgment. The lien shall then be dissolved and the property will be turned over to the assignee.

Under Wisconsin statute, Chapter 811 (PDF), Attachment, any creditor may attach a debtor's property only through the issuance of a Writ of Attachment by a judge or judicial officer at the express request of the creditor at any time before final judgment and after a summons and a complaint are filed.

If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.

Wisconsin Statute of Limitations

Each state has its own statute of limitations on civil matters. Under Wisconsin Chapter 893.43 (PDF), the statute of limitations on open accounts (i.e., credit cards), and written and oral contracts is 6 years. The statute of limitations on promissory notes is 10 years.

Wisconsin law prohibits any collection efforts on accounts where the statute of limitations clock has expired. This rule applies to original creditors and collection agents.

Under Wisconsin § 893.05, a creditor may not file a lawsuit on a debt after the Wisconsin statute of limitations expires. If a collection agent or original creditor attempts to collect expired debt create a cause of action under Wisconsin law as well as under the federal FDCPA because any collections actions misrepresent the legal status of the debt. This consumer-friendly rule is an exception only Wisconsin and one other state share (Klewer v. Cavalry Invs., LLC, 2002 U.S. Dist. LEXIS 1778 *7 (W.D. Wis. 2002) and Gervais v. Riddle Associates, 479 F. Supp. 2d 270 (D. Conn. 2007)).

ollection 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.

The statute of limitations on Wisconsin judgments is a bit more complicated. In Wisconsin, a judgment becomes a lien for 10 years on all real property the judgment-debtor owns or acquires in the county or counties where the judgment is docketed. A judgment-creditor has 20 years from the judgment date to have a county sheriff attempt to seize the debtor’s property. The 10- and 20-year lengths on Wisconsin judgments can be extended another 10 and 20 years if the judgment-creditor obtains permission from the court and refiles an action against the judgment-debtor.

Wisconsin Foreclosure

Wisconsin foreclosure laws can be found in Chapter 846 (PDF), Real Estate Foreclosure. Under the original judgment of foreclosure, a deficiency judgment may also be rendered as a separate judgment (Chapter 846.04). The party is then liable on or after the confirmation of sale.

Wisconsin Vehicle Repossession

Read the Wisconsin Bar Association's article Wisconsin's New Automobile Repossession Law: Creditors in the Driver's Seat to learn more about Wisconsin's repossession laws.

Recommendation

Consult with an attorney licensed within the state of Wisconsin experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Wisconsin.

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

Best,

Bill

Bills.com

39 Comments

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  • HT
    Mar, 2013
    Heather
    I have an unsatisfied judgment. The date entered is 03-15-2006. This judgment was granted to my ex-husband in the divorce, who has still yet to pay. I had contacted the creditor some time ago to see if they would remove my name from the judgment and they denied my request. This sucks, but I figured it would fall off soon enough. Starting last year, the creditor has been pulling my credit without my approval, most recently being yesterday. I'm not sure if that's legal or what the purpose behind them pulling my credit would be. Any insight you could give would be greatly appreciated. Thank you in advance!
    0 Votes

    • BA
      Mar, 2013
      Bill
      You have two issues. The first is the liability for the judgment. The second is the judgment's appearance on your credit report. Let's talk about your liability first.

      You mentioned a family court assigned liability for the judgment to your ex-spouse. In some states, this assignment liability is meaningless because other courts will consider the divorce decree to be a form of contract between the spouses that is not binding on other parties. Other courts, however, find that such decrees contain more sweeping power and authority over third parties. I confess I do not know how Wisconsin courts have decided this issue. Consult with a Wisconsin lawyer who has family or remedies law experience to learn if you can use the decree as a shield from collections.

      Now let's turn to the credit report issue. Under the Fair Credit Reporting Act, a federal law, judgments can appear on a consumer's credit reports for 7 years or his/her state statute of limitations for judgments, whichever is longer. Under Wisconsin 893.40, the statute of limitations for most judgments in 20 years, and can be renewed. Therefore, this judgment will appear on your credit report for 20 years.

      As previously mentioned, consult with a Wisconsin lawyer to learn if you can use the decree as a sword to cut the judgment from your credit report. You may need to file a libel action against the big-three consumer credit reporting agencies — Equifax, Experian, and TransUnion — to force one or more of them to remove the derogatory judgment from your credit reports.
      0 Votes

  • BH
    Jan, 2013
    Brandi
    I have a medical bill that is due to come off my record in March of 2013. I recently (last week) got a letter from a lawyers office saying that they have been asked to pursue wage garnishment. However, I haven't gotten anything saying my wages will be garnished. Can they do this if it's due to be off my record in 2 months? Can they do it if my wages are being garnished already? I live in Wisconsin.
    0 Votes

    • BA
      Jan, 2013
      Bill
      We can infer some missing facts from your question to guess at answers to your questions. (Note the use of the word guess here.)

      You mentioned you reside in Wisconsin. The statute of limitations for breach of contract in Wisconsin is 6 years. Wisconsin is one of two states that outlaws the collection of debt after the statute of limitations expires. Therefore, if you stopped paying the debt more than 6 years ago, neither the original creditor or a collection agent may use the Wisconsin courts to collect the debt.

      You mentioned the debt is "due to be off my record in 2 months." I assume you refer to your credit report, and the federal 7-year time limit a derogatory item may appear on a consumer's credit report. The clock here starts from the date of first delinquency, which may or may not be the same date that you defaulted on the debt. The two dates can be different.

      Let's assume for the sake of argument the date of default is the same as the date of first delinquency. If, as you mentioned, the debt is supposed to fall off your credit report in 2 months, then the debt is older than Wisconsin's statute of limitations. Therefore, the original creditor or a collection agent may not use Wisconsin's courts to obtain a judgment against you. Without a judgment, the creditor has no mechanism in law to obtain a wage garnishment.

      You mentioned you are already subject to a wage garnishment. Read the original article above to understand Wisconsin's rules for wage garnishment. The short answer to your two-garnishment question is, "It depends, but a second garnishment is probably not allowed."
      0 Votes

  • SP
    Jan, 2013
    Shannon
    I moved to WI last year from CA and, due to a recently developed seizure condition, I have amassed just over $6,000 in medical bills in the past six months. I applied for, but was denied, patient assistance (I'm unemployed and my husband makes just over minimum wage, we don't own any property or vehicles and don't have a bank account, and are receiving monthly FoodShare assistance, so I'm not quite sure what criteria they used, nor was I told why I was turned down). I spent approximately a month discussing various payment options with the billing dept, however the monthly payments they were asking for were far above our ability to pay. I explained that if I were able to make payments of that size, then I would never have applied for patient assistance, but since I know I am responsible for the bills I incurred I would be making payments in an amount that I could afford, which I did every two weeks without fail. I was advised by billing that even though I'm making payments, they could still choose to send me to collections if they weren't happy with the amount, which they have done after only two months. I guess I'm just surprised that it went that way so quickly. I'm concerned if they're going to be this aggressive in collecting on my bill then they may just as quickly file to garnish what little wages my husband makes.

    I received a collection notice last week and want to make sure I handle the situation appropriately - I want to pay what I owe, I just can't pay a large amount every month. Any suggestions on the best way to handle this situation so that it doesn't turn into a bigger nightmare than I'm already dealing with? I'm currently poring over the Fair Debt Collection Act to understand my rights but I guess I'm asking more about the tactical handling of it, rather than the legalities. Thanks in advance for any suggestions.
    0 Votes

    • BA
      Jan, 2013
      Bill
      If the hospital's billing office denies your application for patient assistance, and is unwilling to work with you to develop an affordable payment plan, then one option is to stop payments to the hospital altogether. Instead, save what you can in a separate savings account. Eventually, the hospital will sell your collection account to a collection agent for pennies on the dollar.

      When the collection agent contacts you for payment, your first action will be to validate the debt. If the collection agent validates the debt, then your second action will be to start a negotiation to settle the debt with a lump-sum payment.
      0 Votes

  • DT
    Oct, 2012
    Destiny
    I have a debt with a hospital, and I'm making payments on it. But the hospital billing department says that what I'm paying isn't to their liking and so they are threatening to take me to court, can they legally do this even though I'm making monthly payments?
    0 Votes

    • BA
      Oct, 2012
      Bill
      I can't give you legal advice, as only a lawyer can properly do so, but I will share some thoughts with you.

      Just because you are sending some kind of a payment does not mean they can't sue you. If you have a formal agreement to pay a certain amount and you adhere to it, I believe you would be able to convince the court to throw out their suit. However, if you are sending what you can, but it is not fulfilling a committment made to pay, then I believe you would likely end up with a judgment against you.

      You may want to speak with an attorney, to find out if I am on the right track or, perhaps the fact that they've been accepting a certain amount from you for a certain period of time is equivalent to agreeing to accept that as a monthly payment.
      0 Votes

  • EA
    Jun, 2012
    Erik
    I worked for a company in Milwaukee, and signed a training bond, agreeing to stay for one year, if they gave me training for the job. I left the company because they were asking me to do illegal things at work, and putting my professional certifications in jeopardy. I took another job outside the USA, and they took me to court and go a judgement against me for $5000 in 2008. It would have cost me more than $5000 to leave my other job and defend the suit in court, so they won. I now live in Connecticut, and my drivers license will expire soon. Will this 4 year old Wisconsin judgement prevent me from renewing my drivers license in Connecticut?
    0 Votes

    • BA
      Jun, 2012
      Bill
      I am not an expert on Connecticut law, but I find nothing in Connecticut's statutes to allow or require the Connecticut DMV to suspend a resident's driver's license for failure to pay a civil judgment. Traffic tickets? Unpaid property taxes? Unpaid DMV fees? Yes, a drivers license can be suspended for those reasons in Connecticut, plus the usual reasons one would expect, such as DUI and reckless driving. Call the Connecticut DMV for a more informed answer.
      0 Votes