Child Support in Personal Injury Cases: What You Need to Know

The relationship between the proceeds from a personal injury case and child support obligations can raise many questions for parents. If you receive money from a settlement, are you required to pay child support from that sum? If your child’s other parent is delinquent in their child support payments and receives money from a settlement, can you request that they pay child support from the settlement? Can the amount of your child support obligation change because of the receipt of a lump sum of money? This article serves to provide guidance to those struggling to answer these and other questions surrounding settlements and child support.

Personal injury settlements paid in a lump sum are considered “nonrecurring income” by the child support guidelines.[i] The recipient of settlement proceeds may be ordered to pay an average or prorated amount in child support overtime or may be required to pay a percentage of the settlement that is “equivalent to the percentage of the [payor’s] recurring income paid for child support.”[ii] The court may determine what amount of a settlement will be allocated to child support payments. The court is free to use their own formula to calculate this amount, so long as the formula is “based on logic and reason and meets the child’s reasonable needs in light of the parties’ accustomed standard of living and the parent’s ability to pay.”[iii]

How Does Receiving Proceeds from a Settlement Impact Child Support?

The answer is… it depends. If a payee parent is current on their payments, there is no course of action to be taken against the proceeds of the settlement. However, if a payee parent is behind on their child support payments, a lien can be asserted against the settlement proceeds in the amount of past-due payments owed.

In this circumstance, the court will attach a lien to the settlement proceeds upon request of the non-payee parent or the Department of Health and Human Services.[iv] Liens placed on settlement proceeds are secondary to other liens that may be asserted against the settlement proceeds, such as liens for medical treatment.[v] To assert a lien, the court must find that child support payments are past due and issue an order stating as such, including the amount of child support that is due. Notice of the lien must be provided in writing to the insurance company that is paying the settlement proceeds along with a certified copy of the court order.[vi]

One important caveat is that the above process only applies if a lump sum settlement is equal to or more than $3,000, or if the total aggregate amount of settlement payments is equal to or more than $3,000.[vii] Settlement amounts less than $3,000 are not eligible to be garnered for child support payments.

Can a Child Support Order be Modified Because the Payee Parent Received Settlement Proceeds?

The answer, again, is that it depends. In some circumstances, the receipt of settlement proceeds will be considered when determining the amount of child support the payee parent owes. One of these circumstances is when the payee parent receives settlement proceeds prior to the calculation of child support.[viii] However, the child support guidelines do not require courts to include nonrecurring income (such as settlement proceeds) in its calculation of child support, and the court may use its discretion.[ix]

It is also possible that a child support order could be modified by the court if the payee parent receives settlement proceeds that result in a substantial change in circumstances.[x] Generally, for there to be a substantial change in circumstances, the payee parent’s obligation under the child support guidelines based upon their new income must create at least a 15% difference between the new calculation and the amount of child support previously calculated.[xi]

In circumstances where a large lump sum of money is obtained by the payee parent from a personal injury settlement, it is likely that the difference between a new calculation including the settlement proceeds and an original calculation will meet or exceed the 15% threshold. Again, the child support guidelines treat settlement proceeds as a nonrecurrent income that is subject to inclusion in the calculation of child support obligations to be determined at the court’s discretion. The appropriate action to take if settlement proceeds have resulted in a substantial change of circumstances is to file a motion to modify the child support agreement.

There is another scenario to consider regarding personal injury settlements, and it is if the non-payee parent receives settlement proceeds and the payee parent’s child support order in this scenario would be the same as that detailed above. Though the court may not determine that the payee parent now owes no child support due to the non-payee parent’s increased income, the guidelines calculate child support based on both parents’ income. Therefore, there could be a scenario in which the payee parent’s child support obligations are lowered due to the increase in income of the non-payee parent.

The receipt of settlement proceeds from a personal injury claim can have a drastic impact on child support. Whether you are the payee or non-payee parent, the receipt of settlement proceeds may alter your obligations.

Our attorneys are available to answer questions regarding these and other child support issues.

If you are in need of assistance, the attorneys at Collins Family & Elder Law Group can help.

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