debt compromise: a giveaway or good...

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, DirectorMecklenburg 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 theamount of past due support owed under the terms of your court order. Byagreeing to consistently pay your current support due and additional amountto arrears for a 24 month period, the arrears you owe that are designated aspublic assistance debt may be reduced by two thirds (2/3) at the end of the 24month 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 renotifiesDistribution 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


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.


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.


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)


– Formerly incarcerated obligors

– Cases with no payment ordered on the arrearage (E.g., emancipated child)

– Cases with ongoing current support if requested by obligor


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)


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.


• 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.


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.


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.


• 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.


• 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.


• 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!


• 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.


• 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.


STATISTICS485 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)


NEW APPROACHES

– Veteran’s Groups

– Drug Court participants

– Homeless Court

– Offender Re-entry Programs

– Day Reporting Center referrals


CONTACT INFORMATION • Jeff Henry, Legal Caseworker, [email protected]

Presented by:Angela AntonAssistant Jefferson County AttorneyChild Support Division315 West Muhammad Ali BoulevardLouisville, Kentucky 40202(502) [email protected]

mailto:[email protected]

mailto:[email protected]

debt compromise: a giveaway or good...

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