According to a recent article in the Charlotte Observer, 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 in mailing out paper checks. The Treasury Department has decided to begin making government benefits payments electronically in March of 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.
States have the power to put a freeze on bank accounts of those who owe child support. A relatively recent ruling by the Treasury Department now authorizes states to freeze Social Security, disability and veterans’ benefits that appear in bank accounts. Once the decision to eliminate paper checks is implemented some 275,000 people could lose access to all of their income.
This presents huge problems for a certain segment of the population, the often poor men behind on their child support. There are many instances where these back payments are decades old and concern child who are long since grown. Much of the money owed is for interest and accumulated fees.
Of the money that is collected most will go to governments, not to the children of the men who were owed the money. States are permitted to keep this money as repayment for money they spent on providing welfare services for these children.
Though the goal is a good one, cracking down on deadbeat dads not paying the money they owe to their children. Unfortunately, the method of going about this 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. By allowing states to seize federal benefits, these men may very well be left penniless.
Beginning next march the Treasury Department will deposit all federal benefits directly into bank accounts or load them onto prepaid debit cards. Regardless of the chosen method state governments will be allowed to reach the money. According to the Treasury Department these electronic payments are expected to save the government $1 billion over the next 10 years. The savings result from the shipping costs: about $1 to mail a check compared with about 10 cents for an electronic transfer.
States are currently only permitted to garnish only 65% of the benefits an individual is entitled to before they are disbursed. This same limit does not apply once the money is in an account and states are then allowed to have banks freeze it.
Other federal agencies are calling the practice into question, starting with the Department of Health and Human Services. DHHS does not want states to collect child support so aggressively that poor people are left with nothing, spokesman Ken Wolfe says. Though details are scarce, Wolfe said HHS is developing guidelines for states to “make sure we’re not putting someone into deep poverty as a result of an automatic collection.”
DHHS says they have research indicating that the policy could make life harder for people collecting government benefits. People who owe large amounts of child support are almost exclusively poor. The figures are stark: among those owing $30,000 or more, three-fourths had no reported income or income of less than $10,000.
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