New Arizona Law Expands Judicial Creditors’ Rights – Insolvency / Bankruptcy / Restructuring


United States: Arizona’s New Law Expands Judicial Creditors’ Rights

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A new law in Arizona, HB 2617, makes significant changes to Arizona’s homestead exemption and extends the rights of judgment creditors. The law came into effect on January 1, 2022, but creditors whose judgments were rendered before that date can also take advantage of the changes to the law.

Prior to HB 2617, registered judgments did not create liens on homestead (typically, the personal residence of the judgment debtor), and up to $ 150,000 of the equity in the homestead was exempt from collection by creditors. The absence of a lien could cause a variety of problems for a creditor seeking satisfaction from a judgment against the debtor’s homestead. For example, the judgment debtor could thwart collection efforts through “cash out” refinancing that would deprive the equity in the homestead. Since there was no lien on the family property, the judgment creditor had no right to the proceeds of the “collection”.

Effective Jan. 1, 2022, the homestead exemption amount is increased to $ 250,000, but registered judgments now create homestead liens and provide other opportunities for judgment creditors. On the one hand, judgment debtors cannot receive any cash proceeds from a refinance until the judgment is paid. Likewise, in some circumstances, judgment creditors must be paid before title can be transferred to the purchaser of the homestead. In addition, the new law expressly authorizes a judgment creditor to force the sheriff’s enforcement of the sale of the homestead if the equity in the property exceeds $ 250,000. Additionally, if the judgment debtor files for bankruptcy, the judgment creditor will be treated as a secured creditor and the lien may survive bankruptcy under certain circumstances.

These changes, and others, create new collection opportunities for judgment creditors. The extension of judgmental creditors’ rights by HB 2617 makes it even more important to register and timely renew judgments in every Arizona county where the judgment debtor owns property and to understand the remedies available to judgment creditors .

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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