According to an article on Cleveland.com, an important change could soon have an unexpected impact relating to child support debts. The change has come about as an attempt to reduce money spent by the federal government mailing out paper checks. The Treasury Department has decided to start making government benefits payments electronically as of March 2013. This will put a stop to the paper checks that many rely on to shield a portion of their monthly income from states that attempt to collect back child support.
Starting in 2013 the Treasury Department will deposit all federal benefits directly into bank accounts or load them onto prepaid debit cards. These electronic payments are expected to save the government $1 billion over the next 10 years by not having to issue paper checks. Regardless of the chosen method, state governments will be allowed to reach the money. Currently states are only permitted to garnish 65% of the benefits an individual is entitled to before the money is disbursed. This same limit does not apply once the money has been distributed to an account or a prepaid debit card when the states can demand that banks freeze the funds.
States have long had the power to put a freeze on the bank accounts of those who owe child support. A relatively recent ruling by the Treasury Department permits states to freeze Social Security, disability and veterans’ benefits that appear in bank accounts. Once paper checks are eliminated some 275,000 people delinquent on child support could lose access to all of their income.
This presents huge problems for a certain segment of the population, typically poor men behind on their child support. There are many instances where these back payments are decades old or concern children who have long since grown up. Usually in these cases the bulk of the money owed is for interest and accumulated fees.
Of the money that is collected, most will go to state governments, not to the children of the men who are owed the money. The rationale is that the states should be allowed to keep this money as repayment for money they spent on providing welfare services for these children.
Though the goal is a good one, the method will likely produce complicated and even counterproductive effects. Many of the men on the receiving end of this new collection practice are already facing financial ruin in the form of eviction, foreclosure and inability to pay other bills. The figures are stark: among those owing $30,000 or more, three-fourths reported either no income or income of less than $10,000. By allowing states to seize federal benefits, these men may very well be left penniless.
By Connor Alexander, Law Clerk, Meriwether & Tharp, LLC