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.
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 federal law. Wisconsin law permits earnings garnishment for child support and maintenance up to 25% of the debtor’s disposable income.
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.
Please note, 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.)
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
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.
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.
Under Wisconsin § 893.05, a creditor may not file a lawsuit on a debt after the Wisconsin statute of limitations expires. Nor may a collection agent or original creditor collect on the debt either. 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)).
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 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.
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.
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