Many people go through a divorce, receive a money judgment against their former spouse for something other than child support or spousal maintenance, and then do not know what to do with it when the other former spouse does not pay the judgment. Unlike a child support judgment or a spousal maintenance judgment, the State of Arizona will not help you enforce the judgment and you must do so yourself. Different rules apply to different kinds of judgment, but this article is only about a regular money judgment, such as for property.
The first thing you should do with a money judgment is record it with the county recorder. Often, the best choice for your second step in collecting a judgment is a wage garnishment. This depends on whether the judgement debtor has a wage-earning job. Arizona state law limits the amount that you can garnish from the other party’s paycheck. Federal law also limits what a judgment creditor may garnish from a judgment creditor’s paycheck, but federal limits are the same as Arizona’s limits. Creditors can only garnish nonexempt wages, and the amount they can take is generally limited to 25% of net pay.
The players in a wage garnishment are the court, the judgment creditor (the person who has the judgment against the other person), the judgment debtor (the person who has a judgment against him or her), and the garnishee (the judgment debtor’s employer).
A wage garnishment is an order from a court that a judgment creditor serves on the garnishee, called a writ of garnishment. The writ of garnishment requires the judgment debtor’s employer to withhold a certain amount of money from the judgment debtor’s paycheck and send this money directly to the judgment creditor.
A creditor holding a regular money judgment can start a garnishment proceeding when he or she has a judgment signed by the court. Certain other types of creditors, such as the IRS, the Department of Revenue, a person to whom you owe child support, or an entity holding a defaulted student loan, have different rules.
Arizona law limits how much money a judgment creditor may take from a judgment debtor’s paycheck through a wage garnishment. A court may issue a writ of garnishment of no more than 25% of the judgment debtor’s non-exempt net earnings; or the amount of a judgment debtor’s non-exempt net weekly earnings that exceed 30 times the federal minimum wage. "Net earnings" means the judgment debtor’s wages minus deductions that the employer makes that the law requires, such as income tax withholding. "Non-exempt" earnings means income that is not exempt pursuant to law. Examples of income that is exempt pursuant to law include Social Security Disability, VA disability, and child support. There are other examples, but these are the most common examples.
The judgment debtor also has a right to request a hearing to contest the validity of the garnishment. The judgment creditor can also use the hearing to ask the court to lower the amount that the garnishee withholds from 25% to 15% of his or her net earnings. Also, only 25% of a judgment debtor’s net earnings is subject to garnishment. This means that two judgment creditors may not garnish 25% of the judgment debtor’s earnings apiece; only 25% of the judgment debtor’s earnings is subject to garnishment no matter how many judgment creditors are seeking a wage garnishment.
A writ of garnishment is a hassle for many employers and some may rather terminate an employee instead of continue to comply with the writ of garnishment. However, pursuant to federal law, the garnishee may not terminate the judgment debtor for one garnishment but, federal law does not protect a judgment debtor with two garnishments from termination. In Arizona, a garnishee cannot fire a judgment debtor because you have a child support withholding order. Employers may ask new hires, returning employees, or rehired employees to disclose whether they have an existing child support withholding order, but the employer cannot base any hiring or firing decisions on such information.
Not many family law attorneys do collection work on their clients’ judgments that are not for family support. If you have a money judgment to collect or have someone seeking to collect from you, contact Thomas A. Morton, PLLC for a consultation.
Arizona law divides a married couple’s property into two groups: community property and separate property. Community property is the property that belongs to the husband’s and wife’s marital community. Simply put, it belongs to both the husband and the wife. Separate property is property that belongs to one spouse only.
Arizona law presumes all property acquired by either spouse or both spouses from the date of marriage until the date that one spouse serves the other spouse with a petition for divorce or legal separation to be community property (except for property that was a gift to one spouse only, an inheritance by one spouse only, and most of a personal injury settlement or award). Upon divorce or legal separation, the court will equitably divide the community property. Usually, "equitably" will mean substantially equally. Under limited circumstances, when the normal equities of marriage have not occurred, the court may divide community property substantially unevenly. One example is if the spouses separate and live apart for several years, one spouse becomes a teacher during the separation, and then the parties divorce. In that case, the court may divide the teacher spouse’s retirement unevenly. The example from the Arizona Supreme Court is when spouses marry, the next day they buy a house together with one spouse’s separate property (money he had prior to the marriage), and two weeks later they file for divorce.
Also, property can change its characterization over time from separate property to community property or vice versa. Courts call this transmutation. This can occur by gift, such as when the spouses decide to refinance one spouse’s separate property house and sign a new deed accepting the property as community property. It can also occur by commingling, such as when one spouse deposits separate funds into a joint account and, over time, enough transactions occur to make it impossible to trace the separate funds. Community property can also become one spouse’s separate property, but this is much more difficult to prove and the spouse making this claim has the burden to prove it by a higher standard of proof than normal. When determining whether property has transmuted, Arizona courts use the inception of title rule, which says that property retains its characterization as separate or community unless the spouses undertake some affirmative action that changes the characterization, such as signing a new deed or comingling as discussed above.
Characterizing property as community or separate may seem straight forward (and usually is straight forward), but there are some potential complexities. One example is when the marital community expends funds or labor on improving or paying secured debt on one spouse’s separate property. The marital community may have a lien for the increased value and, in the case of community payments on debt secured by separate property, for the community funds spent to pay the secured debt. However, when a spouse spends his or her separate funds to improve community property, the law presumes the expenditure to be a gift to the marital community. A spouse must prove an express agreement to the contrary to overcome this presumption and must do so by a higher standard of proof.
Another complexity is the theory of quasi community property. When spouses marry in a non-community property state and move to Arizona, upon divorce Arizona courts will treat the spouses’ property acquired in the previous state of residence as community property if the property would have been community property had the spouses acquired it in Arizona. The quasi community property rule also applies when a creditor is attempting to collect a debt of one spouse incurred in another state if the debt would be a community debt if the spouse incurred it in Arizona. This means that if one spouse incurs a debt in a non-community property state and the couple then moves to Arizona, a creditor can collect against community property (such as either spouse’s employment income) if the debt would have been a community debt had they incurred the debt in Arizona.
This is just a basic overview of Arizona’s community property laws. It may answer many questions, but is by no means comprehensive. For example, this article does not address the characterization of employee stock options. You should seek an experienced family law attorney’s advice when determining issues like community property. Thomas A. Morton is an experienced family law attorney in Phoenix, Arizona who you may contact for a consultation on this subject.
Many people think that they will lose everything they own in a bankruptcy. However, a Chapter 7 bankruptcy does not require you to lose everything you own. The bankruptcy code and state law provide several exemptions for people in bankruptcy. With a little planning, many people can emerge from a Chapter 7 bankruptcy without losing their property. The following list includes all of the common exemptions under Arizona law.
BANKRUPTCY EXEMPTIONS FOR INDIVIDUAL DEBTORS
1. The following household goods and furnishings up to a total value of $4,000.00:
A. Dining room table and chairs
C. Living room chairs
D. Three coffee or end tables
E. Three lamps
F. Carpet or rug
H. Bed-table, dresser and lamp for each bed
I. Bedding for each bed
J. Pictures, paintings and drawings by debtor and family in frames
K. One television, radio or stereo
L. Radio alarm clock
O. Washing machine
P. Clothes dryer
Q. Vacuum cleaner
2. Food, fuel and provisions for six months
3. The following personal items:
A. Wearing apparel up to a total value of $500.00
B. Musical instruments up to a total value of $400.00
C. Pets, horses, milk cows, and poultry up to a total value of $800.00
D. Engagement and wedding rings up to a total value of $2,000.00
E. Library up to a total value of $250.00
F. Watch up to a value of $150.00
G. Typewriter, bicycle, sewing machine, family bible, burial lot, one shotgun or rifle or pistol for a total value up to $1,000.00
H. Vehicle up to a net value of $6,000.00 ($12,000.00 if disabled)
I. Prescribed prostheses including wheelchair
4. The following money benefits or proceeds:
A. Life insurance proceeds payable to a surviving spouse or child up to $20,000.00
B. The earnings of a minor child
C. Child support and spousal maintenance
D. Benefits from a health, accident or disability insurance policy
E. Money from a claim for the destruction of exempt property
F. Cash surrender value of life insurance policy maintained for two years or more with a dependant for a beneficiary
G. Annuity at least two years old with dependant as beneficiary
H. Claim for damages relating to exempt property
I. One bank account up to $300.00
J. Retirement plans under Sections 401(a), 403(a), 403 (b), 408, 408A, 409 and 457 of the Internal Revenue Code of 1986, but NOT an alternate payee pursuant to a qualified domestic relations order and NOT contributions made within 120 days of filing bankruptcy
5. Teachers’ school equipment
6. Tools of a trade actually used in a trade up to a value of $5,000.00
7. Farm equipment of a debtor whose primary income is from farming up to a value of $2,500.00
8. Arms, uniforms and accouterments required by law to be kept by debtor
9. A house, condominium, mobile home (plus the land on which the mobile home sits) up to a net value of $150,000.00 (or proceeds from the sale thereof) OR prepaid rent in the amount of $2,000.00
In addition family law cases, I also defend credit card debt collection cases. Often, divorcing couples are left with credit card debt that they cannot pay because they have just went from having a certain amount of money to support one household to supporting two households with the same amount of money. Almost always, plaintiffs in credit card collection cases cannot prove their case, whether the plaintiff is the original creditor or an entity that has purchased the account. This is because of poor record keeping. Often, the only evidence the plaintiff can produce is a small amount of monthly statements that show little if any purchases; a card holder agreement that lists no parties, is undated, and is not signed; and an affidavit from a paralegal claiming to be the plaintiff's custodian of records that lists no documents, but claims that he or she has reviewed the records and makes a conclusory statement about the balance owed. Clearly, this is insufficient to prove the plaintiff's case. However, many trial court judges often grant judgment to the plaintiff anyway, declining to hold them to the standard of proof. Often, trial court judges will grant the plaintiff summary judgment on such flimsy evidence (summary judgment is granting judgment without a trial because, on the evidence presented in the motion for summary judgment, any reasonable juror would find for the moving party and the moving party is entitled to judgment as a matter of law).
Fortunately, the Arizona Court of Appeals has finally published a decision clearly stating the requirements to grant summary judgment in a credit card debt collection case. In Wells Fargo Bank v. Allen, Wells Fargo, the plaintiff, sued the Allens for collection of a credit card debt. Wells Fargo presented one monthly statement showing no purchases; an unsigned card holder agreement that did not identify the parties to the agreement; and a conclusory affidavit from a custodian of records that listed no documents, but claimed that the custodian had reviewed records and made a conclusory statement about the amount owed. The trial court granted summary judgment.
The Arizona Court of Appeals first addressed the summary judgment standard generally. It held that a plaintiff cannot shift the burden of proof to the defendant by filing a motion for summary judgment. It is the party moving for summary judgment who bears the burden of persuasion. To meet its burden, a plaintiff seeking summary judgment must submit undisputed admissible evidence that would compel any reasonable juror to find in its favor on every element of the claim. In a credit card debt collection case, a general avowal in an affidavit by a paralegal claiming to be a custodian of records (without attaching or describing those records or otherwise providing the court a means to evaluate the accuracy of the calculation of the balance due) does not demonstrate by admissible evidence that the plaintiff is entitled to judgment as a matter of law, even if the defendant does not dispute any of the facts.
Hopefully, the Allen decision has made the outcome of credit card debt collection cases more predictable.
Thomas A. Morton, P. L. L. C.
2916 N. 7th Avenue, Suite 100
Phoenix, Arizona 85013
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All information on this website is not, and is not intended to be, legal advice. You should consult an attorney for advice regarding your individual situation, as each case is different and contains different facts. I invite you to contact me and welcome your calls, letters and e-mail. Contacting me does not create an attorney-client relationship. Please do not send any confidential information until you establish an attorney-client relationship with me.
Attorney Thomas A. Morton is located in Phoenix, Arizona, and serves clients throughout Maricopa County, including Tempe, Mesa, Scottsdale, Glendale, Peoria, Gilbert, Chandler, Goodyear, Surprise, Avondale, Cave Creek, Carefree, New River, Anthem, Black Canyon City, Sun City, Laveen, Buckeye, Goodyear, Litchfield Park, Tolleson, Youngtown, Queen Creek, Guadalupe, Fountain Hills, Paradise Valley, Wickenberg, Apache Junction, and El Mirage.