A new law in Arizona is being touted as a win for homeowners, but could have dangerous consequences for people’s finances.
When HB 2617 was signed into law by Governor Doug Ducey in May, homeowners received some extra protection from debt collectors.
In the past, only $150,000 of a person’s home equity was protected from debt collectors. The new law increased that amount to $250,000.
There’s one important downfall to the law for homeowners who have past, current or future financial judgments placed on them: Any judgment can now be attached to home equity.
Arizona’s former homestead exemption only allowed a contract to be attached to the value of a home if it were entered into willingly. In other words, a homeowner would have to agree to a contract or deed for it to be attached to their home’s value.
The homeowner could protect up to $150,000 in equity for as much as 18 months after the sale of a home as long as the proceeds were put in an entirely separate financial account and used only for expenses related to housing, such as purchasing another home.
Under HB 2617, that protection is gone.
What this means is that any creditor can attach a lien to someone’s home. A credit card company, for example, can attach a judgment to one’s home value.
When that person goes to sell their home, they’d have to settle up the judgment before receiving any cash proceeds. If there isn’t any cash left, they could walk away from the sale of their home with nothing.
So, even though the homestead exemption was increased by $100,000, Arizona’s new law actually makes a homeowner’s equity more susceptible to debt collectors than in the past. This is especially true since past, present and future judgments could all be tied to home equity.
This new law makes it more important than ever for Arizona homeowners to get a handle on their debt. HB 2617 only affects homeowners if a creditor places a judgment on them for an unpaid bill.
Those who have a true handle on their debt picture won’t have to worry about the law at all. Their equity will be protected in all cases.
With economic times as challenging as these, it’s not always a simple thing to do, though. Homeowners should keep an open line of communication with all of their creditors if they’re having trouble meeting obligations, and do everything they can to avoid adding debt.
In tough times, people should also consult with an experienced consumer protection attorney that can advise them of their rights under the law. To ensure you speak with the most appropriate legal counsel, contact Resolvly, a lawyer referral service that helps clients nationwide connect with consumer protection attorneys that specialize in debt resolution.
Knowing your rights and staying on top of debt can protect homeowners from losing their most valuable asset — their home’s equity.
Resolvly adds a personal touch to debt assistance and their ultimate goal is to help clients with their current debt while empowering them to not end up in the same position in the future. The company is devoted to helping its clients reach true financial freedom. Resolvly can assist with all types of unsecured debt, including credit cards, medical bills, private student loans, business debt, and vehicle repossessions.