HB 2617 is signalificantly altering the Arizona homestead exemption regulations on December 31, 2021.
Beneath current regulation, As a lot as $150,000 in equity proceeds in a debtor’s House is exempt from assortment by collectors. Furtherextra, the homestead exemption has prevented judgment liens from attaching to a debtor’s homestead property. “. . . [A] doced judgment shall not Discover your self to be a lien on any homestead property. Any particular person entitled to a homestead on exact property as provided by regulation maintains the homestead property free and Away from the judgment lien.” A.R.S. § 33-964 (current) (emphasis added). The homestead exemption has operated To shield Arizona housemaintainers As a lot as $150,000 in equity They Might have Inside the property, and To permit them to promote their homestead property free and Away from any judgment lien, and with out discover to any judgment creditor. If a judgment creditor needed To collect in the direction of the homestead property, it presently should acquire a Writ of Execution and ask the sheriff To maintain an execution sale of judgment debtor’s property. However for any sale to be accomplished, the sale worth Must first Repay all consensual liens and The complete quantity of the judgment debtor’s homestead curiosity ($150,000). As properly as, if the judgment debtor promotes the property Earlier to the completion of the sheriff’s sale, the judgment creditor is left And by no means using a remedy as to that property.
However, HB 2617 is considerably amending The current regulation. On Might 19, 2021, Arizona Governor Doug Ducey signaled the HB 2617 into regulation. Efficient Dec. 31, 2021, the homestead exemption is growing from $150,000 to $250,000. At first look This will Appear to be a constructive change for housemaintainers, However the mannequin new regulation additionally provides fewer shieldions in the direction of judgment collectors. On and after January 1, 2022, a civil judgment will Discover your self to be a lien on the debtor’s homestead And fasten On to The exact property after the creditor data a judgment Inside the county the place The exact property is located. The attachment Shall be automated and retroactive for current doced judgment liens, permitting collectors An alternative to pursue any previous judgment money owed upon a debtor’s sale or refinance of a homestead property. Debtors will Not personal their homestead “free and clear” of judgment liens.
Whereas this new regulation dramatically alters debtors’ rights, it creates a quantity of new methods for collectors To collect on judgment liens. First, collectors can look to the equity in homestead property as collectors Might be paid from the proceeds of a judgment debtor’s sale of the homestead after the $250,000 exemption is paid to the judgment debtor. Second, and extra importantly, judgment collectors are additionally now entitled to money proceeds from a debtor’s refinance. “If the judgment debtor receives money proceeds from refinancing the homestead property That is topic to a judgment lien, the judgment creditor Want to be paid in full from these proceeds earlier than the judgment debtor…receives any proceeds.” A.R.S. § 33-964 (effective Dec. 31, 2021). This prevents the judgment debtor from siphoning equity out of the homestead with out promoteing the property. Finally, The mannequin new regulation requires judgment collectors to be paid upon the refinance or sale of the homestead property earlier than title to The exact property may move free and Away from any encumbrances, with sure exceptions based mostly on The quantity of proceeds anticipated to be paid to the judgment debtor from the sale.
For event, if after deducting from the proceeds of the sale The quantity of any consensual liens and the affordable prices of sale, the anticipated cost to the judgment debtor is Decrease than eighty % of the $250,000 homestead exemption (or Decrease than $200,000), a title insurer may doc a discover of partial launch of judgment with out prior discover to judgment collectors. However, if the anticipated cost to the judgment debtor is A minimal of eighty % of The quantity of the homestead exemption (i.e., $200,000 or extra), the title insurer should Adjust to particular procedures To inform the judgment creditor that the judgment lien seems pretty More probably to be extinguished. If these procedures (which embrace amongst others, mailing discover by way of licensed mail and return receipt requested) are adopted, and no objection is lodged by the judgment lienmaintainer, the title insurer may put together, signal, and doc a discover of partial launch of the judgment lien, thereby extinguishing the judgment lien and permitting the property to change to purchasers and encumbrancers for worth Away from the lien. The discover of partial launch of the judgment lien Does not have an effect on a judgment lien on One other exact property personaled by the judgment debtor Aside from the homestead property recognized Inside the discover of partial launch of judgment lien. Lastly, a title insurer that put togethers or data a discover of partial launch of the judgment lien is liable to any celebration for the exact damages, collectively with lawyer costs and courtroom prices, That are Launched on by wrongfully docing any discover of partial launch of the judgment lien.
It Is important judgment collectors understand their new rights pursuant to HB 2617 Provided that the regulation On this space has remained largely unchanged for a quantity of many years. With rising home prices throughout the Valley and all by way of Arizona, some housemaintainers have all of a sudden found themselves with vital new equity Inside their homes, which as of The prime of 2021, could be topic To collection by judgment collectors upon a sale or refinance by the debtor. Quarles & Brady legal professionals Can be found To debate this new regulation, and the rights and potential new avenues of assortment that it provides collectors looking for to recuperate on their judgments.