Arizona Debt Relief: Your Guide to State Laws and Managing Debt

Home to one of the country’s most iconic natural landmarks, the Grand Canyon, as well as the desert metropolises of Phoenix and Tucson, the sunny state of Arizona is bursting with natural beauty and urban delights. Unfortunately, Arizonans are also in quite a bit of debt, ranking 29th in the nation when it comes to student loan debt.

Thankfully, the state of Arizona does offer numerous protections and solutions for consumers who find themselves in serious debt. This guide will cover the state’s debt collection laws and the statute of limitations on various debts in Arizona, as well as debt relief programs, options for paying off your debt and filing for bankruptcy.

• Debt in Arizona: At a glance
• Debt collection in Arizona
• Arizona debt-relief programs
• Payday lending laws in Arizona
• Tips to tackle debt in Arizona
• Filing for bankruptcy in Arizona

Debt in Arizona: At a glance

Debt collection in Arizona

If you’re unable to make payments on your debt, creditors can sell your account to a debt collector. Debt collectors purchase overdue debt balances for pennies on the dollar and then attempt to collect the debt in order to make a profit. If your debt is sent to collections, you should know that there are federal and state laws in place regarding how collectors can contact you and what they can do to recover their money.

Under the federal Fair Debt Collection Practices Act (FDCPA), debt collectors generally cannot:

• Contact you before 8 a.m. or after 9 p.m.
• Contact you if they know you’re represented by an attorney; they must contact your attorney instead
• Contact anyone but you or your spouse regarding your debt, although they can contact third parties to request your contact information
• Contact your place of work if they know, or are told, that your employer prohibits this type of communication
• Make any threats

Debt collectors must send you a written notice within five days of the first contact that includes the amount you owe, the name of your creditor and information on how to dispute the debt, which you must do within 30 days of receiving the notice. If you notify a debt collector in writing that you wish for them to cease all communication with you, they must comply.

However, in Arizona, creditors and collections agencies may pursue legal methods to collect any debt you owe. They must first file a lawsuit and appear in court, but if they’re granted a judgment against you, the state of Arizona gives them the right to pursue the following actions:

• Garnishing your wages. In Arizona, creditors can typically garnish 25% of your disposable earnings, which is calculated as your income minus taxes and government benefits, such as retirement and long-term disability.
• Placing a lien on your property. Creditors in Arizona may place a lien on real estate in order to collect debt. With a lien on the title of your property, creditors can require that you pay off your debt before collecting any money from the sale or refinancing of that property. A property lien in Arizona expires after 10 years.
• Levying your personal property or wages. Creditors can place a levy on both personal property and wages under Arizona law, meaning they can seize that property in order to cover unpaid debts. Creditors may also seize money from your bank account to cover unpaid debts, although the first $300 in your account is protected against seizure by law.

Responding to collection letters

If you’re contacted by a debt collection agency, respond in writing asking that they send you a validation notice that includes the following information:

• Amount owed
• Source of the debt
• Name and contact information of the debt collection agency
• How to dispute the debt

If you don’t believe the debt is yours, or you’re unsure, follow the procedures outlined in your validation notice for disputing it. You have 30 days after receiving the validation notice to send a letter disputing the debt. You can also inform the debt collector that you don’t want to be contacted again.

If the debt does belong to you, you have several options in Arizona that are outlined below, including debt settlement, refinancing or debt consolidation.

Regardless of whether the debt is yours, if you believe that the debt collector is acting unlawfully, you should contact the Arizona attorney general’s office. You can file a report online, or call one of the following numbers, depending on your location:

• Phoenix: 602-542-5763
• Tucson: 520-628-6504
• Anywhere else in the state: 800-352-8431

Understanding Arizona’s statute of limitations

Before responding to a debt collector, you should understand the statute of limitations in Arizona. The statute of limitations is the amount of time a creditor or debt collector has to take you to court regarding the money you owe. Once this time period passes, your debt doesn’t disappear, but creditors can no longer pursue legal action with regard to the debt. Knowing whether the statute of limitations on your debt has passed or is close to passing will help you decide which course of action to take.

In Arizona, your statute of limitations “clock” begins when the creditor “accelerates the debt,” or demands payment in full. The statute of limitations on written contracts, which includes most debt, is six years. However, the statute of limitations on taxes owed is longer — 10 years — and the statute of limitations on contracts for sale, such as a car repossession, is only four years.

When the statute of limitations on your debt passes, the debt becomes time-barred and the collector can no longer file a lawsuit against you to recoup it. This means the legal remedies described above, such as wage garnishment or seizure of property, are no longer on the table. Without the possibility of legal action, you might feel less inclined to repay your debt.

Arizona debt-relief programs

When it comes to Arizona debt-relief programs, you have a number of options. The U.S. Department of Justice offers a list of approved credit counseling agencies in Arizona, and these offer everything from financial education to debt management programs. Included on that list is Summit Financial Education, an Arizona-based non-profit offering assistance and education to consumers with unmanageable debt. The National Foundation for Credit Counseling (NFCC) can also help you connect with a credit counselor free of charge.

For Maricopa County residents with car title loans, the Arizona Community Foundation and MariSol Credit Union provide the Lend a Hand program, which offers free credit counseling and budget help as well as the chance to qualify for a $2,000, fee-free, low-interest loan from MariSol Credit Union to pay off your expensive car title loan.

There are also a number of national debt relief programs, such as Freedom Debt Relief, National Debt Relief, and CuraDebt, that will help you settle your debt with collectors and make monthly payments on your behalf. These companies are often able to settle your debt for significantly less than what you owe, although a percentage of your monthly payments on the settled debt will go to the debt relief company. Beware of debt settlement companies that charge upfront fees, commissions of 50% or higher, or promise to settle your debt for a specific amount.

Payday lending laws in Arizona

Payday loans are illegal in the state of Arizona. These loans come with extremely high interest rates and very short loan terms (typically until your next payday), making it easy to miss a payment, accrue massive interest fees and fall into unmanageable debt in a short period of time. Payday loans are considered predatory, and for that reason, they are no longer legal in Arizona.

That being said, Arizona doesn’t really place a legal limit on the interest rate that can be charged by a lender. While Arizona law suggests a 10% interest rate, it also states that a different rate is valid, as long as it was agreed to in writing. So while payday lenders can’t legally operate in Arizona, lenders technically can still charge predatory rates.

Tips to tackle debt in Arizona

If you’re in need of debt relief in Arizona, you have several options. Make sure to consider the cost of each option in the long run before making a decision.

Consolidate your debt

Debt consolidation in Arizona involves taking out a loan in order to pay off existing debt from multiple accounts, thus consolidating your various debts into one loan.

This option simplifies the repayment process by giving you one loan and one payment due date to keep track of. It can also lower your monthly payments by lengthening your repayment period and/or lowering your interest rate. Keep in mind that decreasing your monthly payments by lengthening your repayment period means that you’ll be spending more on interest over time, so debt consolidation won’t necessarily save you money. For that reason, this option is best for people who can’t manage their current payments. If you have good credit and can qualify for a debt consolidation loan with a lower interest rate than what you’re currently paying, debt consolidation can lower your monthly payment and save you money over the length of your loan.

To qualify for loans with affordable rates, you’ll typically need a good credit score, although people with fair credit may still be able to consolidate their debt at a decent rate. If you have bad credit, you might be able to qualify for debt consolidation loans from alternative lenders, but they’ll likely come with a high interest rate.

Refinance

Refinancing, popular for auto loans and mortgage loans, involves taking out a new loan with more favorable terms in order to pay off your old loan. This is also an option for student loan debt, but refinancing federal student loans might mean you lose flexible repayment options and/or loan forgiveness programs that often come with federal student loans, so check to see if you qualify for and are interested in those first. Typically, borrowers will look for a loan with a lower interest rate when refinancing so that they can save money on interest and pay off their debt more easily.

Securing a lower interest rate is one of the best ways to pay down debt quickly, but you’ll need to have good or excellent credit in order to qualify for most refinancing. You’ll also want to weigh the benefits of refinancing against the costs of loan fees. Pay attention to the terms of the loan you’re offered through refinancing, as it might come with a longer repayment period, which can actually cost you more over time, even with a lower interest rate.

Use a balance transfer card

If you have a lot of credit card debt, a balance transfer credit card can help you pay off a significant amount in a short period of time by lowering your interest rate — sometimes all the way down to 0%. You typically need good credit to qualify for a balance transfer credit card.

Balance transfer credit cards come with attractive introductory interest rates that last for a pre-set period of time. One example might be a credit card that offers a 0% annual percentage rate (APR) on balance transfers for the first 12 to 21 months. As long as you pay off the balance in full before the promotional period ends, you can save a lot of money on interest, which allows you to get rid of credit card debt more quickly. Note that most credit cards charge a fee on balance transfers, usually 3% of the transfer amount, so weigh that against the money you’d save.

However, if you’re unable to pay off your balance before the introductory period ends, your remaining balance will get hit with the credit card’s regular APR, which could be quite high. For this reason, it’s crucial to only transfer an amount you’re sure you can pay off in time.

Filing for bankruptcy in Arizona

If you’ve considered all your options, spoken with a credit counselor and you still find you’re unable to make payments on or settle the debt you owe, it may be worth looking into bankruptcy, which can be used as a tool to recover from serious debt. However, it costs money to file for bankruptcy, and doing so will have a lasting impact on your credit, likely resulting in you pay more for loans in years to come.

There are two types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcy results in the sale of most of your property, which is then used to pay back your debt. It’s designed for people who don’t have the money to repay their creditors, even at a lower cost. Chapter 13 bankruptcy doesn’t involve the sale of your property as long as you’re able to complete a three- to five-year debt repayment program as ordered by the court.

If you’re considering bankruptcy, you can seek legal counsel through the National Association of Consumer Bankruptcy Attorneys. The Arizona District of the U.S. Bankruptcy Court also provides information on filing for bankruptcy without an attorney. Finally, make sure to connect with a credit counselor through the NFCC to discuss your situation before deciding to file for bankruptcy.

The bottom line

Dealing with overdue balances and high interest rates is stressful, especially when you don’t have the money to make your payments. Luckily, Arizona offers its residents plenty of options for debt relief, no matter how dire your situation.

The information in this article is accurate as of the date of publishing.