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Wisconsin Collection Laws

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IN THIS ARTICLE:
  • Wisconsin's statute of limitations for most consumer debts is 6 years.
  • Collections is illegal after the statute of limitations expires.
  • You may have liability for your spouse's debts in Wisconsin.

Your Rights as a Consumer in Wisconsin For Collections

If you owe debt and reside in Wisconsin, it’s important to understand your rights and liabilities. It is even more important if a creditor threatens to file a lawsuit against you.

A lender, collection agent or law firm that owns a collection account is a creditor. Wisconsin law gives creditors several means of collecting delinquent debt from you.

Before a creditor may use these legal tools in Wisconsin, the creditor must go to court to receive a judgment against you. See the Bills.com article Served Summons and Complaint to learn more about this process, and how to fight a lawsuit.

Is Your Debt in Collections Causing You Problems?

Call 800-998-7497 and speak with a Money Coach. Review your options to resolve your debt and make a financial plan to avoid this problem in the future.

A court will hold a hearing after a creditor files a lawsuit. A hearing may result in a judgment awarded to the creditor. A judgment is a court’s declaration the creditor has the legal right to demand:

The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which tool a judgment-creditor may use depends on the circumstances and Wisconsin law. We discuss each of these remedies below. In Wisconsin, the following laws are found under Wisconsin Statute Chapter 801 unless specified.

Wisconsin Wage Garnishment Rules

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.

How Much of Your Pay Can Be Taken?
In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. Garnishment of or for consumer debt is not allowed under federal law, but may be allowed for child support. See the Bills.com article to learn more.

In Wisconsin, wage garnishment is allowed under (PDF). Unless the court grants relief under 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 , 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 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 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.

Wisconsin Bank Account Levy

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 (PDF).

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

Wisconsin 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 (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 (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 article to learn more.

Wisconsin Statute of Limitations

Each state has its own statute of limitations on civil matters. Under Wisconsin (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 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)).

Strong Protection for Wisconsin Consumers
Collection agents violate the 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.

Community Property & Wisconsin Law

Wisconsin is one of 10 community property states. If you live in Wisconsin, you may have liability for your spouse’s debt. Wisconsin’s community property law is tricky, so do not assume you must pay your spouse’s debt automatically. Also, a separate law called the doctrine of necessaries may obligate you to pay your spouse’s debt. Read the Bills.com article Wisconsin Community Property to learn more.

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 in Wisconsin who is experienced in civil litigation or consumer law to learn precise answers to your questions about liens, levies, and garnishment in Wisconsin.

If you cannot afford a lawyer, contact Legal Action of Wisconsin or another Wisconsin pro bono program to find no- or low-cost legal services.

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  • S
    Samuel Harper,
    Aug, 2020

    I had a car repossessed back in 2014, they took me to court for garnishment for the remainder of what was owed and they were granted the garnishment. They got 13 weeks of payments back in 2015, than the case was closed. Now this year I find out that they had received another 13 weeks of payments but never took me to court to be granted another garnishment. What can I do, if anything?

    • 35x35
      Daniel,
      Sep, 2020

      Samuel, I am not a lawyer so what I share with you is not to be taken as legal advice.

      Your employer can't take from your pay and send it to a third-party unless obligated to do so. I suggest you contact your employer and find out under what authority the second set of 13 payments were made. If your employer sent money without the due authority to do so, my guess is that your beef is with your employer. Whether raising that issue is worthwhile, even if it were done improperly, is worth weighing. I imagine they are legally barred from retaliating against you if you make waves over something legitimate, but it may make things more difficult for you. 

  • T
    TJ,
    May, 2020

    Back in 2009 I owed a balance of I think $12K to US Bank that was charged off. I was making monthly payments of $50 per month for a total of 139 payments - they were automatically deducted from my bank account. They suddenly stopped in Nov 2018. I haven't heard anything until today May 2020 when I got a letter from a collection agency stating I owe a balance. Not sure what I should do. Correct if I am wrong but didn't the SOL clock start ticking back in 2009 when the account went into a charge off?

    • 35x35
      Daniel,
      Jul, 2020

      TJ, I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

      Making a payment on a debt restarts the clock on the SOL. From what you described, the SOL has not expired.

  • A
    Angie,
    May, 2020

    Hello. We defaulted on a used car loan in 2003 and got a judgement in 2006. We were previously garnished after judgement and can't remember exactly why it stopped. So today we got a wage garnishment for the amount still owed. Are we still liable for this judgement or are they attempting this after the statue of limitation?

    • 35x35
      Daniel,
      Jul, 2020

      Angie, I can't give legal advice, as only an attorney can properly do so. Here are a couple of thoughts, with the understanding that I am not giving you legal advice.

      My understanding is that the SOL on a judgment in the Badger State can be up to 20 years. If that is the case, then you are still on the hook for the debt and can be garnished. 

  • M
    Michelle,
    May, 2020

    I had a judgement in Dane county awarded to a creditor in Feb of 2006 - yes, 2006! They are just now in 2020, trying to garnish my wages for the first time ever. Does the SOL cover this "suing me" and make it illegal?

    • 35x35
      Daniel,
      May, 2020

      Michelle, you're asking for what is considered legal advice, which only attorneys can give. I will share some information with the understanding that it is not considered legal advice.

      Unfortunately for you, a judgment in the Badger State lasts for 20 years. That means the judgment issued against you in 2006 is still valid. The fact that they haven't tried to garnish you previously doesn't negate or invalidate their claim against you.

  • K
    Kay,
    May, 2020

    I have a heloc from 2006. Last payment made on it was November of 2008. The loan was sold numerous times and no contact from anyone in over 8 years. No judgement or actions taken against me. Recently been getting calls from a servicing company trying to collect. Wondering what I should do.. should I try and settle or do they even have recourse since its been over 10 years!

    • 35x35
      Daniel,
      May, 2020

      Kay, I am not a lawyer. I will share the best informaiton I have, with the understanding that you don't consider it legal advice.

      The statute of limitations (SOL) on a written contract in the Badger State is six years. I believe if the lender or whomever legally owns the debt sued you, you could avoid paying the debt by using the SOL as an affirmative defense. That doesn't mean the debt doesn't exist. The property is still secured by a lien from the debt. If you try to refinance or sell the property you will need to satisfy the lien. This can be a favorable time to negotiate a reduced balance settlement, paying them a portion of what you owe, if the lienholder agrees. That decision is likely based on how they view your need to refinance or sell. So, if you have listed the property for sale, for example, they may be less likely to settle than if you appear to be in the home for the long haul.

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