Unexpected expenses like medical costs, job loss, or an economic crisis can leave you struggling to pay bills. If you are in Arizona, here are a few steps to help you survive your debt dilemma:

Know Your Rights

Regain control of your financial situation by understanding your rights. Did you know that federal and state laws protect you from abusive credit collectors? 

The Fair Debt Collection Practices Act (FDCPA) is a federal law that prohibits debt collectors from using deceptive, unfair, or abusive practices to collect debts. In Arizona, state laws outline many of these protections and provide additional safeguards. 

For instance, under Arizona law, debt collectors must be licensed and bonded. They are prohibited from doing the following:

• misrepresenting themselves
• threatening actions or harassment
• contacting you at inconvenient times

If a collector violates these rules, you can report them to the Arizona Attorney General’s Office or even take legal action. 

Arizona exemptions:

• Arizona exempts some income from collection, such as 90% of wages for the head of household (A.R.S. § 33-1131).
• Up to $6,000 equity in one car is protected from most creditors (A.R.S. § 33-1125(8)).

Understand Legal Protections

Arizona has enacted laws to provide additional protections for consumers. For instance, the Arizona Fair Debt Collection Practices Act prohibits collectors from using oppressive or vindictive tactics. Violations can result in penalties. These include fines and license revocation for the collection agency. 

In addition, since 2022, changes have been enacted through the Proposition 209, which: 

• Limits the extent to which creditors can pursue outstanding medical debts
• Reduces the maximum interest rate on medical debt from 10% to 3%
• Increases various debtor property exemptions, including wages that are subject to garnishment 

Create a Debt Payment Plan

Here are some steps that you can take when you can’t pay your bills on time:

Assess Your Financial Situation

Start by listing your income, expenses, and debts. Create a budget to see where your money is going. Then, identify areas where you can cut back. Perhaps you could lessen your credit card usage? How about availing possible tax benefits? This will help you determine how much you can realistically allocate toward debt repayment.

Prioritize Your Payments

In Arizona, certain bills have more severe consequences if you miss out on payments. Therefore, you must pay these first: 

• Rent or mortgage: Arizona landlords can start eviction proceedings quickly (A.R.S. § 33-1368).
• Utilities: APS and SRP may disconnect power, especially in hot months.
• Auto loan: Missed payments can lead to repossession without warning (A.R.S. § 47-9609).

Also, bear in mind that Arizona law does not require notice before car repossession. Thus, pay your auto loan on time or communicate with your lender to avoid losing your vehicle.

Communicate with Your Creditors

Don’t wait for your accounts to go into collections. Reach out to your creditors as soon as you realize you can’t make a payment. Most creditors would be willing to work with you to create a payment plan, extend due dates, or offer temporary relief options. The important thing is to let them know that you are not hiding from them, and you are taking responsibility for your accounts.

Request Debt Validation

If a debt collector contacts you, request a debt validation letter. Under the FDCPA, collectors are required to provide this within five days of initial contact. This letter should include:

• the amount owed
• the name of the creditor
• how to dispute the incorrect debt information

Know the Statute of Limitations

In Arizona, the statute of limitations for debt collection varies depending on the type of debt. For example, credit card debt typically has a statute of limitations of six years. Once this period passes, collectors can no longer sue you to collect the debt. However, they may contact you for collection attempts.

Consider Your Options

Depending on the type and amount of debt, you might consider:

Arizona Note: To file Chapter 7 bankruptcy in Arizona, you must pass a means test based on your income and household size. A 2-person household in Arizona (2024) must earn under ~$70,000 to qualify automatically.

Explore Local Debt Relief Options

If you’re overwhelmed, consider seeking assistance from a credit counseling agency. They can also negotiate with creditors on your behalf. To ensure the agency’s reputation, it must be accredited by organizations such as the National Foundation for Credit Counseling (NFCC). There are several trusted nonprofit and legal organizations in Arizona that offer free or low-cost help:

• Arizona Financial Empowerment Partners: Offers budgeting help and debt counseling. 
• Community Legal Services (CLS): Free legal help with debt collection lawsuits, garnishments, and bankruptcy. Reach them through https://clsaz.org or call 800-852-9075.
• Take Charge America (Phoenix): HUD-approved credit counseling agency offering debt management plans (DMPs). Visit https://www.takechargeamerica.org

Avoid Scams and High Risk Solutions

Be cautious of scammers posing as debt collectors. These individuals may threaten legal action or arrest to coerce you into paying a debt you do not really owe. Some “quick fix” solutions like these can worsen your financial situation:

• Payday loans: Legal in Arizona, but interest rates can exceed 300% APR
• Title loans: Puts your vehicle at risk for short-term cash
• Debt relief companies that ask for large upfront fees

Therefore, you must always request written validation of any debt. Also, verify the legitimacy of the collection agency. Check licenses and complaints through the Arizona Department of Financial Institutions: https://dfi.az.gov

Rebuild and Protect Your Future

Once you’ve stabilized:

• Start a small emergency fund (e.g., $20/month)
• Monitor your credit at AnnualCreditReport.com
• Consider opening a secured credit card to rebuild credit
• Take financial literacy classes offered by local nonprofits or credit unions

If you’re unsure about your options or need legal advice, consult with an attorney who specializes in consumer debt issues. They can provide guidance tailored to your specific situation and help you explore all available avenues for relief.