Bankruptcy, Restructuring, and Creditors’ Rights
But the Homestead Protection Increased to $250,000
October 8, 2021
As the final part of our review of Arizona House Bill 2617 (AZ HB 2617), we will review the impact of the Bill on individual judgment debtors. The first two blogs can be found here.
AZ HB 2617 increases the homestead exemption amount from $150,000 to $250,000 and makes no changes to a homeowner’s eligibility to qualify for the homestead exemption.
A nonconsensual lien, including a judgment lien from a civil judgment, now entitles a creditor to a forced sale of the homestead property if the debtor’s equity in the real property exceeds the homestead exemption amount. The previous language only allowed a forced sale if the judgment debtor’s equity above the homestead exemption amount exceeded the amount of the judgment lien on the property.
Judgment debtors with valid outstanding civil judgments may want to consider filing for bankruptcy before January 1, 2022. If they fail to file before that date, a judgment lien will automatically attach to their homestead property. This will inhibit the judgment debtors’ ability to tap into their home’s equity through a cash-out refinance and could even make it harder to sell their home.
However, some judgment debtors may be incentivized to wait to file bankruptcy until after January 1, 2022. While a judgment lien may attach to their property after that day, the judgment debtor will also be entitled to a larger homestead exemption. Some commentators to the AZ HB 2617’s passing have proposed the viability of using avoidance actions to strip judgment liens from homestead properties. A debtor can avoid a lien if fixing the lien would impair the debtor’s ability to claim an exemption. Enforcing a judgment lien would have the effect of cutting into a judgment debtor’s homestead exemption. A lien impairs an exemption when the sum of the lien, all other liens on the property, and the amount of the exemption exceeds the property’s value. The exemption amount has now increased by $100,000, so a lien that previously did not impair the exemption may do so now. This alternative will need to be analyzed on a case-by-case determination for each judgment debtor client.
For more information on this topic, please contact Bradley J. Stevens or Joel F. Newell, members of the Jennings Strouss Bankruptcy, Restructuring, & Creditors’ Rights Department.
ABOUT THE AUTHOR
Joel F. Newell | Read Bio
Bradley J. Stevens | Read Bio
Will Bassoff, Summer Associate
About Jennings, Strouss & Salmon, P.L.C.
For almost 80 years, Jennings Strouss has been dedicated to providing clients with strategic legal guidance to help them seize every opportunity. The firm is well-known for its rich heritage, commitment to community, and long-lasting relationships. We have a deep understanding of business and law. When you work with us, you’ll have a team of legal experts who are dedicated to your vision of success.
Through our offices in Phoenix, Peoria, and Tucson, Arizona, and Washington, D.C., we leverage resources both regionally and nationally to serve our expanding client base. Jennings Strouss is deeply rooted in each of our locations’ legal and business communities, and is especially instrumental in helping shape the dynamic growth of Arizona and many of its institutions. The firm promotes a pragmatic, results-oriented approach, coupled with a healthy, well-managed, and friendly atmosphere of collaboration.
Our primary areas of practice include advertising and media law; agribusiness; automobile dealership law; bankruptcy, restructuring, and creditors’ rights; construction; corporate and securities; eminent domain and condemnation; employee benefits and pensions; energy; environmental; estate planning and probate; family law and domestic relations; finance; healthcare; insurance defense; intellectual property; labor and employment; legal ethics; litigation; medical malpractice; mergers and acquisitions; professional liability defense; real estate; surety and fidelity; and tax.
The post But the Homestead Protection Increased to $250,000 appeared first on Jennings Strouss.