Arizona Prop 209: Interest Cap, Garnishment, and Exemptions

Arizona Proposition 209, known as the Predatory Debt Collection Protection Act, took effect on December 5, 2022, after roughly 72% of voters approved it. Arizona Prop 209 caps interest on medical debt at 3% per year or less, limits wage garnishment by private creditors to 10% of your disposable earnings, and raises the homestead exemption on your primary residence to $400,000 in equity with annual inflation adjustments. It also expands protections for your car, your bank account, and certain household property.

The 3% Cap on Medical Debt Interest

Before Prop 209, unpaid medical bills could accrue interest at up to 10% per year under Arizona’s general interest statute. Under the revised A.R.S. § 44-1201, the ceiling on medical debt interest is now the lower of two figures: 3% per year, or the weekly average one-year constant maturity Treasury yield published by the Federal Reserve.¹ The Treasury yield is measured as of the calendar week before you first received a bill for the services. The cap also applies to any judgment entered on medical debt, so a creditor who sues and wins cannot add interest above the limit.

“Medical debt” under the statute is broad. It covers any debt from health care services, medical products, or medical devices, including care from licensed health care institutions, private offices and clinics of a wide range of licensed providers, and ambulance services.¹ Emergency room visits, specialist consultations, dental work, prescriptions filled through a provider, and medical equipment all fall under the cap. Interest on non-medical debts stays at the longstanding 10% default unless the parties agreed in writing to a different rate.

Wage Garnishment Limits

The garnishment change is where most Arizona residents feel the biggest difference. Under the old rules, a creditor could garnish up to 25% of disposable earnings, matching the federal baseline. Under A.R.S. § 33-1131, Prop 209 cut the garnishable amount to 10%, meaning 90% of your take-home pay is now protected from private creditors.²

There is a second layer on top of that percentage. A creditor also cannot touch any amount of weekly disposable earnings equal to or less than sixty times the highest applicable minimum wage, whether that minimum is set by federal, state, or local law.² The creditor takes the smaller of the two calculations, which often shrinks the actual garnishment below 10%.

Here is how the math works. Arizona’s minimum wage as of January 2026 is $15.15 per hour, so sixty times that rate equals $909 per week. If you earn $1,000 in weekly disposable income, two calculations run side by side: 10% of $1,000 is $100, and $1,000 minus $909 is $91. Because the creditor must use the smaller figure, only $91 can be garnished. Under the old federal-baseline rules, that same worker could have lost $250 per paycheck. For someone earning at or near minimum wage, the sixty-times floor often means nothing can be garnished at all.

When the Garnishment Cap Does Not Apply

The 10% limit has significant carve-outs. If you owe child support or spousal maintenance, the standard protections do not apply. Instead, half of your disposable earnings are exempt from garnishment for support orders, so up to 50% can be taken.²

The protections also do not apply to debts owed for state or federal taxes, or to orders issued under Chapter 13 of the federal bankruptcy code.² Federal student loan garnishments and other collections on debts owed to federal agencies follow their own rules and are not subject to state garnishment limits. Prop 209 primarily shields you from garnishment by private creditors, hospitals, and credit card companies rather than government collectors.

Social Security benefits are protected separately under federal law. Section 207 of the Social Security Act generally exempts these benefits from garnishment, levy, or attachment by private creditors, with the main exceptions being federal tax levies and court-ordered child support or alimony.³ That protection applies regardless of state law.

The $400,000 Homestead Exemption

Under A.R.S. § 33-1101, the homestead exemption jumped from $250,000 to $400,000 in equity. It protects any adult Arizona resident’s primary home from forced sale to satisfy a judgment, as long as the owner’s equity does not exceed the exemption amount.⁴ The exemption covers a house, a condominium, a cooperative, a mobile home, or a mobile home plus the land it sits on. Only one exemption is allowed per person or married couple, and for a married couple the $400,000 cap applies to combined equity.

Starting January 1, 2024, the exemption adjusts annually for inflation based on the consumer price index (all urban consumers, U.S. city average for all items), rounded up to the nearest $100.⁴ The adjustment uses the percentage change between August of the prior year and August of the year before that. The actual exemption in 2026 is likely somewhat higher than the $400,000 base, though the adjusted number is set by formula rather than published in the statute itself.

Vehicle, Personal Property, and Bank Account Exemptions

Prop 209 also raised the motor vehicle exemption under A.R.S. § 33-1125. Up to $15,000 in equity in one vehicle is protected, or $25,000 if you or a dependent has a physical disability.⁵ Like the homestead exemption, the vehicle amount adjusts annually for inflation starting January 1, 2024.

Other personal property exemptions stayed at their prior levels but still offer meaningful protection:

Clothing up to $500 in fair market value
Engagement and wedding rings up to $2,000
Firearms up to $2,000
A computer, bicycle, sewing machine, or family bible up to $2,000 combined
Musical instruments up to $400
Prostheses and wheelchairs, fully exempt for the debtor or any dependent
Domestic animals and household pets, fully exempt

These amounts cover property used for personal, family, or household purposes. They do not cover items held for business use.⁵

Bank account protection sits in a separate statute. Under A.R.S. § 33-1126, a total of $5,000 held in a single account at any one financial institution is exempt from garnishment or levy, though the institution can still assess normal service charges.⁶ This exemption also adjusts annually for inflation starting January 1, 2024, using the same CPI formula.

How Prop 209 Fits With Federal Law and Bankruptcy

Arizona’s garnishment protections are much stronger than the federal floor. Under the Consumer Credit Protection Act, the federal limit allows garnishment of up to 25% of disposable earnings, or the amount exceeding thirty times the federal minimum wage of $7.25 per hour, whichever is less. When a state law is more protective, the state law controls. Arizona’s 10% cap and sixty-times-minimum-wage floor both clear that bar, so state-level protections govern private-debt garnishments.²

Bankruptcy works the same way in Arizona’s favor. Arizona has opted out of the federal bankruptcy exemption set under 11 U.S.C. § 522, which lets a state require residents to use state exemption amounts rather than the federal ones.⁷ Prop 209’s numbers are generally far more generous than the federal defaults. The federal homestead exemption is roughly $31,575 as of April 2025, compared to Arizona’s $400,000-plus; the federal motor vehicle exemption is about $5,025, compared to Arizona’s $15,000-plus.

Debts That Predate December 5, 2022

Prop 209 took effect on December 5, 2022, after election results were certified.⁸ The law includes a savings clause stating that it applies “prospectively only” and does not apply to “rights and duties that matured” before the effective date. That language has drawn litigation, because reasonable people can disagree about when a right matures in a collection case. Exemption amounts, for instance, are generally claimed at the time a creditor tries to collect rather than when the debt was originally incurred, so the new protections may still apply to older debts in some enforcement situations.

The medical debt interest cap ties the Treasury yield measurement to the date you first received a bill, which effectively limits that cap to bills generated after the law took effect.¹ An Arizona court of appeals has affirmed the validity of the increased exemptions. If you are dealing with a debt or judgment that straddles the effective date, application depends on the specific protection you are claiming and how a court reads the savings clause, so it is worth getting specific legal advice rather than assuming the old limits still apply.

1
Arizona Legislature. Arizona Revised Statutes 44-1201 – Rate of Interest for Loan or Indebtedness; Interest on Judgments; Definitions
2
Arizona Legislature. Arizona Revised Statutes 33-1131 – Definition; Wages; Salary; Compensation
3
Social Security Administration. SSR 79-4: Levy and Garnishment of Benefits
4
Arizona Legislature. Arizona Revised Statutes 33-1101 – Homestead Exemptions; Persons Entitled to Hold Homesteads; Annual Adjustment
5
Arizona Legislature. Arizona Revised Statutes 33-1125 – Personal Items
6
Arizona Legislature. Arizona Revised Statutes 33-1126 – Money Benefits or Proceeds; Exception
7
Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
8
Arizona Judicial Branch. Arizona Judicial Branch Self-Service Center – Proposition 209 Information Sheet