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Federal direct deposit could bankrupt non-custodial parents

A planned change by the U.S. Treasury to stop using paper checks to pay benefits and move to electronic transfers is hailed by as a way for states to access past-due child support. Checks on paper allow delinquent child support payers access to money that might otherwise be seized if placed directly in a bank account.

The plan for federal benefits to move to direct deposit includes benefits for veterans, disabled individuals and Social Security recipients here in Brooklyn as well as elsewhere throughout the country. Once the benefits are deposited in an account, states can freeze and seize the income to pay back-owed child support.

The federal department of Health and Human Services is at a crossroads. On one hand, the switch to electronic transfers in March 2013 could save the federal government $1 billion over a decade. The program could also backfire by impoverishing already-struggling, non-custodial parents, making it less likely that they can ever meet their financial obligations. Once federal benefits are paid directly to bank accounts, it is estimated that as many as 275,000 people will have no income.

Legal representatives and advocates for rethinking the freeze and seize rules say many non-custodial parents do not pay because they cannot afford it. Disability, eviction, imprisonment, foreclosure, unemployment and institutionalization block ways for parents to stay current with support.

Some opponents of the federal switchover say child support arrears owed by many poor parents will end up in states' hands, rather than help children. In some cases, children have outgrown support orders. Delinquent payments on old cases are filled with interest and fees imposed by state governments.

Federal benefits of non-custodial parents owing support may be garnished before they are issued by up to 65 percent under current rules. The limit disappears if the benefits end up in a bank account.

Making a parent poor to pay a child is not considered productive. Government statistics say 75 percent of parents who owe the most back child support are the poorest, with incomes of less than $10,000 a year or no income at all.

HHS is trying to strike a compromise that allows states to access some of the benefits of non-custodial parents without wiping out the parents' entire income.

Source: timesreporter.com, "Rule could leave child support debtors no income ," Feb. 27, 2012

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