Tennessee Restricts Interest on Child Support Arrearages

This may come as a shock to you, but some people get behind on their child support payments.  Some people get really, really behind on their child support payments.  When this happens, the person who is supposed to be receiving child support can go to court and have the missing payments turned into a judgment for a child support arrearage, and have the payor held in contempt.
This judgment is pretty much like any other judgment.  You can use it to inflict all kinds of anguish on the payor of support, like seize bank accounts, put a lien on their property, and garnish their wages.  Under the previous law, the judgment would gain 12% compound interest every year until it is paid in full.  The high interest rate was supposed to motivate people to pay off the judgement as quickly as possible, so the child would have the support they need.

A new law in Tennessee has changed all that.

 

Child support judgments no longer gain interest

On April 17th, 2017, our Governor signed into a law a bill that eliminates interest for all judgments for child support arrearages.  There can still be interest on the judgment if the judge finds reasons why interest should accrue, but the interest rate can be no more than 4%.

So if the high interest rate motivates people to pay and it gets more money to the child, why would they change this?

The law was proposed by the Tennessee Attorney General’s Conference because they felt that the 12% interest was so brutal that it was causing a sense of hopelessness in people trying to pay off these arrearages.

Here’s what actually happens:  Most of the time (not always) people who are struggling to pay child support are people with lower incomes.  Suppose you have a guy who makes $1500.00 per month, but he’s supposed to pay $500.00 per month in child support.  He gets behind, so the mother takes him to court and gets a $10,000 judgment against him for the arrearage.  Under the old law, the 12% interest would add $1,200.00 to the judgment every year, which means he has to pay an extra $100 per month just to pay the interest.

So, you take a guy who’s having a hard time paying $500.00 per month, and tell him he now has to pay at least $600.00 per month, but that’s not enough to even begin to work on the $10,000 he owes.  Can you think of any reason this guy wouldn’t feel a little hopeless?  On top of all that, since he’s behind on child support they’re going to take away his driver’s license, professional licenses, and report the missed payments to the credit bureaus so he can’t get a loan or a better job.  Because that helps him pay more, right?

 

Lower interest might mean more payments

The thought is that if we remove the punishing amount of interest, perhaps people will actually try to pay down the judgments and the result will benefit the children more.  Will it work?  Time will tell.

 

What’s wrong with the law?

The new law already has some problems, however.  The law gives the courts no guidance whatsoever in how to determine whether there should be interest, or how much.  The law only says “the court shall set the rate at which interest shall accrue after consideration of any factors the court deems relevant”.   What factors would be relevant?  Nobody knows.  What’s going to happen is judges across the state are all going to be giving very different and inconsistent rulings on this, and it’ll be up to the Appellate Courts to try to figure out how to make things more consistent.  In the mean time, it’s going to be hard for lawyers to advise their clients on what’s going to happen in court.

 

Call for help

If you have a case that involves child support, whether its a divorce, custody dispute, or even just a child support modification, contact me to see how I can help you resolve your problem.