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How It Is Possible to Collect a 72 Percent Interest Penalty
IN THESE DAYS OF LOW INTEREST RATES on savings accounts, 10 percent—which is the rate of simple, annual interest that applies to any unsatisfied judgment, or any portion of an unsatisfied judgment— sounds very appealing (Code Civil Procedure § 685.010.) So if 10 percent interest sounds good, how about 72 percent? While one may ask if it is too good to be true or if is there a catch, that high rate is permitted by law under specified circumstances for unpaid judgments or orders for child support. While actually obtaining and enforcing a 72 percent interest penalty may be the catch, there is no legal one other than the technical requirements.
The penalty is found in Sections 4722-33 of the Family Code, which provide as a penalty for nonpayment that a judgment or order for child support can accrue interest at the rate of 6 percent per month up to a maximum of 72 percent of the original amount of the unpaid support. A number of technical and practical issues must be considered, however. The legal requirements are that 1) the obligor has to be more than 30 days in arrears (Family Code § 4722(a)); 2) the attorney must file and serve a notice of delinquency (Judicial Council Form FL-485), 3) the notice of delinquency must be signed under penalty of perjury (Family Code § 4723(a)), 4) the notice must state the amount that the child support obligor is in arrears (Family Code § 4723(b)(1)), 5) the notice must list the installments of support due and the amounts, if any, that have been paid and the balance due (Family Code § 4723 (b)(2)), 6) the notice must state that the arrearage must be paid within 30 days of the date of the service of the notice of delinquency and that any unpaid installment of child support will incur a penalty of 6 percent of the unpaid support per month, and 7) the notice must include the current address of the children, unless a protective order is in place to keep the support obligor from knowing their whereabouts (Family Code § 4723 (b)(3)).
The notice of delinquency form has to be served either personally or by certified mail or in a manner provided for service of summons (Family Code § 4724.) If, after 30 days from service of the notice of delinquency the arrearages, the interest or penalty remains unpaid, the creditor may file a request to obtain an order for the amount owed, which can then be enforced in the same manner as any other order or judgment (Family Code § 4725.)
To properly object to the penalty, the debtor will need to file and serve a motion to determine arrearages and to show cause why the penalties should not be imposed (Family Code § 4726.) At the hearing to show cause, the court must find that the debtor has proved any of the following: First, the debtor must prove that the child support payments were not 30 days in arrears on the date of service of the notice of delinquency and are not in arrears on the date of the hearing. Second, the debtor will need to show that he or she suffered serious illness, disability, or unemployment that substantially impaired the ability of the debtor to comply fully with the support order, and the debtor has made every possible effort to comply with the support order. Third, if the debtor is a public employee, he or she may show that the fiscal difficulties of the debtor’s employer have resulted in the employer’s failure to pay the debtor for 30 or more days. Finally, another option for the debtor is to convince the court that it would not be in the interest of justice to impose the penalty (Family Code § 4727.)
While the enforcement of a 72 percent penalty faces these hurdles, as many child support debtors are aware, the Child Support Services Department has broad enforcement powers that surpass those of private attorneys. And while the Child Support Services Department cannot impose the 72 percent interest penalty, it can, for example, garnish a tax refund (Family Code § 4729.) It is also permissible to have both the Child Support Services Department and a private attorney working to collect past due child support from the same person. Should a party opt to hire a private attorney in conjunction with Child Support Services, however, the party must serve a notice to the local child support agency of the party’s intent to take independent action to enforce the support order (Judicial Council Form FL-645.)
The threat of a 72 percent interest penalty for past due child support can be used as a tool to induce a recalcitrant debtor to become compliant or simply to increase the amount owed. Further, the penalty only applies to child support, not spousal support. Ultimately, the question for the attorney and client to ask is if the additional procedural hurdles are worth the trouble. If it is impossible to collect the child support itself, one may need a compelling reason to increase an uncollectible amount and possibly cause the client to develop unrealistic expectations. Nevertheless, the 72 percent interest penalty on child support arrearage is available as a tool that may strike fear into the heart of a delinquent parent—and obtain relief for one’s client.
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