Last week we issued a Member Alert discussing a challenge to an Arizona ballot initiative that would nearly double Arizona’s homestead exemption and almost quadruple the wage exemption. An Arizona trial court has ruled in favor of the ballot initiative and the case is now before the Arizona Supreme Court.

On Friday, RMAI filed a second amicus brief challenging the ballot initiative. Under Arizona law, ballot initiatives cannot contain statements that are “objectively false” or contain misleading information. The Arizona ballot initiative included a statement that it “[d]oes not change existing law regarding secured debt.” RMAI’s brief explains that this statement is false and misleading because an Arizona judgment can create liens on a judgment debtor’s real property, personal property and accounts. While these liens are not consensual liens, like a mortgage or a security interest in a motor vehicle, judgment creditors are provided many of the same rights as consensual lien holders. The trial court, however, found that the “common” understanding of secured debt means only consensual liens. In addition, the trial court noted that the initiative’s summary states it will increase certain judgment exemptions.

RMAI explained that the trial court wrongly decided the “common” understanding of secured debt. Under federal bankruptcy law, Arizona judgment liens are often deemed to be “secured claims” just like consensual liens. To the extent that the ballot initiative would substantially increase a judgment debtor’s exemptions, it does in fact “change existing law regarding secure debt.” In addition, the ballot initiative only mentions “judgments on medical debt” leaving the public to believe the exemptions are not applicable to all judgments, which is not the case. The exemption would in fact harm all judgment creditors, including those holding judgments arising from personal injury and property damage.

A copy of RMAI’s amicus brief is here. A decision is expected within days.

RMAI Board Member Amber Russo and the Arizona Creditor’s Bar are leading the cross-industry efforts in stopping this initiative. Click here for more information on how you can help.

This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.