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Arizona Voters Modify Creditors' Remedies with Passage of Proposition 209

Updated on 5/30/2024 by Nick Bauman and Andrew Jacobsohn. Originally posted on 11/30/2022.

UPDATED 5/30/2024: Prop. 209 became law on December 5, 2022, but was immediately challenged by the Arizona Creditors Bar Association and several other organizations as unconstitutionally vague and internally inconsistent. Prop. 209 contains a Saving Clause that states “[t]his act applies prospectively only” and lists three things Prop. 209 does not apply to: (1) “rights and duties that matured” before its effective date; (2) “contracts entered into” before its effective date; and (3) “the interest rate on judgments that are based on a written agreement entered into” before its effective date.  The plaintiffs argued that the Saving Clause was unconstitutionally vague because it did not enable a creditor to determine whether it was in or out of compliance.

The Superior Court determined on December 22, 2022 that the Saving Clause was not unconstitutionally vague and refused to enjoin the law from taking effect. The plaintiffs appealed.

On April 30, 2024, the Arizona Court of Appeals affirmed the Superior Court’s ruling. The court noted that the plaintiffs failed to adequately assert a facial challenge (i.e., that the Saving Clause was unconstitutional in all applications). Instead, the plaintiffs only challenged a narrow subset of judgments that stemmed from contracts formed prior to December 5, 2022. The court continued that even if the challenge to this subset was sufficient, the Saving Clause language was not unconstitutionally vague. And, while the contours of Prop. 209 may be subject to different interpretations, courts will need to resolve the “difficult questions about prospective application of the Act, including those involving wage garnishment proceedings,” in the context of the unique factual scenarios of individual disputes.  The court declined to provide more specific guidance about how Prop. 209’s prospective effect applies in specific situations.

As the Court of Appeals recognized, some unresolved legal issues will persist until courts further clarify the application of Prop. 209.  In the meantime, employers processing wage garnishments and creditors will need to carefully analyze whether the applicable rights and duties matured before the effective date of Prop. 209—December 5, 2022—and whether Prop. 209 otherwise applies to judgment collection efforts.

For more information about Prop. 209 or creditors’ rights, please contact Nick Bauman at or Andrew Jacobsohn at

On November 8th, Arizona voters approved Proposition 209, which significantly modifies the rights of creditors. Although the pre-election publicity focused mostly on medical debt, Prop. 209 changes how all types of debt can be collected against individuals. The initiative took effect on December 5, 2022.

Before passage of Prop. 209, interest rates for medical debt were treated the same as other debts under A.R.S. § 44-1201. The statute set the maximum rate at 10% per year, but provided that any other interest rate could be agreed to.

Effective December 5, 2022, the interest rate for medical debt will be capped at 3% per year, or the weekly average one-year constant maturity treasury yield—whichever is less. Importantly, the maximum allowable interest rates for other types of debt will not change.

Prop. 209 also significantly modifies Arizona’s property exemptions. Property exemptions are set by statute and protect certain types of property, up to certain dollar amounts, from unsecured creditors’ collection efforts. The property exemptions are also used in bankruptcy cases to protect certain assets (in certain amounts) from being used to pay creditors. Prop. 209 makes the following changes to Arizona’s property exemptions:


Current Exemption

Exemption Beginning Jan. 1, 2023

Homestead exemption



Household goods, furnishings, and electronic devices



Equity in motor vehicle



Equity in motor vehicle if debtor or debtor’s dependent has a physical disability



Money held in a personal bank account



These exemption amounts will be adjusted annually to account for cost-of-living increases. On January 1 of each year beginning in 2024, each exemption amount will be recalculated by measuring the percentage increase of the consumer price index from the previous year.

Finally, Prop. 209 limits the amount of a person’s wages that can be subject to debt collection by any creditor. Under current law, up to 25% of a person’s disposable wages is subject to garnishment by creditors (or 30 times the federal minimum wage, whichever is less). In the case of an order for the support of a person (e.g., child support), half of the debtor’s disposable earnings may be garnished. After Prop. 209 takes effect, only 10% of disposable wages will be subject to garnishment (or 60 times the highest applicable minimum wage, whichever is less). Prop. 209 does not affect garnishments pursuant to orders for the support of a person.

Prop. 209 makes changes to Arizona law that affect all creditors, not only holders of medical debt. It is important for creditors to understand these changes when executing a judgment or deciding whether to bring a lawsuit against an individual.

For more information about Prop. 209 or creditors’ rights, please contact Nick Bauman at or Andrew Jacobsohn at

Tags: Arizona Government Relations, Bankruptcy and Creditors' Rights
  • Nick  Bauman

    Nick Bauman is a trial court litigator whose practice focuses on commercial litigation, including partnership disputes, real estate litigation, contract disputes, business torts, and bankruptcy proceedings. Nick has experience in a variety of industries, including real estate ...

  • Andrew  Jacobsohn

    Andrew is an associate in the firm's Litigation Practice Group. Prior to joining the firm, he interned at a leading computer software company, and was a summer associate at the firm.

    Andrew received his J.D. from the Sandra Day O’Connor College of Law at Arizona State University. While ...

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