In Arizona, a debt collector may not satisfy a judgment by directly seizing federal or state tax refunds. A debt collector can take your federal or Arizona tax refund money under certain conditions. Arizona also places other limitations on non-earnings garnishment, which may include portions of your tax refund.
Judgments and Garnishment
In Arizona, creditors must win a judgment against the consumer before attempting to garnish income or property. Arizona has two separate types of garnishment; earnings garnishment and non-earnings garnishment. In both types, the judgment creditor is the entity or person that has been granted a civil money judgment, the judgment debtor is the person who owes the money and the garnishee is the entity holding judgment debtor's money or property. Tax refunds fall under the non-earnings garnishment category and are subject to seizure if the money is in a bank account.
Non-Earnings Garnishment
In Arizona, non-earnings garnishment includes non-exempt money in bank accounts and personal property. The judgment creditor petitions the Arizona court for a writ of garnishment after obtaining a judgment against the debtor. The judgment creditor then presents the writ to the garnishee that is responsible for freezing funds or withholding property equal to the judgment amount. The garnishee must then notify the judgment debtor that the account is affected. If tax refunds are in the account at the time the writ is served, the refunds are subject to garnishment.
Exemptions
Arizona exempts certain funds and property from garnishment. For example, judgment creditors may not reduce your bank account to zero; a single account holder may retain $150 and a married account holder may retain $300 in the account. If your tax refund falls under these amounts, then it is safe from garnishment. Other exemptions include Social Security income, veteran's benefits, worker's compensation benefits and certain insurance proceeds, retirement income and pension benefits.
Options
Arizona law allows the judgment debtor to object to the garnishment and request a hearing within 10 days of receiving the garnishment notice from the garnishee. The judgment debtor must include the grounds for the objection, such as the fact that the bank account contains exempt funds. Other options to Arizona garnishments include filing for bankruptcy and working out a payment plan with the judgment creditor.
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