Most states obligate a parent who owes past due child support to pay that support out of a personal injury settlement if they receive one. A lot of this legislation has been the result of an increase in litigation creating new case law since the 1990s. Courts have had to intervene when a “deadbeat” mom or dad received substantial compensation due to pain, suffering and misfortune, and the receiving parent made a claim for all or part of it, according to the website SupportGuidelines. Unfortunately, no federal laws govern this eventuality and the provisions of state laws vary somewhat from jurisdiction to jurisdiction.
Most states treat personal injury settlement proceeds as income when calculating child support. In 1997, in the case of Harbison v. Harbison, Alabama determined that a settlement paid out at the rate of $1,000 a month for 10 years was part of that parent’s monthly income. Pennsylvania and New York have come to the same conclusion, according to the website SupportGuidelines.
Some states count settlement proceeds as income but hold them safe from garnishment. SupportGuidelines reports that in 1992, Michigan agreed that a parent’s settlement money was income but it was not subject to wage withholding in the case of Tulloch v. Flickinger. Illinois ruled in 1997 that settlements paid out in installments were income, but lump sum payments were not because they are the result of extraordinary circumstances. Even with periodic installments, only the portion of a settlement representing lost wages is income in Illinois, not the part that is compensation for pain and suffering.
New Jersey and Pennsylvania have passed legislation that obligates personal injury attorneys to pay past due child support amounts, if any, out of awards they recover for their clients, according to the legal website Avvo. New Jersey will place a lien against the proceeds if you owe child support and that lien has to be satisfied before the remainder of the settlement is paid out to you.
In New Jersey, if your personal injury proceeds are less than what you owe in child support, it will all go to satisfy your child support arrears, according to Avvo. Other states consider this unfair. The MacElree Harvey Law Firm in West Chester, Pennsylvania, indicates that after deducting the costs of litigation from your proceeds in that state, you get the next $5,000 and then the balance goes to pay off your child support arrears.
Enforcement measures only come into play if you are not current with your child support obligation. If you are, the state won’t interfere unless your child’s other parent files a lawsuit asking to have your proceeds counted as income so your child support can be recalculated, most likely resulting in a higher child support obligation.