Arizona Proposition 209, otherwise known as the “Predatory Debt Collection Protection Act,” will directly impact homeowners associations and planned communities. Prop 209 states that an HOA will be limited in its ability to garnish a delinquent owners’ earnings or bank account. This is especially important for board members to understand as garnishment can be a useful tool in collecting delinquent assessments. To help Arizona HOAs understand the implications of Prop 209, we put together this simple guide to the new legislation.
Arizona Proposition 209 Details
As a result of Arizona Prop 209 passing, HOAs will need to understand the following key points:
- Creditors can no longer garnish the wages or bank accounts of almost half of the population of Arizona.
- As a result, more HOAs will foreclose on its liens, causing members to pay more to resolve the debt, or to potentially lose their homes
- With HOAs filing more often for assessment lien foreclosures to make up for their increased collection-related expenses and the risk that the HOA may not recover all of its delinquent assessments, HOAs will likely need to increase the annual assessments.
Wage Garnishments
Arizona law previously allowed 25% of disposable earnings to be garnished in order to satisfy judgments. With the passage of Prop 209, only 10% of disposable income can be garnished for debt collection. If anyone currently earns $51,000 or less per year, their wages cannot be garnished. This will limit Arizona HOAs’ ability to garnish wages because, according to a recent study by Phoenix Community and Economic Development, 41% of Arizonans make $50,000 or less annually.
Bank Garnishments
Arizona law previously provided that each individual can protect $300 per bank account from bank garnishments. If two people own the same bank account, they can protect $600. With Prop 209 going into effect, under the new law, each bank account holder can protect $5,000 per bank account from bank garnishments. If two people own the account, then they would be able to hold onto $10,000.
Homestead Exemption
Arizona law previously provided that $250,000 is protected from general creditors as a homestead exemption. Prop 209 increases that to $400,000. When an owner sells their house, judgments for fines will not be paid from escrow unless there is more than $400,000 in equity in the home.
Personal Property Exemptions
In accordance with the current law, $6,000 of personal items/household goods are shielded from debt collection. Prop 209 provides that $15,000 of personal items/household goods are protected from debt collection.
Keeping up with new and updated laws is a time-consuming and frustrating process. You can create legal issues for your HOA and put it in a vulnerable position by not being prepared for these new laws. Being proactive and working with a law firm specializing in Arizona HOA representation is essential. With solid planning and simple adjustments to internal procedures, most associations and planned communities can avoid common legal pitfalls.
Halk, Oetinger, and Brown represents planned communities and associations in Arizona and helps them to avoid as many of these common issues as possible. Our experienced attorneys routinely help associations with all their legal needs, including explaining new laws and how they can affect your HOA. Our firm can help your association make the necessary adjustments for Arizona Prop 209 and any other new legislation that might impact normal operations. Contact us today to schedule your initial consultation on our contact us page.
Halk, Oetinger, and Brown shares this article for informational purposes only and does not create an attorney-client relationship.
