Wisconsin Collection Laws

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

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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.

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.

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 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)).

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.

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

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Comments (56)


Kay N.
Nashville, TN  |  April 13, 2014
When i was married to my husband, he had back surgery. The remaining balance, after insurance, went into collections and then a judgement with both our names. I have been divorced for close to 5 years, live in another state, trying to clean up all the financial messes I was left with. I contacted the hospital, billing dept and county clerks offices asking for a signed document from me saying that I would also be financially responsible for his bill. They have none. Is there a law obligating the spouse to this kind of bill even without a signed agreement?
Bills.com
April 14, 2014
I will assume you were a Wisconsin resident when the events you describe took place because you ask your question on a page covering Wisconsin collection rules.

The Wisconsin Supreme Court decided in a series of three decisions in the early 1980s that when it comes to debts incurred by a husband or wife for the necessities of life, Wisconsin courts can place primary liability on the husband and secondary liability on the wife, regardless of who incurred the debt. (Estate of Stromsted v. St. Michael Hosp. of Franciscan Sisters, 299 N.W.2d 226, 230 (Wis. 1980) and Marshfield Clinic v. Discher, 314 N.W.2d 326 (Wis. 1982))

It is likely a Wisconsin court would find that if a spouse's surgery was necessary (and not say, cosmetic and entirely optional) then the doctrine of necessaries rule applies. The creditor would, under Wisconsin law, need to try to collect from the husband first. If that fails, then it could collect from the wife.

Consult with a Wisconsin lawyer who has civil litigation experience to learn if my quick, and probably incomplete, analysis of Wisconsin's doctrine of necessaries law is complete, and how it applies to you.

You indicated you reside in Tennessee. If you were a Tennessee resident when the surgery took place, then read the Bills.com Tennessee Collection Laws page to learn more about Tennessee's doctrine of necessaries rule.
Chuck M.
Neenah, WI  |  March 18, 2014
I'm a Wisconsin resident, lender from Wisconsin. I surrendered a vehicle to the lender in 2006. Have had no contact with them since. No payments made. This still shows on my credit reports. Shouldn't it have dropped after 7 years? Do I contact the lender now, or will that potentially open "Pandora's box" and cause me more issues.
Bills.com
March 20, 2014
Derogatories like your repossession must be removed from your credit report 7 years after the date of first delinquency. File a dispute with the consumer credit reporting agencies that report this error.

Regarding your Pandora's Box fear, review the statute of limitations section in the original article above, and I believe your fears will be laid to rest.
Gene R.
Two Rivers, WI  |  February 07, 2014
I (plaintiff) won a judgment for breach of contract in circuit court and the day the Judge issued the judgment,the defendant sold three pieces of property to a new corporation that the defendant was a member of. How long before a trial or after a trial can the defendant resell or move the property to friends so the plaintiff can not recover any assets or damages?
Bills.com
February 07, 2014
Your question dives deep into Wisconsin's civil procedure and remedies laws. Consult with a lawyer who has civil litigation and/or remedies experience.
Anne L.
Milwaukee, WI  |  January 24, 2014
After taking on too much credit in college, most of the bad items on my credit report will expire this year. I have read that since they have passed the statute of limitations 6 year mark, it is best to not acknowledge them and let them fall off. My concern is one item which was a personal loan, which says it will come off my report in August of this year (and the associated collection agency says its entry will be removed even earlier, in May of this year.) Would this fall under the statute of limitations for a promissory note though? Meaning, if it is removed from my credit report because it has reached the 7 year mark, they could still bring a suit against me for another 3 years? And the big question: if this happens, would it be re-reported as a judgment on my credit report, or no longer since it has spent its 7 year term? Is any of this likely? Any insight is appreciated. Thank you very much.
Bills.com
January 31, 2014
Without reading your loan contract, I can't say if your loan is a promissory note or an installment loan.

A promissory note is a loan where the borrower agrees to repay a determinate sum at an agreed time in the future, or when the lender calls the loan.

An installment loan is where the borrower promises to make set payments until the loan is repaid. Mortgages and student loans are almost always installment loans, and follow state statute of limitations rules for mortgages and written contracts respectively.

Separate Wisconsin's 6-year statute of limitations for contracts from the Fair Credit Reporting Act's 7-year clock for derogatories on credit reports. The two laws and clocks are unrelated.

Wisconsin and Mississippi outlaw creditors filing lawsuits against consumers when their state statutes of limitations expire. As the Wisconsin statute of limitations clock passes the 6-year mark for each debt, the creditor loses an ability to collect the debt from you. However, the derogatory can appear on your credit report for 7 years, so each collection account will still appear on your credit report for a year or so after the SOL clock runs out.

If you receive notice of a lawsuit, consult with a Wisconsin lawyer immediately to file a motion to dismiss and to discuss filing a counter-suit for violating Wisconsin's statute of limitations laws.

Residents in other states do not have the same consumer protections as Wisconsin and Mississippi residents.
David K.
Oshkosh, WI  |  December 13, 2013
I just had a creditor send paperwork to my employer for garnishment on a debt from 2002. Is that legal? It has been over 10 yrs.
Bills.com
December 13, 2013
The first thing you need to do is learn if the creditor has a court judgment against you. Ask your employer for a copy of the documents. Review them to see if the garnishment is the result of a judgment. Call the court clerk's office and ask if such a case number exists. Or, take the documents to a lawyer who has consumer law experience. If the judgment is real, then consult with a lawyer to learn if you can file an objection to the garnishment.

A Wisconsin judgment is valid for 20 years from the date it was issued. If the judgment here is valid, the judgment creditor has up to 20 years to use it to garnish your wages, levy your bank accounts, and place a lien on your property. (We discuss these remedies in the article above.)

If news of a judgment surprises you, talk to a lawyer who has consumer law experience immediately. You might be able to file a motion to have the judgment vacated based on an ineffective service of process.

Some states allow non-judicial, administrative wage garnishments. Wisconsin allows administrative garnishment for unpaid income taxes, court-ordered child support, child support arrears, and defaulted student loans. Does this wage garnishment fall into one of these four exceptions?

Some states allow non-judicial, voluntary wage garnishment. Some payday and title lenders write clauses into their contracts in which the consumer gives the lender a right to garnish the consumer's wages. I do not know if Wisconsin allows voluntary wage garnishment clauses. If the lender claims you gave it permission to garnish your wages, consult with a Wisconsin consumer lawyer immediately.
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Aaron R.
Foster City, CA  |  December 13, 2013
Wisconsin doesn't call it "voluntary wage garnishment." It's called "assignment of wages", and this is allowed in Wisconsin.
Andrea H.
Portage, WI  |  July 12, 2013
A levy was recently put on our checking account for a supposed debt owed to the department of corrections for vacation time paid out by mistake prior to it being earned when my husband retired from his position with the state dept. of corrections almost 12 years ago. Before we received the letter informing us of the levy, it was too late and already had been taken. Prior to the levy, the also intercepted $37.00 of our state tax return. Are they allowed to do this when it's been we'll over 6 years? The levied amount was over $800.00 , so it's not something I really want to let go. We don't agree with the overpayment to begin with. Now that they have their money, is there any quick way (or any way period) to get this money back? It, of course, happened at the worst possible time since I just lost my long term employment. I really can't afford to hire an attorney unless I could find one that would send a letter on our behalf for cheap. We'd appreciate any advice you have to offer. Thank you!
Bills.com
July 15, 2013
I don't know of a quick way to resolve your problem. It may not even be possible to get your money back. It seems your only grounds for getting money back would be to get the Department of Corrections to agree that there was no overpayment and that they were in error in taking your money. Perhaps your husband can contact the union in which he was a member when he served. Another route would be to contact your elected state representatives, seeing if there constituent services section can assist you.
Josh G.
Madison, WI  |  July 12, 2013
I was in college in 2008, but dropped out mid-semester. The University of Wisconsin - Oshkosh needed to pay back the loan money to the federal government. I was unemployed for most of 2008-2012, and have just recently found full-time work. Since I wasn't able to pay, they gave the debt to the Wisconsin Department of Revenue, who has levied my bank account (now closed) twice, and have now started garnishing my wages at 20%. If I could afford to pay this amount of money back, $3500, I wouldn't have taken loans for school in the first place. Two questions... I only make about $14,500 / year and -20% puts me very close to the poverty line, if I can prove that in court, how much would they be able to still levy? Also, even though the Wisconsin Department of Revenue is collecting this, it's not tax debt, so can I still declare bankruptcy on what I owe?
Bills.com
July 15, 2013
Congress gave the Dept. of Education the ability to garnish up to 15% of a delinquent borrower's disposable income, subject to limits. See the Bills.com wage garnishment article to understand the basic rules the Dept. of Education and judgment creditors must follow and the amount both are allowed to garnish. It appears the Dept. of Education assigned collection of your account to the Wisconsin Dept. of Revenue, the state tax collector. Consult with a Wisconsin bankruptcy lawyer to learn if it is within the Dept. of Revenue's legal authority to collect federal debts.

You mentioned filing bankruptcy. Because this is a student debt, it is unlikely the bankruptcy court will discharge this debt. However, if you file a chapter 13 bankruptcy, it is possible to put a temporary stay (a hold) of wage garnishment. The court will then set a payment amount, which may not be much different from the wage garnishment, but that's a question for your bankruptcy lawyer to answer.
BOBBI L.
Merrill, WI  |  June 18, 2013
My father past away in 1986. He had and still has oil royalty money coming in (not much-nothing to get rich on). My brother and I were only minors at the time. Judgements for debt were brought forth to the Oneida County Court and entered into judgement. An attorney was assigned to the case to collect the oil royalty monies and pay off the allowed debts. 26 years later, oil money royalties are still in an account, and the attorney paid far and few debts. Most of the businesses listed have either closed their doors, have written off the accounts, or we are unable to contact except one person. He has not resubmitted any claims in 26 years and is now saying he wants his money from the account. My question: Is there a statute of limitations in the State of Wisconsin for a debt this old when ordered by the court back in 1986 to be paid?
Bills.com
June 18, 2013
It's unclear to me if the "he" in your message is the attorney from 26 years ago or the creditor. Regardless, consult with a Wisconsin lawyer, and not the one from 26 years ago, who has probate experience to learn if the debts unpaid by the lawyer from 26 years ago have any validity under Wisconsin's probate law. On a related note, you may have a cause of action against the lawyer from 26 years ago if he or she failed in his or her duties to close probate on your father's estate property. The new lawyer you consult with will explore that issue, too.
Heather T.
Neenah, WI  |  March 09, 2013
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!
Bills.com
March 14, 2013
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.
Brandi H.
Antigo, WI  |  January 17, 2013
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.
Bills.com
January 17, 2013
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."
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