Can Creditors Take My Personal Injury Settlement in Arizona?

The personal injury experts at Gage Mathers often speak to clients who need a Scottsdale or Mesa personal injury attorney because they have suffered an injury, accident, or impairment that wasn’t their fault and have incurred substantial costs and financial pressures.

We recognize that thousands of people injured in accidents juggle huge expenses during their recovery and in the long term. The good news is that, provided you take steps to protect your settlement, it will be safeguarded from creditors and help you get back on your feet personally and financially.

Getting the right legal advice and support will ensure you receive the compensation you are entitled to, covering all costs associated with your injury and resolving any credit issues you have encountered. 

Personal Injury Claims and the Impacts on Your Finances

As we’ve noted, a large proportion of people who have been injured or hurt in an incident due to a third party’s negligence incur vast costs and may be unable to work for a few weeks or months or incur life-changing injuries that affect their ability to earn an income.Many people rely on credit cards, loans, or help from friends and family to cover those immediate costs while waiting for a personal injury claim to conclude. 

Our skilled, experienced lawyers work to pursue compensation to the full extent of the law, repaying not only the financial costs of your injury but also compensating you for other aspects such as suffering, trauma, stress, and changes to your quality of life.

Are there caps on personal injury settlements in Arizona? State law prohibits any cap, which ensures you can claim full compensation–Arizona is one of only five states that considers ‘damage caps’ unconstitutional. We negotiate with insurance providers, culpable third parties, and legal representatives throughout the process and can often secure a successful compensation payment much faster than you may anticipate.

What Happens if a Creditor Tries to Claim a Personal Injury Settlement to Cover Debts?

In most scenarios, a personal injury settlement is exempt from a creditor’s lien. A lien allows a creditor to claim assets to repay an outstanding or overdue debt but is subject to strict rules.

Creditors might also attempt to take some of your personal injury compensation through a bank garnishment, where the bank is obliged to turn over your funds or allocate a proportion of each paycheck. However, this is not a foregone conclusion, and your settlement may be fully protected, regardless of whether the costs of your injury have forced you into bankruptcy. 

Creditors must apply for a legal judgment before they can attempt to enforce either a lien or a garnishment, and the courts will consider your circumstances and the impacts of your injury before making any decisions.

Does Arizona State Law Protect Accident Victims From Creditors?

In 2022, a new set of guidelines called the Arizona Proposition 209 came into force, helping to protect consumers from unfair debt collection, including those subject to creditor action to recover medical debts incurred following an accident.

Healthcare creditors cannot garnish all your wages, have a maximum 3% interest rate they are legally allowed to charge and must provide comprehensive information about your rights. In all cases, even if the creditor were successful, they can garnish up to a maximum of 10% of your disposable income, and only if you have sustained earnings of more than forty times the federal minimum wage.

When Can a Creditor Access Personal Injury Compensation?

Banks and other creditors must comply with limitations, including:

• A statute of limitations–creditors have a maximum time frame, usually six years, to apply for a garnishment ruling
• Restrictions on the types of income or accounts they can access, often including wage garnishments but excluding compensation payments
• Rules around disposable and non-disposable funds and the amount in the account in question on the ruling date

Many personal injury claimants are advised to deposit their compensation payment into a separate account, avoiding any ‘comingling’ of funds that could inadvertently mean their settlement is included in other funds that a creditor might potentially have access to–although, as we’ve indicated, this is often unnecessary. We recommend contacting our knowledgeable team as soon as possible for more information and help managing your financial position during a personal injury case!

About the Author

Joseph D'Aguanno

Guided by the belief that being a highly skilled specialist in a narrow field is better than being ordinary in everything, Joseph “JD” D’Aguanno leads Arizona’s best personal injury law firm in Phoenix, AZ. Having extensive cross-training in pre-litigation negotiations and trial lawyer skills, with decades of experience, JD strives to provide clients with the most valuable legal services a personal injury lawyer can provide. Under his direction, Gage Mathers Law Group is an award-winning personal injury law firm providing aggressive representation to victims of a car accident, medical malpractice, dog bite, motorcycle accident, and other injurious events. Gage Mathers is trusted by thousands of lawyers and clients throughout the country because of their reputation for getting clients the maximum compensation they deserve.

Years of experience: Over 23 years
Bar number: 020421
Location: Phoenix, AZ
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