Understanding the Financial Risks with Owing Child Support

Adam Rust

As a matter of principle, we want parents to provide for their children regardless of their circumstances. Kids do better with support, and that perspective extends to how we think about the level of financial resources they should receive. We think more is better, and the reverse is also true: less creates problems for their well-being.

Most parents, even those who owe child support, understand that principle. Yet no single reason can begin to explain why seventy percent of the nation’s 15 million child support cases are currently in arrears.

Tolstoy’s analogy from Anna Karenina that “happy families are all alike; every unhappy family is unhappy in its own way” applies here. We know that custodial parents are more likely to seek a remedy in court when the other parent finds a new partner, for example. Most conflicts can trace their roots to emotional pain.

Some people would argue that the child support system has fostered a new kind of debtor’s prison. If that is true, then it is a gulag covering a vast territory within our homeland. According to a 2014 study from the Council on Contemporary Families, noncustodial parents owe $114 billion in child support obligations.

Owing child support is a serious problem with drastic consequences. Punishments begin with relatively modest inconveniences such as the loss of the right to a passport, to challenges to basic aspects of daily life such as a driver’s license suspension, and all the way to incarceration. Many states consider it a felony to be more than $10,000 behind in child support; many obligors go to jail simply because they cannot afford to make the payments. All of that underscores why it is important to understand what it means to be late on child support.

The first question many people have is "can the money in my bank account be taken for outstanding child support debts?" The answer is "perhaps, it depends, certainly in some instances, but there are certain protections to help."

Garnishment of income

The courts will move quickly to garnish income. By federal law, child support agencies can ask an employer to garnish a portion of a worker’s disposable earnings.

However, obligors have certain protections. If he or she can prove that paying child support will make it impossible to cover basic living expenses, the courts must grant an accommodation. However, the rules aren’t too easy: the court will care if you might become homeless, but not if you might need to move to a more modest apartment.

The courts use “disposable earnings” to gauge a person’s ability to repay their child support debts. The government defines disposable earnings as wages received after subtracting for legally required deductions (Social Security, Medicare, unemployment tax, and employee retirement systems). However, under Title III of the Consumer Credit Protection Act, garnishments cannot take more than the lesser of a) 25 percent of disposable earnings or b) leave the worker with less than 30 times the federal minimum wage per week of work. Under the second criteria, a worker would have a right to keep at least $217.50.    

Garnishment tiers:

• Disposable earnings less than $217.50: no garnishment allowed

• Disposable earnings of between $217.50 to $290: up to $72.50

• More than $290 in disposable earnings: garnishment make take 25 percent of disposable earnings.

In some states, the law gives additional protections to obligors.  

The Department of the Treasury’s 2011 rule on the garnishment of federal benefits payments limited allowable sources of income to those derived in relation to employment:

• Social Security Disability Insurance

• Social Security retirement benefits

• Federal Employee Retirement System benefits

• VA disability benefits

• Railroad Retirement System benefits

Treasury’s rule protected means-tested benefits payments from garnishment.

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Attachments and Levies

If a court wants to capture funds inside a bank account, they can still do so by means outside of the garnishment process – most often by issuing an attachment on those assets.

Think of it like this: an attachment captures an existing asset, whereas a garnishment draws from a flow of funds.

An attachment is a strong instrument. Unlike with garnishment, where laws make sure that an obligor still has access to a portion of disposable earnings, levies have no such restriction. A court-ordered attachment can be levied against all of the assets in an account.

Obligors do have certain protections. Consumer credit laws protect bank accounts that receive cash flows from means-tested benefits programs from attachment orders. If your bank account holds funds that come from any of the following sources, then it cannot be levied:

• TANF (Transitional AID to Need Families)

• TAFDC: (Transitional Assistance to Families with Dependent Children

• EAEDC (Emergency Assistance for Elderly, Disabled, and Children)

• SSI: Supplemental Security Income

• Veterans’ benefits.

Also, if an obligor can prove that the account holds funds for another person, then those monies also receive protection from an attachment.  

An obligor cannot protect funds from attachment merely by co-mingling them with funds that come from protected sources.

A frozen bank account can still receive new deposits. New deposits become available for attachment.

Most states limit the duration that a levy attachment can remain on a bank account. In Massachusetts, for example, the attachment expires after 60 days - or earlier if the obligation is satisfied. California limits the number of times that a new attachment may be recorded to any one account in a particular 12-month period.

Obligors can take proactive steps to avoid losing all of their assets, starting with setting up a payment plan. You should not leave the country, fake your own death, or transfer all of your assets into Ethereum.

You should not consider this post as the opinion of a legal expert. You should refer legal questions to an attorney, preferably one with expertise in family law.

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Adam Rust has worked to defend consumers against harmful financial practices since 2005. He has written extensively about overdraft fees, payday lending, credit insurance, student loans, prepaid debit cards, high-cost installment loans, and subprime mortgage lending. He serves on the Board of the US Faster Payments Council. He is Director of Research at Reinvestment Partners in Durham, North Carolina. He is the author of BankTalk. He is the author of "This is My Home: Challenges and Opportunities of Manufactured Housing" and has testified to Congress on how to redress some of the problems with manufactured housing.