CS 700-1 Payment in Full at 100% or Discounted Settlement
11/85 Revised 05/16/16 Training Completed 05/27/16
Generally, the Office of Recovery Services\Child Support Services (ORS\CSS) must treat all current support with equal priority, so a payment received will be divided among current support debts in different cases proportionate to the size of the monthly current support debts. Similarly, we generally treat monthly or partial payments towards arrears in different cases by dividing them equally (not proportionate to the size of the debts) among eligible arrears debts. There may be an exception, such as we can only apply income withholding payments to cases set up for income withholding.
However, negotiating settlements to pay cases in full is done on a case by case basis, even when a non-custodial parent (NCP) has multiple cases. This is because the custodial parent (CP) on a Non-IV-A case may have a different opinion about acceptable terms for a settlement than CSS has on a IV-A or IV-E arrears-only case, and the CP on a Non-IV-A case must agree in advance to the terms of a discounted settlement.
Although federal distribution rules require that all debts on a case must be paid in
full at the same time in order to use the discounted settlement method (see
below), it is possible to settle on just one case at a time, in a multiple case
Payment in Full Methods
There are two methods in which the NCP may settle the arrears in full to bring the account current. They are listed below in the order of CSS priority.
1. Payment in full at 100% of the amount owing. Demand payment in full every time you discuss repayment options with the NCP. Do not offer a discounted settlement or discuss other repayment options until you have decided that the NCP is unable to pay 100% of the debt in full.
2. Payment in full at a discounted lump sum figure. If you have decided that the NCP is unable to pay 100% of the debt in a lump sum, you may offer the NCP a settlement at a discounted rate,* if appropriate. Any discounted settlement offer is time limited and must include current support for the present month if current support is charging on the case.
NOTE: CIC cases: Only offer a discounted lump-sum settlement if the arrears amount is over $1000.00.
If the NCP indicates that s/he does not have access to immediate funds (e.g., bank account, and credit cards) to pay the debt in full, instruct the NCP to attempt to borrow from a financial institution, relative, or other source. You may require the NCP to provide written verification that s/he applied for a loan from up to three lending institutions and was denied the loan at each institution.
If the NCP needs time to liquidate assets or arrange for a loan, continue to enforce payment of the obligation by income withholding at either 50% of the NCP’s disposable income or up to 100% of the current support obligation amount (25% of the current support obligation amount on CIC cases), and possibly take other enforcement actions. The NCP may request a computed assessment to decide the arrears payment while s/he secures the funds to pay the debt in full.
If the NCP has the ability to borrow the money or to pay the debt in full but refuses to do so, you may enforce the obligation by income withholding at 50% of the NCP’s disposable income.
NOTE: When accepting lump-sum payments for $2500.00 or more on an arrears debt, such as when the NCP is paying the debt off in full or you have negotiated a discounted settlement, inform the NCP that s/he must pay with cash, credit card, or a certified check from a financial institution. Money orders are not considered to be “certified” because the purchaser can cancel them. An advance on a debit card is also not considered to be certified funds.
Additionally, UCA 70A-3-311(5) states: “Merely writing a statement on a check which declares that a child support obligation is paid in full is not sufficient to bind the recipient who endorses the check. Child support obligations are considered owing unless paid in full or otherwise ordered by a tribunal.” If a NCP or payer writes “paid in full” on a check to ORS, but the payment does not settle the debt in full according to Volume 2 procedures, the balance of the debt is still due and owing.
Accounting places a 21-day hold on all personal checks, money orders or electronic checks received for $2,500.00 or more. The hold is placed on the transaction with a future release date (21 days). This hold allows sufficient time for the payment to clear the bank and/or ensure that the NCP does not place a stop payment on the check before it is allocated and disbursed to the family, another state or another state government agency.
In a Non-IV-A case, if a NCP is unwilling to provide certified funds for a settlement or arrears payment over $2500.00, attempt to ensure the current support for the month will be met by a separate payment from the one that will be held by Accounting.
If the NCP is on income withholding for current support, this will cover the current support obligation for the month.
If the NCP is not on income withholding and insists on paying by personal check, ask the NCP for one check to cover the current support due for the month and a second check for the arrears settlement amount. This will allow the arrears payment to be held for 21 days without delaying the current support.
Procedures for Payment-in-full
1. Demand immediate payment in full at 100% of the amount owing.
Always demand that the NCP pay the full amount of the debt(s) in a one-time lump-sum payment. If the NCP indicates s/he does not have immediate funds available to pay the debt in full, ask the NCP to seek a loan or liquidate assets. You do not need to code ORSIS for a settlement that is 100% of the debt. The payment will be posted as “RCM” and will be distributed according to standard priority posting rules.
NOTE: Before you can satisfy any Non-IV-A sum-certain judgments, the CP must sign the Agreement to Accept Settlement of Non-IV-A Child Support Arrearage (form C05C) waiving the claim to collect interest.
2. Payment in full at a discounted lump sum figure. If you have decided that the NCP is unable to pay 100% of the case balance in full but the NCP may be able to pay the case in full at a lump sum reduced rate, consider offering the NCP a discounted settlement. If the case is an incoming interstate case, the initiating state must approve a discounted settlement before accepting payment from the NCP.
NOTE: CIC cases: Only offer a discounted lump-sum settlement if the arrears amount is over $1,000.00.
Before you offer a discounted settlement to the NCP on Non-IV-A and some IV-A debts, the CP must approve the offer by signing the Agreement to Accept Settlement of Non-IV-A Child Support Arrearage (form C05C). The portion of the IV-A debt that is more than the life-to-date unreimbursed IV-A cash assistance issued to the CP is considered Non-IV-A debt. The LTD URA (Unreimbursed Assistance) field on the 427 Benefit History Screen indicates the amount of life-to-date IV-A assistance in which the State has not been reimbursed. If the life-to-date unreimbursed amount is less than the balance of the AFDC and TEMP debt you are negotiating for settlement, you must obtain the CP’s approval before offering a discounted settlement on this type of IV-A debt.
Due to federal distribution rules you may not settle the IV-A debts and not the Non-IV-A debts. All debts on a case must be paid in full at the same time in order to use the discounted settlement offer.
NOTE: A CP may forgive some or all of a non-IV-A arrears debt with a signed and notarized written statement.