Arizona Collection Laws

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Highlights

  • Arizona's mortgage recourse laws are a bit tricky.
  • Wage garnishment, liens, and account levies are legal in Arizona.
  • Arizona is a community property state, and creditors can reach one spouse's assets for the other's debt liability.

Your Rights and Liabilities For Debt in Arizona

If you owe debt and reside in Arizona, 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. Arizona law gives creditors several means of collecting delinquent debt from you.

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

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 Arizona law. We discuss each of these remedies below. In Arizona, the following laws are found under unless specified.

Arizona 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.

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 Arizona, wage garnishment is allowed under Arizona Title 12, Chapter 9, Article 4.1 . If the judgment-creditor is aware of your place of employment, it may seek wage garnishment.

The maximum you can be garnished for a consumer debt in Arizona is 25%, the same as under federal law. The garnishment applies to 25% of the your net, take home pay (your gross pay less certain required deductions). A calculation, that takes 25% of disposable income and minimum wage into consideration, determines the correct garnishment amount (see Title 12, Chapter 9, Article 4.1 for the exact calculation. Garnishment can occur only you have received a 10-day’s notice.

However, under Arizona Title 12, Chapter 5.1, Article 2 , periodic installments for future damages for loss of earnings or loss of support for beneficiaries of a judgment entered in a wrongful death action are exempt from garnishment, attachment, execution and any other process or claim to the extent wages or earnings are exempt under any applicable law. Periodic installments for all other future damages are exempt under garnishment, attachment, execution and any other process or claim except to the extent they may be assigned pursuant to section 12-591.

Garnishment is allowed for child support under Arizona Title 33, Chapter 8, Article 2 .

Arizona Bank Account Levy

A levy means that the creditor has the right to take money in your bank 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 Arizona, levy for family support is allowed under Arizona Title 25, Chapter 5, Article 1 . If there is a court-ordered judgment or if the obligor is in arrears in an amount equal to twelve months of support, the department may issue a levy and collect the amount owed by the obligor by levy on all property and rights to property not exempt under federal or state law.

Arizona levy laws are also found in Title 23, Chapter 4, Article 5 , and . What Arizona calls its levy law covers what other states consider garnishment. Personal property and wages can be seized under Arizona Title 23, Chapter 4, Article 5.

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

Arizona Lien

A lien is an encumbrance — a claim — on a property. For example, if your own a home, a creditor with a judgment has the right to place a lien on your home. That means if you try to sell or refinance your home, the creditor can require that you pay it off or you transaction will be stopped. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent you from selling or refinancing until the debtor can pay off the judgment.

Under Arizona Title 33, Chapter 7, Article 5 , a judgment shall become a lien for a period of five years from the date it is given, on all real property of the judgment debtor except real property exempt from execution, including homestead property, in the county in which the judgment is recorded, whether the property is then owned by you or is later acquired. A judgment lien for support, as defined in section 25-500, remains in effect until satisfied or lifted.

If you reside in another state, see the Bills.com article to learn more.

Arizona Statutes of Limitations

Each state has is own statute of limitations rules for debt. Arizona law regarding consumer accounts is found in Title 12, Chapter 5, Article 3. The statute of limitations for oral contracts is 3 years ), written contracts is 6 years (), and credit cards is 6 years (A.R.S. § 12-548). For credit cards, A.R.S. § 12-548 specifically carves out exceptions where, in some cases, a shorter statute of limitations may apply. (The statute of limitations for credit cards was 3 years prior to 2011.)

Arizona Title 47 contains three references to statutes of limitations relating to property:

  • Default Under a Lease Contract, must be commenced within four years after the cause of action accrued. See Chapter 2A, Article 5 .
  • Breach of any Contract for Sale, must be commenced within four years after the cause of action has accrued. See Chapter 2, Article 7 .
  • Taxpayer’s obligations for any tax, interest or penalty required to be collected by the department for any tax period are extinguished, if not previously satisfied, six years after the amount of tax determined to be due becomes final unless extenuating circumstances apply. See Title 42, Chapter 2, Article 2 .

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.

Regarding judgments, a judgment-creditor has 5 years to enforce a judgment unless the judgment is renewed. See . A judgment may be renewed by filing an action to enforce the judgment or by filing an affidavit with the court within 90 days before the expiration of the 5-year period. See and .

Arizona Foreclosure

Arizona foreclosure laws are found in .

Under Arizona law, a lender may be prevented from suing the borrower for the deficiency following a foreclosure. However, Arizona’s anti-deficiency laws are tricky. Under Arizona , a homeowner is liable for a deficiency judgment if they have not resided in their home for six consecutive months. A deficiency on a purchase-money mortgage is not allowed on residential property if a single one-family or single two-family dwelling that is on 2.5 acres or less (33-814G).

The Arizona anti-deficiency laws apply to second mortgages and deeds of trust if they are purchase money loans (Baker v. Gardner, 160 Ariz. at 104, 770 P.2d; and Ross Realty Co. v. First Citizens Bank & Trust, 296 N.C. 366, 250 S.E.2d 271, 275 (1979); and Nydam v. Crawford, 181 Ariz. 101, 887 P.2d 631 (App. 1994)). A deficiency is allowed if the value of the house has declined because the homeowner has committed waste (33-814A). Consult with an Arizona attorney with experience in property law to understand your rights and liabilities in your situation.

Community Property & Arizona Law

Arizona is one of the 10 community property states. Regarding debts, this means if a married Arizona debtor individually signs a contract at the time he or she is married, both the debtor and spouse have liability to repay the debt, with a few exceptions.

Analysis of spousal debt is complicated. See the Bills.com article to learn more about this issue.

Arizona Collection Agency Law

Arizona adds protections not found in the federal . Arizona law requires collection agencies:

  • Be licensed in Arizona and provide a bond
  • "...deal openly, fairly and honestly..." in their business

Arizona collection agent licensees may not:

  • "Engage in any unfair or misleading practices"
  • Use any "oppressive, vindictive or illegal" collection methods
  • Send any written communication that imitates any form of judicial process from a court, government entity, or lawyer
  • Represent the debt collector practices law or maintains a legal department unless the collector is, in fact, also licensed to practice law
  • Attempt to collect any collection fee, attorney’s fee, court cost or expenses the debtor is not legally obligated to pay
  • Misrepresent the amount of the existing debt or falsely stating that if the debt is not paid, the debtor will incur additional attorney fees, investigation fees, service fees, or any other additional charge
  • Give the impression the debt collector represents the state
  • Say the Arizona government or any state agency endorses its activities

Violation of these laws is a class 1 misdemeanor. If you have been victimized by a collection agency, file a report of the violation with your local city or county district attorney or prosecutor. Also consult with a lawyer to discuss filing a civil lawsuit against the collection agent. Some lawyers take these cases on a contingency basis, which means no out-of-pocket costs to you. These limits and prohibitions can be found in A.R.S. § 32-1001 to 32-1057.

Recommendation

Consult with an Arizona attorney experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, foreclosure, and community property law in Arizona.

If you cannot afford a lawyer, contact or another to find no- or low-cost legal services.

108 Comments

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  • BT
    May, 2014
    Becca
    I receive disability and a small retirement through my mother's death of $189 per month. How much can a judgment lien be? Maximum?
    0 Votes

    • BA
      Jun, 2014
      Bill
      The amount of a judgment or lien is not dependent on the judgment-debtor's income. The amount of the lien depends on the amount the judge awarded the judgment-creditor.

      I think what you really want to know is what funds are completely exempt from collections resulting from a judgment, and the exemption amounts for everything else. Reread the original article above, and then consult with a lawyer who has consumer law experience to get specific advice for you situation.

      If you cannot afford a lawyer in Arizona, contact Community Legal Services or another Arizona pro bono program to receive no-cost legal services.
      0 Votes

  • KT
    May, 2014
    Kelly
    Husband and I were co-buyers on a truck through a dealer which was financed by a credit union. We did a short sale with them 4 months later and now owe the balance of $5500. We just received a debt validity letter threatening to sue from an attorney for this balance owed. I can file BK (which I would think I can put in my BK) but husband can't. We can't afford a lawyer and not sure what to do. Thank you
    0 Votes

    • BA
      May, 2014
      Bill
      Call the lawyer and discuss a settlement for less than $5,500. If the lawyer wants to be hard-nosed, then consult with a bankruptcy lawyer to discuss your options. Ask if a chapter 13 will, in your state, shield both of you from legal action.
      0 Votes

  • RF
    Apr, 2014
    Renee
    I just married and we put my husband on my bank account. We just received a levy on the bank account for over $4000.00 for back taxes. My question is this: first neither of us are working at the moment so we have no income. At the moment the only money going into this account is school loan money and child support. Do I have any way to put a stop to this?
    0 Votes

    • BA
      Apr, 2014
      Bill
      For the benefit of other readers, Renee's story here shows why Bills.com recommends people keep separate financial accounts. It is much more difficult, or in some cases impossible, for a judgment-creditor to levy the account of a non-debtor spouse.

      You mentioned residing in Arizona and delinquent taxes. I will assume the tax authority is the IRS. The IRS follows state family law when it comes to levying the account of a spouse. Arizona is a community property state. Therefore, even if you had kept your accounts separate, it's possible the IRS would have levied this account anyway, even if the spouse with the delinquent tax debt was not the account owner or co-owner.

      What to do? Start by reading the Bills.com article Levy From IRS to understand what just happened to you, how you could have prevented it, and what you can do to resolve this situation.
      0 Votes

  • SX
    Mar, 2014
    Stephanie
    We lost a lawsuit and now are being faced with garnishment. My husband is the sole provider for our family of 5. I read that most states (haven't been able to confirm AZ) have a Head of Household exemption if you provide 50% or more support to dependents. First, does that exist in Arizona? If so, does that make my husbands salary exempt or they reduce the amount being garnished?

    Second, if your salary does become exempt does that mean they can't touch levy your bank account in which that salary is deposited?

    Lastly, can a payment agreement be submitted to courts to avoid the garnishment? If so, who approves that? The courts or do the two parties have to come to an agreement?
    0 Votes

    • BA
      Mar, 2014
      Bill
      Reread the original article above, and then consult with an Arizona lawyer immediately. If you cannot afford a lawyer, contact Community Legal Services or another Arizona pro bono program that provides no-cost legal services to Arizona residents.
      0 Votes

  • SQ
    Feb, 2014
    Steven
    Hello, I live in AZ, but have a money judgement against me from MI for arrears child and spousal support of $10k, and also to pay my ex's legal fees of $2500. I have managed to stay current on all support payments for several months by exhausting my 401(k) and using low-interest credit cards, because I only net $1000/mo income while my child support is $972/mo (thanks to judge imputing my income very high). I live with my partner, have only a car worth under $5k, and my personal clothing and household goods. My question is, what can my ex or the MI court come after me with in Arizona? I have nothing else to give them. Should I worry about these money judgments or, since I don't have the money, just let them ride? And never show up in Michigan again? Thank you.
    0 Votes

    • BA
      Feb, 2014
      Bill
      Do not ignore this issue because doing so will make matters worse. Consult with an Arizona lawyer who has family law experience. If you cannot afford a lawyer, contact Community Legal Services or another Arizona pro bono program to find no-cost legal assistance.
      0 Votes

    • CJ
      Jul, 2014
      Chevy
      I have a separate question for Bill. I moved out apartment in 2009-2010 in Chandler, AZ. It shows on my credit with NCO I was scared at the time when i puuled my credited and show it, so I started paying on it. I paid the balance down to $1200.00. So my question is do I go by the state of AZ or the current state I live for the Statutes of Limitations? And being that it has been over 5years which letter would I sent to have this removed from my credit report because it is effecting me from getting an apartment?
      0 Votes

    • BA
      Jul, 2014
      Bill
      Your state statute of limitations has nothing to do with how long a derogatory appears on your credit reports. The Fair Credit Reporting Act sets the rules Equifax, Experian, and TransUnion must follow when publishing consumer credit information. Follow the link I just mentioned to learn more about the FCRA and your credit reports.
      0 Votes