Debt Compromise: A Promising Tool to Ease Financial Burdens
Debt Compromise is a promising tool for child support agencies. Some states are starting to utilize this tool to assist noncustodial parents in decreasing or waiving arrears owed to the state. The majority of this debt is uncollectible, creating financial hardships for families as it diverts money away from the household.
I recently attended the ERICSA session, “Debt Compromise: Benefits to Families and States,” which featured a panel discussion led by Elaine Sorenson. Elaine Sorenson is a leader in this initiative at the federal level. Also, there were representatives from Georgia and Virginia present to discuss their state-level practices. Across different states, the application process for debt compromise programs requires noncustodial parents to provide extensive information. This includes applying for the program, submitting years of tax returns, prior and current employment information, bank account details, and other asset-related information. Once received and verified, a debt compromise team evaluates this information. They then determine whether to reduce the debt, waive it entirely, or set up a payment plan that aligns with the noncustodial parent’s income and expenses. It’s important to note that the specific processes and decision-making authority may vary from state to state.
Data Related to Child Support Arrears
The panel shared some staggering statistics on child support arrears. As of 2021, the total child support arrears certified by states and submitted to OCSE totaled a daunting $111.7 billion. On average, each case owed approximately $17,000. What’s concerning is that nearly 70 percent of these arrears were initially submitted to OCSE more than 10 years ago. Due to the age of the debt and that most of it is owed by noncustodial parents with low reported income, the panel believes a considerable portion of the debt is uncollectible. It’s essential to recognize large arrears balances may give the impression state child support agencies are not effectively doing their job. But this perception is not always accurate, especially when dealing with aging debt.
Impact of Debt Compromise Programs
Debt compromise programs have proven to be impactful in multiple ways. The panel’s research indicated that 88 percent of arrears certified as of January 2021 were submitted more than 5 years earlier. Almost 30 percent were submitted more than 20 years earlier. This raises the question again of whether this debt is realistically collectible. However, debt compromise programs have shown an increase in the willingness of non-custodial parents to engage with the child support program. Moreover, these programs have been found to lead to higher employment rates, increased earnings, and more consistent child support payments. When noncustodial parents know that their payments will directly benefit their children and not solely offset arrears, they are more likely to fulfill their financial obligations.
The Importance of Debt Compromise Programs
Debt compromise programs are vital in improving outcomes for noncustodial parents and their families. By reducing or waiving arrears, these programs encourage parents to make more consistent and timely payments, thereby alleviating financial hardships. In addition, debt compromise removes employment barriers that might have previously discouraged noncustodial parents from seeking better job opportunities. This, in turn, can improve relationships between parents and children, fostering a more stable and supportive family environment.
A Personal Account from South Carolina
In a program implemented in South Carolina, noncustodial parents were offered the opportunity to have up to $10,000 in state arrears forgiven if they completed a fatherhood curriculum. This example showcases the positive impact of debt compromise, as reducing indebtedness can alleviate hardship and tension, thereby improving parent-child relationships.
Encouraging Noncustodial Parent Participation
Debt compromise programs act as powerful incentives for incarcerated noncustodial parents to participate in educational programs, fatherhood initiatives, and employment or training opportunities offered by correctional facilities. Upon completion of these programs, debt is reduced or waived. This provides a light at the end of the tunnel, encouraging positive change.
Debt compromise programs are an essential tool states can utilize to alleviate the financial burdens on clients. Providing opportunities to reduce or waive arrears can also motivate parents. The end goals of debt compromise programs are creating more engagement with child support initiatives, helping those involved seek employment, and ultimately contributing to the well-being of their children. Although not mandated by the OCSE, states encourage and initiate these programs. Debt Compromise programs have the potential to create positive change and improve the lives of families across the nation.
Gary Gamble is a senior implementation consultant at Courtland Consulting.