Iowa Wage Garnishment Laws

Wage garnishment is one way that creditors in Iowa can collect from debtors who do not pay. It’s when a creditor has the debtor’s employer send part of the debtor’s wages or salary to the creditor for the debt.

It’s important to note that a creditor can’t garnish wages on its own. Unless it’s a tax authority, like the IRS, it needs a court order to garnish wages; to obtain that order, the creditor needs a judgment in its favor, which means suing the debtor in court and winning.

Garnishment is available for any debt, including debts resulting from torts (like professional malpractice and auto accidents), breach of contract, the sale of goods and other consumer transactions, and promissory notes. Its most common uses are for consumer debts (such credit cards), alimony, child support, and taxes.

Also, while wage garnishment is the best known type of garnishment, any money belonging to a debtor which is in the control of a third party (the garnishee)—or which is owed to the debtor by a third party—can be garnished. For example, bank accounts and payment streams created by structured settlements could both be garnished.

Iowa Garnishment Exemptions and Non-Exemptions

Many types or sources of income will be protected, in whole or in part, from garnishment under either federal or state law. (Note: wages and salary are among the least protected types of income). Here are some of the exemptions available in Iowa:

  • Social Security: under federal law, it can only be garnished for child support, alimony, and certain federal debts (like taxes0. However, Iowa goes further and completely exempts Social Security from garnishment.
  • Pensions: it appears that Iowa has fairly broad-based protection for pensions—not just police, fire, and state worker pensions, but even private pensions. However, it does not appear to extend that protection to distributions from other retirement accounts, such as 401(k) or IRA accounts.
  • Public assistance or benefits: almost every form of public assistance or benefit is protected from garnishment, including workers’ compensation; unemployment benefits; aid to families with dependent children; disability or illness benefits; local public assistance; veteran’s benefits; even adopted child assistance.
  • Insurance benefits: many insurance benefits are also protected, but in many cases only up to a certain dollar amount and/or with other limitations. For example, accident, health, illness, or life insurance proceeds paid to a surviving spouse or dependent child are protected up to $10,000; or an unlimited amount of life insurance proceeds are protected if they are from an employee group insurance policy.
  • Alimony or support, up to the level the recipient actually needs for support.

A number of these different exemptions are also limited in that while they act against most creditors or judgments, they will not prevent garnishment for child support.

Iowa Maximum Threshold

Iowa follows federal law in terms of how much income can be garnished. The lesser or smaller of the following may be garnished:

  • 25% total of disposable income, with disposable income defined as gross income less legally required (not just employer or benefit plan required) paycheck deductions, such as FICA
  • The amount by which the debtor’s weekly income is greater than 30 times the minimum wage, which guarantees a low-income debtor a weekly income equal to working 30 hours at minimum wage.

Increasing the complexity is that the 25% threshold is for most debts—including all consumer debts. However, there are a few high-priority debts, such as taxes (the government wants to make sure it gets its share) and child support for which more than 25% of a debtor’s income can be garnished. Indeed, for these debts, potentially 50% (or more!) of a debtor’s income is subject to garnishment.

Iowa Statute of Limitations

Garnishment is a two-step or –stage process: (1) get a judgment; (2) enforce it through garnishment. This means there are two different statutes of limitation to comply with. The first is the time available to bring a lawsuit on the underlying debt, since if it’s too late to sue, it’s also too late to garnish. That statute varies with the type of debt or cause of action, though common consumer debt limitation periods are:

  • Five years, for open accounts (credit cards) and oral/verbal contracts
  • Ten years, for written contracts

After the creditor has a judgment, Iowa gives the creditor  at least a decade to enforce a judgment by garnishment, which means the creditor can wait up to 10 years to see if a then-impoverished debtor starts earning enough to make garnishment worthwhile.

Writ of Garnishment in Iowa

The debtor’s involvement in garnishment is often minimal, assuming that the underlying debt was fully and fairly litigated in the previous action (when the creditor obtained its judgment). The usual garnishment process begins when the creditor, armed its judgment, applies in writing to the court for garnishment. The judgment forms the basis for the garnishment; beyond citing it, the creditor merely needs to state that—

1) it has not been paid on the judgment;

2) it believes that garnishment is necessary to secure payment; and

3) it believes a garnishee (such as the debtor’s employer) has money owed to the debtor (such as the debtor’s wages) which could be used to satisfy the judgment.

The garnishee will be served by the court, and will be asked to verify the particulars—that it owes such-and-such amount of money to the debtor. Assuming that the garnishee does in fact have money belonging or owed to the debtor, and that the debtor has not successfully challenged the garnishment in some way (see next section), an order will most likely be issued, directing the garnishee to divert the appropriate percentage of the debtor’s income for the creditor’s benefit. More on Stopping Wage Garnishment in Iowa.

Getting Legal Help

As alluded to above, it is possible—especially with the help of counsel—to fight garnishment IF something about the process by which it, or the underlying judgment, was rendered was improper or incorrect; or if there is an error in the garnishment; or it can be shown that the debtor’s income is mostly or entirely exempt.

Generally speaking, by this time, it is probably too late to dispute the debt itself, except in the case of (1) mistaken identify—the wrong “John Doe” is being garnished—or (2) a mistake regarding the amount or existence of the debt—such as if it had been paid in whole or in part, but payment has not been credited. Absent mistake, however, since garnishment follows the creditor already having sued the debtor and won (thereby obtaining a judgment), it is very unlikely that the debtor can successfully challenge the fundamental existence of a debt or an obligation to pay.

However, it possible that there was some procedural violation that would provide grounds for overturning the judgment or fighting the garnishment, such as improper notice or service, or that a statute of limitations has been exceeded. It also may be possible—especially in state like Iowa, which has many exemptions—to show that the debtor effectively has little or no disposable income to garnish. In particular, since Iowa is so protective of pensions, this can be an important strategy for retirees fortunate enough to be receiving a pension. It can also be very important to people on some form of public assistance, since Iowa exempts many forms of public assistance from garnishment.

These challenges turn not on the merits of the case or on equity or fairness, but on procedure and the rules for calculating disposable income; that is what makes the assistance of an attorney so valuable.

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