By Howard Fischer
Mail | Twitter: @azcapmedia

PHOENIX - Unable to kill it at the ballot box, a group of lenders, debt collectors and their attorneys is asking a court to void new voter-approved protections from creditors.

The lawsuit filed in Maricopa County Superior Court contends the wording of Proposition 209 is so "vague'' and "unintelligible'' to make it legally unenforceable. And while the legal complaint deals mainly with one particular provision, the challengers want the entire law struck down.

That move will get a fight from Healthcare Rising AZ, the union-backed organization that put the measure on the ballot and got it approved last month by a margin of close to 3 to 1.

"We do not believe this will be a successful argument,'' Jim Barton, the group's attorney, told Capitol Media Services.

Proposition 209 was billed largely as a measure to cap annual interest medical debt at no more than 3%. That compares with prior law at 10%.

But the measure has other far-reaching provisions.

First, it allows anyone who declares bankruptcy to protect to $400,000 in the value of a home, up from $240,000.

Similarly, up to $15,000 of possessions are shielded from seizure by creditors. That figure is now $6,000. And up to $25,000 in equity in a motor vehicle also is protected, compared with $12,000 under the old law.

And then there's a provision limiting the amount of someone's disposable income that could be seized under garnishment actions.

The challengers clearly are not happy with the changes that voters ratified.

"By increasing the exemptions and reducing the garnishment rates on all types of debt, Prop 209 effectively makes a substantial amount of outstanding debt in Arizona uncollectable because many judgment debtors' assets are no longer reachable through these collection actions,'' wrote attorney Brett Johnson on their behalf.

That argument did not win the day at the ballot box. So now the plaintiffs are saying the wording of what debts are affected is too confusing to let the measure stand.

Central to that is the effective date.

The measure does spell out that it applies prospectively only, meaning it does not affect contracts entered into and legal actions prior to Dec. 5, the date the election results were certified, and it was formally declared enacted.

But Johnson said that language only creates "fatal confusion'' in what is and is not affected.

For example, he said, it leaves questions about debts that were incurred before the effective date but for which garnishment actions had not yet commenced.

Johnson said it is so confusing that those who deal with such debt actions have offered different interpretations of how all of that applies. And that "ambiguity,'' he argued, will harm everyone connected with debt collections.

"In addition to increasing borrowing costs because lender will be less likely to legally collect what they are owed in a timely manner, Prop209 creates substantial confusion for creditors, debtors, garnishees, attorneys, courts, judges and anyone else involved with the debt collection process,'' he argued.

And Johnson said that creditors who don't interpret the initiative language correctly can be held liable under laws governing the activities of debt collectors.

Consider, he said, what happens if it turns out that garnishment actions on contracts that existed before Dec. 5 must be administered under the new rules. That not only forces those involves - including the debtors - to amend their paperwork but also could require creditors to send out full or partial refunds from previously withheld funds.

Barton, for his part, said there's nothing particularly confusing about the language - and certainly nothing that would provide the legal basis to entirely void what voters have approved.

Johnson has won at least a preliminary victory of sorts.

Maricopa County Superior Court Judge John Blanchard has issued a temporary restraining order spelling out that, at least for the time being, the provisions of Proposition 209 cannot be applied in enforcement actions occurring after Dec. 5 in cases where the underlying contracts were entered into prior to that date. But the judge has set a hearing for this coming week to hear evidence.

It's not just the lenders, debt collectors and their attorneys who want legal relief. Johnson also is representing two homeowner associations which routinely go to court to collect unpaid dues from homeowners and have current garnishment proceedings underway.