Credit Card Debt Judgement in Arizona

Receiving legal papers from a stranger with the words “You’ve been served” can be a frightening experience. If you’ve fallen behind on your credit card payments, you might have anticipated this moment, yet it doesn’t make it any less daunting. 

Being sued for credit card debt can throw your life into turmoil, leaving you with countless questions and concerns. What are your next steps? How do you protect yourself and your assets? Let’s explore the legal process, your options, and how you can navigate this challenging situation.

So, what happens when a credit card company sues you?

You have two options:

1. File a response with the court.
2. Do nothing and risk a default judgement of credit card debt.

To defend yourself, answer these questions:

• Are you responsible for the debt?
• Did you miss payments?
• Is the amount correct?
• Did you miss a full payment less than six years ago?

If the answer is “yes,” your defense might be weak in Arizona.

Arizona Debt Collection Laws

Arizona’s debt collection lawsuit process allows creditors to sue within six years of your first missed payment. This period is called the Arizona debt statute of limitations. If more than six years have passed, you should mention this in your response to the court. 

Understanding Arizona Debt Statute of Limitations

The Arizona debt statute of limitations is crucial in defending against a credit card debt lawsuit. If the creditor files a lawsuit after six years from your first missed payment, you can use this as a defense. This defense can prevent the court from granting a judgment against you.

However, it’s essential to raise this defense in your response to the lawsuit. Failing to mention it can result in the court overlooking this crucial detail. A credit card debt attorney can ensure this defense is properly presented and argued in court.

What Happens if You Don’t Respond to a Credit Card Debt Judgement Lawsuit

If you answer the complaint, the court will decide if you owe the debt. The court won’t consider your ability to pay or get involved in settlement talks. If the court sides with the creditor, they will issue a credit card debt lawsuit judgment against you.

If you ignore the lawsuit, the creditor can request an application for default judgment. 

A default judgment of credit card debt occurs when you don’t respond to a lawsuit. The court assumes you owe the debt and rules in favor of the creditor. This judgment allows the creditor to start collecting the debt through wage or bank account garnishments.

To avoid a default judgment, you must respond to the court summons. Knowing how to respond to a court summons for credit card debt is vital. If you’ve already missed the deadline, a credit card debt attorney can help you explore options to set aside the default judgment.

Judgment Collection in Arizona

A judgment collection in Arizona can lead to wage or bank account garnishments. Wage garnishment is ongoing, taking part of each paycheck until the debt is paid. Bank account garnishments can happen multiple times but are not continuous. Creditors prefer wage garnishments if you have a job but can use both methods at the same time.

Wage and Bank Account Garnishments

Once a creditor obtains a judgment, they can garnish your wages or bank accounts. In Arizona, creditors can take up to 25% of your paycheck. However, you can request a reduction to 15% by proving financial hardship. Your attorney can assist you in requesting this reduction and prepare the necessary documentation. They can also advise you on other exemptions and protections available under Arizona debt collection laws.

A notable difference between wage garnishments and bank account garnishments is that a wage garnishment is a continuing lien.  This means that the non-exempt portions of your earnings (25 percent, or 15 percent if reduced) will be deducted from every paycheck until the judgment is satisfied.  Once the judgment creditor serves the writ of garnishment, your employer is required to comply for as long as you remain an employee. 

Bank account garnishments, on the other hand, are more unpredictable as it is not a continuing lien on your bank account. Upon serving your financial institution with a writ of garnishment, a judgment creditor collects the non-exempt portion of the funds in the account on that date. Creditors can freeze your account and take all but $300 (or $600 for joint accounts). If the judgment creditor wants to repeat the process, it is necessary to obtain and serve a subsequent writ of garnishment.  

Because a bank account garnishment is generally a “hit or miss” proposition, judgment creditors normally favor wage garnishments when the debtor is employed.  That said, it is possible for a judgment creditor to garnish wages and garnish bank accounts at the same time.

Renewing a Judgment

Judgments in Arizona last for ten years but can be renewed indefinitely. To renew a judgment by affidavit, the judgment creditor must file an affidavit setting forth the information required by A.R.S. § 12-1612(B) “within ninety days preceding the expiration of ten years from the date of entry of such judgment.” A renewal affidavit filed more than ninety days before the judgment expires is ineffective.

Renewal keeps the judgment enforceable and allows creditors to continue collection efforts. There is no limit on the number of times a judgment can be renewed, and therefore, a judgment can remain enforceable indefinitely.  Unfortunately, this means that a judgment can haunt you for a lifetime unless you satisfy the judgment, or obtain a bankruptcy discharge on the debt.

Recording a Judgment

Creditors often record judgments with the county recorder’s office. For example, a judgment entered in a Maricopa County court would normally be recorded with the Maricopa County Recorder. Once recorded, the judgment becomes a lien on any non-exempt real property, and the judgment creditor may satisfy the judgment by executing on non-exempt real property owned or later acquired by the judgment debtor.

The good news is that a recorded credit card debt judgement does not become a lien on homestead property in Arizona. This issue has been litigated in both the Arizona state courts and federal bankruptcy courts, and the Arizona Court of Appeals recently revisited it again in a case called Pacific Western Bank v. Castleton. 

In the Pacific Western Bank case, the judgment creditor argued that its recorded judgment attached as a lien to the debtor’s homestead because the equity in the property exceeded the $150,000 Arizona homestead exemption. The Arizona Court of Appeals held that, although the creditor could satisfy its judgment by forcing an execution sale when there is excess equity in the property, a judgment lien still does not attach to a homestead.

To summarize, as long as the equity in the house you live in does not exceed the $150,000 Arizona homestead exemption, a recorded judgment does not attach as a lien and a judgment creditor cannot sell your house to collect on the judgment. Even with equity exceeding $150,000,, the homestead itself remains protected, though creditors can force a sale to get excess equity.

How to Stop a Judgement for Credit Card Debt

If you’re facing a judgment for credit card debt, there are steps you can take to prevent wage or bank account garnishments. The first and most crucial step is to respond to the lawsuit promptly.

Responding to the Lawsuit

When you receive a court summons, it’s essential to understand how to respond to a court summons for credit card debt. Failing to respond can lead to a default judgment of credit card debt, meaning the court will rule in favor of the creditor by default. This judgment gives the creditor the right to garnish your wages or seize funds from your bank account.

Here’s how to respond to court summons for credit card debt effectively:

1. Read the Summons Carefully: Understand the claims against you and the deadlines for your response.
2. File an Answer: Your answer should address each point in the complaint. You can admit, deny, or state you lack sufficient information to admit or deny each claim.
3. Raise Defenses: Use any applicable defenses, such as the Arizona debt statute of limitations, which bars creditors from suing you if too much time has passed since your last payment.
4. File with the Court: Submit your answer to the court within the specified timeframe, typically 20-30 days.
5. Serve the Plaintiff: Ensure the plaintiff (creditor) receives a copy of your answer.

How to Settle Credit Card Debt After Judgment

Even if you’ve lost the lawsuit or if a judgment has already been issued, you can still settle the debt to avoid further legal action and financial hardship.

1. Negotiate a Payment Plan: Contact the creditor or their attorney to discuss a feasible payment plan. Creditors may be willing to accept smaller, regular payments instead of pursuing garnishments.
2. Offer a Lump Sum Settlement: If you have access to a significant amount of money, you can offer a lump sum settlement. Creditors might accept a reduced amount if it means they receive payment upfront.
3. Get Everything in Writing: Ensure that any settlement agreement is documented in writing. This protects you if the creditor later claims you still owe money.
4. Make Payments as Agreed: Follow through on the settlement terms to avoid further legal action.

How to Win a Credit Card Lawsuit

Winning a credit card lawsuit requires a well-prepared defense. One of the strongest defenses is the Arizona debt statute of limitations. This law prevents creditors from suing for debts that are older than six years from the date of the last payment. If the creditor files the lawsuit after this period, you can use this as a defense to have the case dismissed. You should also consider hiring a credit card debt attorney can to significantly improve your chances of winning.

The Role of a Credit Card Debt Attorney

Working with experienced and reputable lawyers can provide you with invaluable assistance throughout the debt collection lawsuit process. With their knowledge of Arizona debt collection laws, an experienced attorney can review your case, identify potential defenses, and represent you in court. They can help you file the necessary paperwork and ensure you meet all deadlines. 

If you’re facing a judgment, they can advise you on how to stop a judgment for credit card debt and negotiate settlements with creditors.

Dealing with a credit card debt lawsuit can be daunting, but understanding your options and rights can make a significant difference. Whether you’re looking to stop a judgment, settle a debt after a judgment, or win a lawsuit, being informed and proactive is essential.

Talk to an Attorney Today!

Alcock & Associates specializes in different areas of law, helping clients across Arizona navigate complex legal waters. Our team of experienced attorneys understands Arizona debt collection laws and can provide the guidance and representation you need. 

If you’re facing a lawsuit, need help negotiating a settlement, or want to explore your defense options, contact Alcock & Associates today. Reach out for a consultation, and let us assist you in resolving your debt issues effectively.

Call us at 602-989-5000