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On January 1, 2022, HB2617 will become the law of Arizona.  Your home is no longer protected from your judgment creditors, which will have a devastating effect on Arizona’s consumers, and those hardest hit by Covid-19.
This bill was promoted by Ben Toma, House Majority Leader, bought and paid for by the debt collectors and creditors.
There are three parts to the bill and its amendments:

1.  The   bill   increases   a   homeowner’s   homestead   exemption   from   $150,000   to $250,000 effective January 2022.  YEA, THAT IS WONDERFUL, BUT WHAT DOES THE HOMEOWNER GIVE UP?
2.  The bill retroactively turns any existing judgment into a lien on the judgment debtor’s homestead (some that has never been allowed in Arizona – back to Statehood).
3.  The Toma amendment to the bill creates a new right for judgment creditors to receive proceeds otherwise exempt if a person refinances the mortgage on their home.

The homestead exemption has been an essential Arizona consumer protection law since the beginning of Arizona statehood.
The purpose of the homestead exemption is to protect a person’s home. For decades, A.R.S. § 964(A) has prohibited judgments from attaching to a person’s home by providing:
“[A] judgment shall become a lien for a period of ten years from the date it is given, on all real property of the judgment debtor except real property exempt from execution, including homestead property.” A.R.S. § 964(A) (emphasis added).
The bill eliminates this protection by automatically converting judgments into a lien that encumbers the person’s homestead.  It puts the interests of the judgment creditor ahead of a homeowner’s interest in the home. It puts families at risk of being left without shelter.
The consequences on debtors who file bankruptcy.
A bankruptcy discharge only relieves a debtor from its personal liability (i.e., the creditor is no longer able to sue or garnish a debtor for the debt). The purpose of a bankruptcy discharge is to give a debtor a fresh start by eliminating all debts. Bankruptcy judges have relied on the A.R.S. § 33-964(A) when holding that no lien attached to a debtor’s homestead and thus no lien could be avoided under the Bankruptcy Code. (i)   It is possible that thousands of bankruptcy cases will need to be reopened, at a substantial cost to the homeowner, to obtain a court order avoiding a lien that didn’t exist at the time of the original bankruptcy.  Some language was included as an amendment, but only time will tell if that language holds up to litigation of the issue.
This change in the law will most certainly lead to a significant increase in bankruptcy filings in order to eliminate the judgment liens on homestead property.
The bill amendments allow the judgment creditor to invade the homestead proceeds in the case of a refinance.
Homeowners refinance their existing mortgages to reach the excess equity in their home. Often, this amount is less than their protected homestead amount.    When a borrower is struggling financially, the borrower can refinance the mortgage, take out existing equity and use that excess cash to pay essential living expenses, repair a home, and pay off medical bills.
The Toma Floor amendment effectively eliminates the homestead exemption by creating an exception to its application in the event of a refinance.  As a result, a judgment creditor can take a homeowner’s equity upon refinance without regard for the exemption.
This happens without warning to the homeowner.   If someone refinances their home, expecting to receive cash to pay for repairs, necessities or other items, the judgment creditors get the money, not the homeowner.  That leaves the homeowner with nothing other than a higher mortgage balance. Judgment creditors would receive an automatic windfall and be allowed to take all the homestead exemption.
The bill and its amendments negatively affect other creditors.
By allowing a judgment to retroactively attach to a homestead, the new law will deprive many existing creditors of their lien positions, because the loan was granted subsequent to the date of the judgment. Similarly, holders of second or subsequent mortgages will likely be denied their rights to the house.
Results:
The provision to increase the homestead exemption to $250,000 is long overdue and a welcome change to existing laws.  However, converting judgments into automatic liens that attach to a person’s homestead grants no added benefit to judgment creditors, while significantly weakening the homestead protections granted to Arizonans.
Retroactively granting lien rights to judgment creditors will be the foundation for a significant amount of litigation in both Arizona courts and federal courts and could potentially create chaos in the Arizona bankruptcy court. Giving judgment creditors greater rights in a homeowner’s equity upon refinance completely defeats the purpose of the homestead exemption.
Courts   have   repeatedly   reiterated   that   the   legislative   purpose   of   the   homestead exemption statutes is to allow the family to prevent judgment creditors from taking the family home.(ii) Judgment creditors (iii) are paid only if a sale takes place and then only after the homeowner receives their homestead exemption.
The bill, with its amendments, change the existing law to the extreme detriment of families who need basic shelter.

i  In re Rand, 400 B.R. 749 (Bankr. D. Ariz. 2008) (holding that a creditor’s judgment does not attach to any homestead, regardless of equity, and judgment creditors are “denied the special and convenient remedy of obtaining a lien against the homestead and waiting for their collection to fall into their laps when their debtor has to sell or refinance).
ii  Pacific Western Bank v. Castleton, 246 Ariz. 108, 434 P.3d 1187 (Ct. App. 2018) (affirming the longstanding rule that judgment liens never attach to a debtor’s homestead, regardless of equity); Union Oil Co. v. Norton-Morgan Commercial Co., 23 Ariz. 236, 202 P. 1077 (1922); Security Trust & Savings Bank v. McClure, 29 Ariz. 325, 241 P. 515 (1925); Wheeler Perry Co. v. Mortgage Bond Co., 41 Ariz. 247, 17 P.2d 331 (1932); Schreiber v. Hill, 54 Ariz. 345, 95 P.2d 566 (1939); Seaney v. Molling, 62 Ariz. 81, 153 P.2d 532 (1944).
iii  Excludes judgments for domestic support/child support which are not subject to the homestead exemption.

So who voted for the bill:

In the Senate, those who voted for debt collectors over the homeowner were: Barto, Borrelli, Bowie, Boyer, Engel, Gowan, Gray, Kerr, Leach, Livingston (the sponsor in the Senate), Mesnard, Pace, Petersen (made the huge changes allowing the liens to attach retroactively), Rogers, Shope, Townsend, Ugenti-Rita and Fann.

In the House: those who voted for debt collectors over the homeowner were:: Barton, Biasiucci, Blackman, Bolick, Burges, Garroll, Chaplik, Cob, Cook, Dunn, Fillmore, Finchem, Grantham, Griffin, Hernandez, D., Hoffman, John, Kaiser, Kavanagh, Nguyen, Nutt, Osborne, Parker, Payne, Pingerelli, Pratt, Roberts, TOMA (THE SPONSOR OF THE BILL), Udall, Weninger, Wilmeth and Bowers.

.fusion-body .fusion-builder-column-1{width:100% !important;margin-top : 0px;margin-bottom : 0px;}.fusion-builder-column-1 > .fusion-column-wrapper {padding-top : 0px !important;padding-right : 0px !important;margin-right : 1.92%;padding-bottom : 0px !important;padding-left : 0px !important;margin-left : 1.92%;}@media only screen and (max-width:980px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:640px) {.fusion-body .fusion-builder-column-1{width:100% !important;}.fusion-builder-column-1 > .fusion-column-wrapper {margin-right : 1.92%;margin-left : 1.92%;}}@media only screen and (max-width:980px) {.fusion-title.fusion-title-1{margin-top:15px!important; margin-right:0px!important;margin-bottom:0px!important;margin-left:0px!important;}}@media only screen and (max-width:640px) {.fusion-title.fusion-title-1{margin-top:10px!important; margin-right:0px!important;margin-bottom:10px!important; margin-left:0px!important;}}MUSINGS BY DIANE:
Politically, this is a very strange time.  Politicians are doing things that only a criminal would try (from the insurrection on January 6, 2021, to selling their soul to a narcissist).  Arizona has become the laughing stock of the nation (equal to Florida and Texas).  Voting rights are something to hold hostage.  Why?  Where is honesty,  respect and common courtesy? 
Arizona legislators just invaded your homestead protection.  They cloaked this invasion in an appealing cover of raising the homestead from $150,000 to $250,000.  But, just like the Greeks, this was a Trojan horse.  Pretty on the outwide, but deadly on the inside.  After January 1, 2022 all past valid judgments are now going to attach to your homestead.

Eventually everyone is going to harmed by this change in the homestead law.  Secondary lending will slow down, and, probably, disappear completely for those with modest incomes.  The consequences of refinancing are not going to be known by the common Arizonian, at least not until they try to refinance their home, only to find out the money goes to the creditor(s) who have judgments, not to the homeowner.  So much for paying for the new roof, or dad’s heart surgery.
When will this insanity stop? When will people be more important than the dollar?

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• Transferring Assets Before Bankruptcy
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• Do Student Loans Debts Die With You?

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The post New Law Allows Creditors to Invade Arizona Homestead Protection appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy Attorney.

After Bankruptcy, are you getting your mortgage statements? After you file bankruptcy, you are still supposed to keep getting your mortgage statements.  But, are you? This question came up at the 29th Annual Meeting of the National Association of Consumer Bankruptcy Attorneys.  (I’m at that meeting this week, which was supposed to be in Orlando, […]
The post After Bankruptcy, are you getting your mortgage statements? by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.

Many married people in California have individual debt. When they fail to make payments on their debt, their creditors are entitled to take legal action to collect. One step a creditor can take is to get a judgment and levy a person’s property, including their bank account.  Because California is a community property state, the […]
The post Can Your Spouse’s Bank Account be Garnished for Your Debt in California?  appeared first on The Bankruptcy Group, P.C..

If you experience financial problems that make you unable to pay the money that you owed to a creditor, declaring bankruptcy may be your last option to seek debt relief. Bankruptcy will allow you to reorganize your finances, pursue debt settlement, and pay off a creditor. Different types of bankruptcy will help you manage your finances and pay your debts.
There are two different types of debt: secured debts and unsecured debts. Secured debt is a type of debt backed by collateral to reduce the risk associated with lending. It is often associated with borrowers that have poor creditworthiness. If you have a good credit history, you will have higher chances of loan approval. Because the risk of lending to an individual or company with a low credit rating is high, securing the loan with collateral significantly reduces that risk.
If the borrower on secured loan defaults on repayment, the bank will seize the collateral, liquidate and sell it, and use the proceeds to pay back the borrowed money. Assets backing debt or a debt instrument are considered as a form of security, which is why unsecured debt is considered a riskier investment than secured debt.
Secured credit is created with liens. It provides a lender with added security when lending out money. A lien is classified as a voluntary lien or involuntary lien. An experienced Oregon bankruptcy attorney can help you understand how the liens affect your bankruptcy filing.
A voluntary lien is a type of lien where the owner of a property consensually grants another party legal claim to the property as security for the repayment of a debt. The debtor voluntarily grants the lien to the lender, and the property is used as collateral. For example, when you apply for a housing loan, you will be required to sign a deed of trust or a mortgage. This agreement serves as proof that you grant the lender a lien or security interest for your property. If you fall behind on your monthly payment, then the lien will be used to allow a foreclosure auction.
A lien can be granted to a lender against your personal property through a security agreement. This includes equipment, vehicles, furniture, inventory, tools, stock shares, cash, other investments, or anything that you possess that is not a real estate property. Types of loans such as car loans and home mortgages are secured debts with a voluntary lien. When you apply for a car loan, you will be required to sign and authorize a security agreement that grants a lien against the car that you will buy. If you fail to repay according to the payment plan, the lender can repossess the car using the voluntary lien.
On the other hand, an involuntary lien may be imposed by the court, often for non-payment of taxes. The involuntary lien gives the tax authority (or other body) the right to confiscate one’s property if the debt is unpaid. It includes mechanic’s liens, income tax or real estate liens, judgment liens, and landlord liens.
Secured creditors can protect their collection rights by perfecting a lien. In legal terms, “perfection” refers to a mandatory action to give a creditor notice of lien depending on the applicable state law and property type. A perfected lien provides legal documentation to prove that a creditor has a legal right to seize a collateralized property in place of payments for which they are owed.
In most states, a lender can perfect a lien for a real estate property by filing or recording deeds of trusts and mortgages in the same location of that property. For vehicles, lenders may perfect the liens against motorcycles, trucks, and cars by filing a notation on the certificate of title with the state motor vehicle department.
To perfect a lien for tangible personal properties such as furniture, equipment, tools, materials, and goods, a financing statement must be filed. It is a legal document or record that recognizes the lender, the borrower, and the collateral for secured debts. A financing statement can be filed by a creditor even without a signature, as long as the debtor has signed the agreement for the collateral.
A lender needs to perfect a lien. Some borrowers are granting liens to multiple creditors against the same property. For instance, home equity lines of credit are typically considered as junior to the home loan that you have taken. If the owner of the mortgage is unable to perfect the secured interest, the junior lien can move up in priority.
Lenders might face serious consequences if they fail to perfect a lien. If you decide to file for bankruptcy, the court can disregard a lien that was not perfected properly. In this case, the lender will be considered as an unsecured creditor.
Secured and unsecured debts differ from one another in terms of how a creditor can impose his or her rights to collect, in case you are unable to make monthly payments on time. A credible Oregon bankruptcy attorney can help you classify your assets as secured or unsecured. When you deal with unsecured debts, a creditor is required to file a lawsuit in bankruptcy court before they seize your assets or property.
In contrast, a secured creditor can immediately enforce rights when you fall behind your loan debt and have not yet declared bankruptcy. A court order is not required before the repossession of any car or motor vehicle; however, secured creditors are not allowed to breach the peace or to trespass on any private property.
A lender can impose a home mortgage by foreclosing the deed of trust. Some states allow foreclosure even without any legal action from the bankruptcy court and it can be accomplished within a couple of months. In some states, foreclosure may require approval from the bankruptcy court, therefore the process may take longer.
Before you declare bankruptcy, it is important to know and understand how the bankruptcy process and bankruptcy exemptions will solve your debt problems. Credit counseling can give you an in-depth understanding of the importance of debt management. For legal help in filing for bankruptcy, do not hesitate to consult our qualified Oregon bankruptcy lawyers at Northwest Debt Relief Law Firm. Our lawyers will guide you on how to file your bankruptcy forms, prepare your paperwork for the bankruptcy filing, negotiate settlements to reorganize a repayment plan, help you get out of debt, and improve your credit score according to the bankruptcy laws.
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