Child Support Liens and How They May Affect Your Personal Injury Settlement
Possibly the most complicated issue related to seeking compensation for your North Carolina car accident is understanding and dealing with the different types of liens that may be attached to your settlement. As you may know, liens can greatly affect the amount of money you actually receive from a personal injury claim. Thus, it is important to have a clear understanding as to how each type of lien can affect your recovery proceeds.
Child support liens are just one of the many types of liens that can have an effect on your recovery. Generally, if you receive a recovery for a personal injury claim and are past due on child support, the Department of Health and Human Resources or the other parent of your child may seek a lien against your personal injury recovery.
How Are Child Support Liens Perfected?
North Carolina places a priority on a parent’s ability to receive payment for overdue child support. The state has done so by allowing child support liens to attach to an array of recoveries. The aggrieved party, however, must take several steps in order to have their child support lien attach to a recovery. Before a child support lien can be established, a court order must be issued stating that support payments are in fact past due. The court order must also state the amount of child support that is past due. Either the parent or the Department of Health and Human Services can seek the court order.
Additionally, the parent or Department of Health and Human Services will need to send a notice of the lien along with a certified copy of the court order to either you, your insurance company, or your attorney. The lien will then attach once the notice and a copy of the certified court order are received.
It is also important to note that the lump sum amount of your recovery must be at least $3,000 in order for a lien to attach. If your recovery is less than $3,000, a child support lien will not be able to attach. Therefore, if you recover only $2,999, the child support lien holder will receive nothing from your recovery.
Listed below are three general requirements needed for a child support lien to be established against a personal injury recovery:
1. Written notice must be given to you, your insurance carrier or your attorney.
2. The notice must include the certified court order stating that you are in fact delinquent on child support and must also state the amount that is past due.
3. Your recovery must be for a lump sum amount greater than or equal to $3,000.
Preventing or Reducing a Child Support Lien
Being injured in a car accident can be traumatizing, to say the least. Bills can begin to pile up and stress can mount as your injuries may prevent you from working. The good news is that North Carolina allows for potential modification of your child support obligation when injuries may prevent you from working. The bad news is that courts do not like giving child support modifications, and these can be difficult to obtain. It is important to move for a child support modification as soon as possible. Child support modifications should be sought before your next support payment is due, as these payments are “vested” (cannot be changed) at the due date. When you or your attorney file for a modification of child support, you will need to show that there is a “compelling reason” for the modification. Essentially, this means that the court will want to see that your accident has caused some form of physical or mental disability that prevents you from working. If the court decides that you do qualify for a child support modification, the lien will not likely attach to your recovery.
When Should You Negotiate a Child Support Lien?
Generally speaking, you should always try to negotiate with a lien holder who has an interest in your personal injury recovery. Child support liens are unique, however, because the negotiations are usually with the other parent of your child. Child support liens are generally best negotiated when the lien amount is more than your recovery. Under these circumstances, you may not receive any of the proceeds of your settlement. When this occurs, you will want to contact the person who is seeking the child support lien to ask for a reduction. It is paramount that you explain to the lien holder that the case may not be worth pursuing unless they reduce the lien amount. The lien holder may be willing to reduce the amount so they at least receive some amount of compensation. If the lien holder agrees to a reduction, you will be obligated to pay the remaining amount of past due support, as the reduction and payment of the lien cannot be accepted as payment in full. Lastly, whenever a lien holder agrees to a lesser amount, you or your attorney should always request that agreement in writing.
Whenever a child support lien attaches to your personal injury recovery, it is important to know how to calculate the lien holder’s share. Child support liens are one of the easiest to calculate, as they are subordinate to most other liens and are taken after attorney’s fees are deducted. Furthermore, these liens are not capped as to the amount they can receive from a recovery. As previously mentioned, child support liens will not attach to a recovery of less than $3,000. There are two key scenarios that should be examined in order to understand how these liens are calculated:
1. Your recovery is $3,000 or greater, and the proceeds cover the full amount of your child support lien.
Consider the following example: Jason receives a $20,000 settlement for his personal injury case. Jason’s attorney received the normal contingency fee of 1/3 of the settlement in the amount of $6,666.67. Jason also has a physician lien attached to his settlement in the amount of $2,000. Lastly, Jason has a $3,000 child support lien attached to his recovery. The calculation would be as follows:
Attorney Fee: – $6,666.67
Physician Lien: – $2,000.00
Child Support Lien: – $3,000
Amount to Client: $8,333.33
In the example above, the child support lien will be paid in full because there were sufficient funds remaining after attorney’s fees and the physician lien were deducted.
2. Your recovery is $3,000 or greater, but it does not cover the full amount of your child support lien.
Consider the following example: Jason receives a settlement of $20,000. Jason’s attorney received the normal contingency fee of 1/3 of the settlement in the amount of $6,666.67. Jason has a physician lien attached to his settlement in the amount of $2,000. Lastly, Jason has a child support lien in the amount of $25,000 attached to the recovery. In this instance, the calculation would be as follows:
Attorney Fee: – $6,666.67
Physician Lien: – $2,000.00
Child Support Lien = $11,333.33
Amount to Client = $0.00
In this example, the child support lien will only receive $11,333.33 of the $25,000. Whenever your child support lien is less than your recovery, the lien holder will receive the entire remaining balance after attorney’s fees and all other liens are deducted. Thus, under these circumstances, you are not likely to receive any of the recovery proceeds. Also, when your child support lien is greater than your recovery, you should always try to negotiate the lien amount (please see section above).
As you are now probably aware, many different kinds of liens can attach to your recovery proceeds. Each lien can have a different effect on how your recovery is disbursed. Child support liens are distinctive because they are generally subordinate to other liens. In other words, physicians, Medicare, Medicaid and most all other types of liens will receive their share of the recovery proceeds first. With this being said, child support lien holders will still likely receive a portion of the recovery due to most liens being capped at either 1/3 (one-third) or 1/2 (one-half) of the net proceeds. Thus, it is important to know the cap amount for each lien attached to your settlement.
Although child support liens may be one of the easiest to calculate, liens in general can be very complex. It is highly recommended that you seek the advice of an attorney when dealing with liens, as they can help guide you through this inevitable maze.
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