Arizona Court of Appeals Affirms Voter-Approved Increases to Exemptions

March 26, 2025

By David M. Barlow

Last spring, we wrote about Proposition 209 and the significantly increased protections afforded to debtors through a voter-approved amendment to Arizona’s exemption statutes, which place specific assets outside of the reach of judgment creditors. In November 2022, Arizona voters overwhelmingly approved Proposition 209, also known as the “Predatory Debt Collection Act” (the “Act”). In addition to lowering the maximum interest rate on medical debt, Proposition 209 significantly increased protections afforded to debtors and altered the rights of creditors by increasing exemption amounts related to: homesteads; household goods, furnishings, and electronic devices; equity in a motor vehicle; equity in a motor vehicle if the debtor or the debtor’s dependent is physically disabled; and money held in a personal bank account. There are particularly significant changes for the most commonly asserted exemptions—homestead and wages. The homestead exemption for equity in a personal residence increased from $250,000 to $400,000 and the amount of wages (“disposable earnings,” as defined in the statute) that a creditor now may reach has decreased from 25% to 10%. The Act provides that it applies “prospectively only,” meaning that these changes will only apply after the Act’s effective date of December 5, 2022, and will not apply retroactively.

Upon the passage of Proposition 209, the Arizona Creditors Bar Association and several other pro-creditor organizations immediately challenged the constitutionality of Proposition 209. A Maricopa County Superior Court judge denied their challenges, and they appealed the decision to Division One of the Arizona Court of Appeals. On April 30, 2024, the Court of Appeals unanimously affirmed the lower court’s ruling.¹

Although both the challengers and the State presented arguments based on standing—a party’s right to bring a lawsuit and have the court rule on the merits of its claims—the crux of the challengers’ argument was regarding the constitutionality of Proposition 209.

They argued that Proposition 209 is unconstitutional because it is vague and unintelligible. The challengers sought to prevent the Act from taking effect, or, alternatively, to have a declaratory judgment issued specifically delineating the scope of the Act’s application.

Along those lines, the challengers focused on the issue of whether the new law applies where a judgment being enforced was obtained prior to the Act becoming effective, but the garnishment proceedings were initiated after the Act went into effect. The essence of their argument was that the Act is unconstitutionally vague because it fails to cover whether it applies when a judgment pre-dates the Act but the garnishment proceedings occurred or continued after the December 5, 2022 effective date of the Act. The Court of Appeals ruled that the challengers’ arguments could not prevail and held that the Act was valid.

In issuing its opinion, the Court of Appeals acknowledged that “[t]here will undoubtedly be difficult questions about the prospective application of the Act, including those involving wage garnishment proceedings.” In doing so, the Court of Appeals acknowledged that judgment creditors may face issues caused by the uncertainty surrounding the Act’s application, such as where a court may be asked to decide when a particular right or duty matured under the new law.

Despite these “difficult questions,” the Court of Appeals stated that trial courts should be tasked with working through these types of issues. True to that prediction, the Court of Appeals has already considered two recent appeals relating to the interpretation of the Act in the context of garnishment proceedings.

In February 2024, the Court of Appeals issued a ruling on the issue of whether a judgment obtained before the Act’s effective date² was subject to the increased exemption amounts where the garnishment proceeding began after the Act’s effective date. The Court of Appeals held that the garnishment proceeding was a separate action, and even though it was based on a judgment entered before the Act’s effective date, the judgment debtor was nonetheless protected by the increased exemptions.

Even more recently, the Court of Appeals considered whether a judgment creditor’s writ of garnishment and continuing lien on a judgment debtor’s non-exempt earnings could be quashed based on the passage of Proposition 209.³ Specifically, the judgment debtor moved to quash or amend the continuing lien and garnishment because of the changes Proposition 209 made to the law.

On June 27, 2024, the Court of Appeals held that the language in the garnishment order and continuing lien did not violate the Act, and that although the percentage of the judgment debtor’s wages that was subject to garnishment decreased from 25% to 10%, as provided in the Act, the judgment debtor’s request to have the garnishment quashed was denied.

Both of these recent cases reflect some of the questions that the Court of Appeals acknowledged would exist when it issued its April 30, 2024 opinion. Additional challenges to the Act and its application are sure to follow and, eventually, judgment creditors and judgment debtors alike will benefit from the additional interpretation provided in written decisions. These fact-specific challenges will eventually be resolved, but in the meantime, creditors should take note of the increased protections afforded to judgment debtors in light of the Act. One thing is certain—the Act is not unconstitutional, and protections afforded to judgment debtors have increased. Not only are there increased protections afforded to judgment debtors, but the assets of debtors that are available to judgment creditors attempting to enforce judgments and collect debts are now more limited.

Any judgment creditor should also keep in mind the federal statutory scheme that protects debtors—the Fair Debt Collection Practices Act (“FDCPA”). Judgment creditors who run afoul of the FDCPA face exposure in the form of monetary damages and statutory penalties. The reality is that a prudent judgment creditor needs to consider the risks and rewards associated with pursuing collection efforts, and should seek legal advice in determining the cost-benefit analysis of any specific course of action.

Additionally, judgment creditors may want to review comments in our previous article on this subject, which was included in the firm’s Spring/Summer 2023 Newsletter. Creditors should consider the changes to Arizona’s exemption statutes and reevaluate whether the cost of obtaining, pursuing, and enforcing judgments is truly worthwhile, and perhaps how this should factor into their decisions to extend credit in certain cases. More proactive creditors should consider protecting themselves in advance by seeking non-exempt property as security for their loans. How Arizona courts will interpret the infinite number of scenarios that will arise under the Act is unknown at this point, but consulting with experienced attorneys can aid prudent creditors in evaluating the options, risks, and rewards of pursuing a specific course of action.

¹ Arizona Creditors Bar Association, Inc. v. State, 549 P.3d 205 (Ariz. App. April 30, 2024).
² HJ Ventures, LLC v. Candelario, 2024 WL 449970, at *2 (Ariz. App. Feb. 6, 2024).
³ Silence v. Betts, 2024 WL 3198383 (Ariz. App. June 27, 2024).

HELP TO RECOVER

If you need assistance with evaluating your rights and remedies in light of the recent changes brought about by Proposition 209, please contact the attorneys at Tiffany & Bosco, P.A.