For creditors in Arizona, the debt collection landscape has been reshaped by the Predatory Debt Collection Protection Act (Proposition 209) and the court decisions that followed. Enacted in late 2022, the Act dramatically increased asset exemptions for debtors. Now, with key appellate rulings in 2025 providing clarity, creditors must adapt their enforcement strategies to navigate this new, more debtor-friendly environment. Understanding these changes is critical to maximizing recovery on judgments in 2026 and beyond.

The Game-Changer: Proposition 209’s Increased Debtor Exemptions

The core of Proposition 209 was to shield more of a debtor’s assets from seizure by creditors. The law significantly increased several key statutory exemptions, including:

• Homestead Exemption: Raised from $250,000 to $400,000 and now adjusts annually for inflation.
• Wage Garnishment: Limited the amount of disposable earnings that can be garnished, increasing the exempt portion a debtor keeps.
• Personal Property & Bank Accounts: Increased the exemption amounts for a debtor’s vehicle, household goods, and cash held in a bank account.

However, the Act included a “Saving Clause” stating it “applies prospectively only” and would not impact “rights and duties that matured” before its December 5, 2022, effective date. This left a crucial question for holders of pre-2022 judgments: which exemption levels apply?

When Do New Exemptions Apply? The Landmark Reilly v. Canale Ruling

The Arizona Court of Appeals provided a definitive answer in the 2025 case Michael K. Reilly v. Philip L. Canale. In Reilly, a creditor who had obtained and recorded a judgment lien in 2016 attempted to force the sale of the debtor’s home in 2023. The creditor argued their right to collect had “matured” in 2016, meaning the old, lower $250,000 homestead exemption should apply.

The court rejected this argument. It established a critical distinction between the substantive right to payment (the judgment itself) and the procedural right to enforce collection through a specific legal action, like a forced sale .

The court held that a creditor’s right to use a specific enforcement tool does not “mature” simply by obtaining a judgment . To lock in the exemption amounts in effect at a certain time, the creditor must have already initiated the specific enforcement proceeding (e.g., applied for a writ of execution) before the law changed . Because the creditor in Reilly waited until after the Act’s effective date to start the forced sale process, the debtor was entitled to the new, higher $400,000 homestead exemption.

Impact on Wage Garnishments and Other Enforcement Actions

This “proactive enforcement” principle was reinforced by a similar ruling on wage garnishments. The court found that even if a creditor had a writ of garnishment from before the Act’s effective date, the new, more generous wage exemptions applied to any pay period that occurred after the Act took effect. The reasoning was that the right to garnish wages from a future paycheck doesn’t mature until the wages are actually earned and the pay period arrives .

Even minor disputes with homeowners can result in disproportionately large liabilities due to attorneys’ fees and court costs.

Actionable Strategies for Creditors in 2026

The message from the courts is unmistakable: passive judgment holding is a high-risk strategy. Here are the key takeaways for creditors:

1. Proactive Enforcement is Essential: Simply having a judgment and lien is no longer enough to preserve the collection laws that were in effect when the judgment was entered. To maximize recovery, creditors must promptly and actively pursue enforcement actions like writs of execution and garnishment. Delaying enforcement means the debtor will benefit from the current, higher exemption amounts.
2. Re-evaluate Dormant Judgments: If you hold a judgment that predates December 5, 2022, but have not initiated collection, its potential value is likely lower than you once thought. Any new enforcement action will be subject to today’s increased exemptions, which may shield a significant portion of the debtor’s assets.
3. Strategize for Attorney’s Fee Recovery: While recovering attorney’s fees post-judgment is possible, Arizona law creates a critical distinction between fees for the garnishment action itself and fees for general collection efforts.
   • Garnishment-Specific Fees: The garnishment statutes provide the exclusive method for recovering fees incurred in the garnishment proceeding. These statutes only permit an award of fees against the debtor if the debtor is found to have objected “solely for the purpose of delay or to harass the judgment creditor”. This is a high bar that makes routine recovery of fees for preparing and litigating the garnishment itself difficult.
   • General Collection Fees: However, this strict rule does not apply to all post-judgment legal work. The court in Ironwood Commons Cmty. Homeowners Ass’n v. Randall, 439 P.3d 1193 (Ariz. Ct. App. 2019), confirmed that a creditor may still recover fees for general collection activities that are unrelated to the garnishment proceeding, such as preparing a judgment renewal, provided the original contract or the underlying judgment itself authorizes their recovery.

The practical strategy is twofold. First, ensure your underlying contracts and proposed judgments contain strong, clear language allowing for the recovery of all post-judgment collection costs and fees. Second, when seeking fees, carefully distinguish between garnishment-specific tasks and other general collection work to maximize your potential recoveryIn today’s Arizona, a judgment’s value is directly tied to the speed and diligence of enforcement. Check out 6 Ways to Collect a Money Judgment in Arizona. The era of waiting for a debtor’s financial situation to improve has given way to a new reality where swift, decisive action is paramount for effective debt collection.

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