Debt Compromise: A Giveaway
or Good Strategy?
Presented by:
Joan Kennedy
Angela Anton
Moderator:
Jacqueline Mull
Debt Compromise in North
Carolina Child Support Offices:
PUBLIC ASSISTANCE DEBT
REDUCTION POLICY
Joan Kennedy, Director
Mecklenburg County Child Support Enforcement Department
NCGS 110-135 provides opportunity for
noncustodial parents (NCPs) who owe Public
Assistance (PA) arrears to reduce that debt when
the NCP:
• Owes a minimum of $15,000 in PA arrears;
• Enters into an agreement with CSE to make
twenty-four (24) consecutive monthly
payments on a timely basis for both current
support and an amount toward arrearages;
and
• Abides by the terms of the agreement.
Selection Process
• ACTS identifies eligible NCPs quarterly and
makes a Debt Reduction Arrears Report
available to local offices
• First Report issued in January 2006
Sample Report
The Process
• Caseworker contacts assigned NCPs to assess
financial ability to make the agreed upon
payments.
– NCP contact letter is used for initial contact
• Consent Order created if agreement to pay is
reached.
• Upon judge’s signature, copy is retained in
the court file
Sample Letter Verbiage
Due to a recent change in the law, you may be eligible for a reduction in the
amount of past due support owed under the terms of your court order. By
agreeing to consistently pay your current support due and additional amount
to arrears for a 24 month period, the arrears you owe that are designated as
public assistance debt may be reduced by two thirds (2/3) at the end of the 24
month time frame.
If you are interested in finding our more information on this change, please
contact _____________ at telephone number _________ between the hours
of _________ and _______.
• Case notes are added to the child support
database, and “Mail Worklist” item is added.
• Central Office Distribution Unit monitors
compliance with the order.
• If NCP fails to comply, Distribution Unit
notifies the caseworker via system note “DEBT
REDUCTION DEFAULT”.
• Caseworker contacts NCP and attempts to
renegotiate compliance.
• If renegotiated successfully, case renotifies
Distribution Unit for continued monitoring.
Compliance Benefits
• If NCP pays consistently for 24 consecutive
months, Distribution Unit reduces the
remaining PA arrears by two-thirds.
• Ex. Docket # 99CVD12345 covers a case owing
$25,000 in PA arrears. Agreement reached to
pay ongoing support and arrears at
$100/month.
-At the end of the 24 months agreement, arrears are
assessed at $22,600.
• The reduction of the PA arrearages is
calculated as follows:
$22,600 x 2/3 = $15,074 total arrearage
reduction
The Results
• Most jurisdictions have not aggressively
pursued the option presented by this policy.
• Causes include philosophical differences of
some local leadership who have not made it a
priority.
• Causes also include reduced staff to focus on
implementation.
• An additional cause includes lack of awareness
of the policy option.
The Challenges
• Gaining local leadership support for aggressive
pursuit of debt reduction
• Training staff on availability of this option and
on implementation strategies
• Dedicating staff to implement policy in an
environment of budgetary constraints driven
by the economic downturn.
Implications for the future
• Opportunity to strengthen relationships with
NCPs as partners in the management of their
child support cases.
• Opportunity to recoup costs incurred by the
State when providing public assistance to
families in need.
• Improves performance of State’s child support
program and increases the earning of federal
incentive funds.
DEBT COMPROMISE—A GIVEAWAY
OR GOOD STRATEGY?
ARREARAGE COMPROMISE PROGRAM
JEFFERSON COUNTY
LOUISVILLE, KENTUCKY
ARREARAGE COMPROMISE PROGRAM
FEDERAL AND STATE SUPPORT FOR
COMPROMISE OF ARREARAGES
– Office of Child Support Enforcement (OCSE) Policy
Interpretation Questions (PIQ) 99-03, 00-03 and
05-01.
– OCSE Strategic Plan FY2005-2009.
– Cabinet’s Child Support Memorandum No. 5 dated
August 19, 2002.
ARREARAGE COMPROMISE PROGRAM
GOALS
– Assist non-custodial parents who have large
arrearages owed to the State by reducing the
amount owed in return for consistent payments
for a specified period of time.
– Change the perception of the Child Support
Division as merely a collection agency to an
agency with which a parent can have positive
interaction.
– Increase arrears collections.
ARREARAGE COMPROMISE PROGRAM
TARGETED CASES
– Arrearage owed to the Cabinet for Health and
Family Services (CHFS) for child support, foster
care and/or birthing expenses
– High pay order in TANF case with arrearage owed
to the CHFS (E.g., default judgment case)
ARREARAGE COMPROMISE PROGRAM
– Formerly incarcerated obligors
– Cases with no payment ordered on the arrearage
(E.g., emancipated child)
– Cases with ongoing current support if requested
by obligor
ARREARAGE COMPROMISE PROGRAM
METHODS
– Special Court docket
– Case-by-case
• Walk-ins/Phone calls/Referrals from
outside agencies
• Caseworker review
• Reports (to find the cases that have fallen
through the cracks)
ARREARAGE COMPROMISE PROGRAM
JEFFERSON COUNTY APPROACH BEGINNING
AUGUST 18, 2008
– Caseworker review and there is a balance owed to
the CHFS for child support, foster care arrearage
and/or birthing expenses.
– Case is forwarded to Legal Caseworker pursuant to
the following guidelines:
• The caseworker did not take any action and no court
action is pending.
ARREARAGE COMPROMISE PROGRAM
• The amount owed is between $10,000.00 and
$15,000.00 and there are no wages or no wage
payments at the time of review.
• The amount owed is over $15,000.00
regardless of wages or wage payments.
• The obligor has multiple cases, owes over
$10,000.00 and the maximum amount under
the CCPA limits is being paid.
ARREARAGE COMPROMISE PROGRAM
Cases are referred to the Garnishment
Department, however, pursuant to the following
guidelines:
• The amount owed is under $10,000.00 and is owed to
the custodial parent, other N-KTAP payee or the CHFS
for child support, foster care arrearage and/or birthing
expenses.
• The amount owed is between $10,000.00 and
$15,000.00 and there are wages and/or current wage
payments at the time of review.
ARREARAGE COMPROMISE PROGRAM
Once the case is forwarded to the Legal
Caseworker, the following steps take place:
• Case is fully audited to determine the amount of
arrearage.
• Letter to obligor prepared, case reviewed by the
assigned attorney and, if approved, letter and
Agreement sent to the non-custodial parent.
ARREARAGE COMPROMISE PROGRAM
• Sample Agreements
-- Current and arrears
-- Arrears only
• Amount to be compromised:
--25% at six months
--50% at 12 months
--80% at 24 months
• If there is no order for a payment on past-due support
in either situation, an Agreed Order to pay a periodic
amount on the arrearage is sent along with the
Arrearage Compromise Agreement.
ARREARAGE COMPROMISE PROGRAM
• The agreement contains the estimated balances at each
level. The balances are figured by taking the
percentage off the existing balance and giving credit for
the ordered amount multiplied by 26 weeks, 52 weeks,
then 104 weeks (if an 80% compromise has been
offered).
The lump sum offer is either the sum of payments over
52 weeks or the 50% estimated balance, whichever is
greater.
ARREARAGE COMPROMISE PROGRAM
• EXAMPLE:
Arrearage only case of $20,000.00 owed to the Cabinet and
there is an Order to pay at $35.00 per week. If the $35.00 per
week is paid for the first six months (26 weeks), the $20,000.00
becomes $14,090.00 ($20,000 less $5,000.00 (25%) less $910.00
(26 weeks x $35.00). If the $35.00 per week is paid for the next
six months, the $20,000.00 becomes $6,135.00 ($14,090.00 less
$7,045.00 (50%) less $910 (26 weeks x $35.00). If the $35.00
per week is paid for another year, the $20,000.00 becomes
$135.00.
• Bottom line: For payments totaling $3,640.00 over a period of two
years, the obligor actually gets a credit of $19,865.00!
ARREARAGE COMPROMISE PROGRAM
• When the agreement is returned, the Legal Caseworker
sets review dates at 26 weeks, 52 weeks and/or 104
weeks for compliance with the agreement.
• If the agreement is not returned, the case is reviewed
for enforcement and referred to the appropriate
department.
ARREARAGE COMPROMISE PROGRAM
• At each review date, the Legal Caseworker meets with
Financial Services/Accounting Department for
adjustments to the account.
• If the six-month review reflects non-compliance with
the Agreement, the remaining diaries are closed out
and the non-custodial parent is notified that the
Agreement has terminated. The case is reviewed for
enforcement and referred to the appropriate
department.
ARREARAGE COMPROMISE PROGRAM
 STATISTICS
485 Agreements mailed out (Total arrears = $8.9 million)
177 returned (36%)
Of the 177, 118 are making consistent payments or took
the lump sum offer (67%)
10 lump sum payments totaled $30,687.00
30 have completed and 23 of those continue to pay
Highest beginning balance: $72,412.77
Highest balance on a completed Agreement:
$33,666.47 (Reduced to $2,500.00 in two years)
ARREARAGE COMPROMISE PROGRAM
NEW APPROACHES
– Veteran’s Groups
– Drug Court participants
– Homeless Court
– Offender Re-entry Programs
– Day Reporting Center referrals
ARREARAGE COMPROMISE PROGRAM
 CONTACT INFORMATION
• Jeff Henry, Legal Caseworker, [email protected]
Presented by:
Angela Anton
Assistant Jefferson County Attorney
Child Support Division
315 West Muhammad Ali Boulevard
Louisville, Kentucky 40202
(502) 574-8356
[email protected]