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The www.FedPrimeRate.com Personal Finance Blog and Magazine

Tuesday, April 27, 2010

In Pursuit Of Child Support

In Pursuit Of Child SupportYour heart sinks down deep into your belly as you open your phone bill. With shame and dread you see not just the current charges, but a sterile red insert alerting you that your account is seriously past due. Again. Gently, the bill is placed on top of the others. Electric bill. Credit card statement. Mortgage note. Relief from this debt seems elusive as your sadness turns to anger when you realize that your ex has failed, once again, to pay even a dime in child support for the month. The pale excuses ring in your ears - “Times are tough”, “I bought her a video game last month” and “Next week, I promise”. None of that nonsense pays the bills nor puts food on the table. None of that eases the despair that you feel down to your soul.

According to the U. S. Census 2006 report, nearly 22 million children depend on timely child support payments to sustain them. This report further indicates that approximately 87% of custodial parents were owed delinquent payments from the non-custodial parent. Clearly there is a need for more efficient child support collection efforts. Because of this gap in services in 2009 Senate Bill 1859 entitled “Child Support Protection Act of 2009” was proposed and has a predicted implementation date of mid-2010. This bill seeks to allow federal funds to match state funds in pursuit of past due child support payments. While this is a step in the right direction as far as protecting the financial interest of dependent children, much more needs to be done. And, there is much that the custodial parent can do to move their case forward.

Sometimes it seems that the easiest piece of business is the actual child support order. All parties work together to come to some sort of mutually beneficial agreement, given the guidelines of each individual state. Most states work with a child support guideline worksheet which translates to a support order of about 20% of the non-custodial parent’s income. Further, orders concerning the coverage of day care expenses, health insurance cost and extra-curricular activities may also be drafted. Many a parent has walked out of a courtroom clutching these agreements smiling as they think that the worst was over. Actually, the real work starts at that very moment. According to the US Department of Health and Human Services 27% of non-custodial fathers and 47% of non-custodial mothers completely default on their support payments and offer zero monetary contribution.

A savvy custodial parent will work immediately post-order to do what they can to ensure that they receive all monies owed to them in the near and distant future. This could be as simple as keeping notes concerning their ex’s employer, their work schedule, and the bosses name. This type of basic information will prove to be very helpful in the months ahead should the payment of support become increasingly erratic. Now is a time to start a file with all of your paperwork, including a log of all support related conversations with your ex, state child support hotlines and your attorney.

Speaking of your attorney, the question you may be asking is this: “Why not just let my attorney handle all of this?”. This simple answer is that it is cost prohibitive to nearly all custodial parents. Per www.lawyers.com the average national billing rate for an attorney is $284 per hour. This means that your 15 minute phone call just cost you over $70.00. Since nearly a quarter of custodial parents fall at or below the poverty line, a private attorney is just not feasible.

The first key to this process is to adjust your thinking about child support. This money is not a gift to you, is not optional and is not contingent on how often the non-custodial parent sees the child. This money is not a luxury, is not something to be bartered and is not a donation. It is money to support a child that two people created. It is a legal debt and a real obligation. Whatever happens outside of the support is secondary. You get along? Great! Hate each other? Doesn’t matter. Pondering getting back together? Of no consequence. The money is the money, plain and simple. This is a gender neutral issue as well, as 16% of all custodial parents are fathers and that number is anticipated to rise in the coming years

Another mistake that people make is believing that if the ex pays for additional items (e.g., a birthday party, new shoes, school supplies) then it relieves the non-custodial parent of all or part of their fiscal responsibility. New shoes are great, but that won’t pay the electric bill. This type of off-set system will only work if all parties agree to the terms in advance and preferably it is all in writing. It is one thing to come to agreement that you will reduce support by 25% if the ex pays for summer camp and it is quite another for a non-custodial parent to refuse to pay support in November because they bought a new backpack in August.

Yet another error that folks make is believing that in order to qualify for state child support enforcement services they must receive state benefits. While it is true that nearly a third of all child support cases involve a custodial parent who receives public assistance, most do not. All states have a department that deals with child support enforcement (“CSE”) and nearly all of these agencies charge no fee for their services. In 2004 over 4 million custodial parents turned to their local CSE for some sort of assistance with their case. Starting with the CSE of your state very early will prove to be helpful. As always, keep track of who you speak with, what you discussed, what follow up is necessary and what sort of timeline you are expecting. It is very helpful to also get an email address and fax number for your local CSE office, should you need to quickly get information to them.

Getting financial assistance for your dependent children is your duty and the non-custodial parent’s responsibility. Think of it in terms of an actual job and decide each week what you will do to get the money your children deserve. One week you may make a phone call to the local CSE office to get an update on your case. Another week you may try to verify where your ex is employed. Yet another week you may want to write to your local congressman to show support for any pending child support enforcement legislation.

If you feel that dealing directly with your ex on these matters is hazardous, then don’t. These things can quickly get escalated and virtually never result in a payment towards past due support. You will walk away angry, frustrated and empty handed. Needless to say, never let these matters trickle down to your children and make them aware of any animosity between the two of you.

Being a parent means many things. It means helping with homework and feeding them healthy foods and kissing their scrapes. You will also cry with your children and laugh at their silliness and dream with them. Part of your responsibility as a parent is also to ensure their continued financial security in order to create a peaceful living space where they can thrive. Do it for them.

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Thursday, February 19, 2009

Living Together After Divorce: It CAN work

living together after divorceIf you've been through a divorce, you know that running into your ex-spouse can be really stressful. Some deal with that issue every day. Because of the failing economy, more and more couples are choosing not to divorce, citing the financial hardship such a move would cause. Even more couples are being forced to live together because neither one can afford to move out. I'll tell you about one such couple. My father and his second wife, Susan, have been divorced for a year, but they remain in the same home. My dad doesn't really like the situation, but he is handling it with good grace and a great measure of patience.

Susan found out before she and my father married that she has Huntington's disease, a progressive, degenerative neurological disorder. People with Huntington's often suffer from jerky, uncoordinated body movements and a decline in mental abilities. The disease itself isn't fatal, but as symptoms get worse a lot of complications can arise that both shorten life and reduce the quality of it. Knowing what he was getting into, my father chose to marry her anyway. They got along well for almost five years, until my father found out that Susan had been unfaithful. Things around their house got more and more strained, with Susan and my father fighting about everything, day in and day out.

Finally, my father had enough and he filed for divorce. The divorce was granted in January of 2008, but by then Susan's health and mental capacity had deteriorated to the point that she could not live on her own. My father couldn't afford to put her in an assisted-living facility, because he is on a fixed income and only gets $800 per month. That barely covers his mortgage payment. She has no family that is willing to help, either. He makes a little pocket money selling on eBay, but not nearly enough to afford a new residence. Basically, he's stuck between a rock and a hard place. He can't leave, but he doesn't want to stay either. Many others are in a similar situation, and here are some tidbits on couples living together after divorce:

  • Many couples choose to live together after a separation or divorce for financial reasons. Perhaps one was the primary breadwinner and the other cannot afford to move out on their own, or they owe more on their home than what it's worth (otherwise known as being "upside down") and cannot find a buyer. This is especially true in today's dismal housing market. Homes that would before sell within weeks, now remain listed for months at a time, if they sell at all.
  • Some couples remain together out of stubbornness. Neither one wants to concede, or be perceived as being "in the wrong", so they delay the inevitable.
  • Living with an ex is usually the last resort. (as evidenced by my father's situation)
  • Many couples who remain together after divorce are seniors living on fixed incomes, who have no family living in the area that they can depend on.
  • Also, a lot of couples who have young children are electing to stay together after divorce, because they believe it's cheaper to maintain the status quo than it is to deal with child support and alimony issues.
Read a related article here, or here.

The state of the economy (such as it is) is surely contributing to the divorce rate. It's been said that money is the number one issue that couples fight over, and it's also the number one reason they divorce. If there isn't enough money to go around, and both parties are stressed out about how their bills are going to get paid, that stress and resentment will spill over into other areas of their relationship, deteriorating it.

I admire the way my father has handled the situation. He's dealing with a wife, who now has the mental and physical capacity of the average five-year old. He takes care of all her personal needs, getting up at 5 am to make sure she takes all of her medications, bathing her, dressing her, feeding her, and anything else she may need. He seems to be coping well, and is receiving a lot of support from everyone in the family. He's a Christian, and I believe that his faith in God is helping him get through this tough situation. We all get together and help him whenever he needs it, and we sit with Susan once or twice a week so that he can get out of the house. I honestly don't know how he has the discipline to do it, (Maybe his training as a Marine has something to do with it) especially as he's no longer legally obligated to do so. He told me that he does it "because I would want someone to do the same for me". I've recommended that he call the local Hospice and get them involved, even if it is just for "respite care" for Susan, so that he can have a break occasionally. He has an appointment with them on February 23rd, and I hope that they are able to help him.

Living together after divorce can happen for many reasons, and some handle it better than others. My father is a prime example of how to "make the best of a bad situation". I hope that others in a similar situation can take something from this story and apply it to their own lives. It's tricky, but it can work.

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Monday, January 05, 2009

Short Sale, Long Consequences

Short Sale, Long Consequences: A story about divorce, foreclosure and the IRS
Short Sale
It is August 2008 and I have been divorced for two years now. What a two years it has been. Left with nearly $15,000 in credit card debt by my reckless and deceitful ex-husband, and just out of graduate school working part-time jobs to get by, it seemed like I would never catch up. Oh, and there is the deadly “foreclosure proceedings begun” on my credit report, which I’m told will be there for the next seven years. Nonetheless, it is August 2008; I am divorced, happy, and free, with a new love in my life, and more than two thirds of the debt paid off. I am able to go off the debt management program that has helped me reach this goal. I plan, and take, my first vacation in more than five years.

What do I come home to? A notice and bill from the IRS that they are increasing my 2006 reported income by more than $5,000, meaning I owe them about $800, because my ex and I sold our foreclosed house in a short sale more than two years ago.

Just when I think life is getting better, something surfaces, something bites my (thankfully, tanned) backside.

Of course, my first reaction is that this is an injustice. For one, the mortgage company (since gone bankrupt itself) never told me that I would be liable for claiming the waived debt as income, and never furnished me with a 1099 form. (In a recent phone call, their rep claimed they sent it to my ex, logical as he was the primary borrower.) For another, there is the sting of personal injustice: my ex had let the home fall into foreclosure behind my back. I still don’t know what happened to all the money that was supposedly going towards mortgage payments, thousands and thousands of dollars. (Of course, I do have my suspicions, most of which involve my ex’s internet affairs, substance abuse, and sending money to his con-artist brother in Europe for weird and always unsuccessful business ventures.)

The irony is, it was me who decided to file taxes separately for 2006, although we were technically still married for half of it, because I didn’t want to be associated with him any longer, even in the eyes of the IRS. If we’d filed jointly, he’d now be liable for half the short sale income. In fact, I might even be eligible for an IRS protection called “Innocent Spouse,” that waives the liability of a spouse when debt or income has been concealed. (He never shared the 1099.) As it is, however, two tax professionals and the IRS help desk in Providence, RI have convinced me that I am liable for the amount and will be held responsible, especially since my ex doesn’t seem to have filed income taxes at all for that year. As both of the accountants told me, “The IRS goes after the person with the deeper pockets.” It seems unimaginable but that person is me!

Ademola, another member of the www.FedPrimeRate.com Money Blog, wrote an entry about this recently. Bush and Co. have issued a special moratorium that currently prohibits taxing short sale amounts. It’s a good idea; with so many people facing foreclosure and crisis, this waiver is a welcome relief, I’m sure. After all, in my case the short sale amount, and subsequent tax, wasn’t thousands and thousands of dollars. In today’s market, however, large short sale amounts are a distinct possibility for those trying to sell their homes, especially if there’s a need to sell quickly. Read more about the moratorium here.

My story, though, is still a teaching story, I think. When you’re in financial and personal crisis, as I was when I negotiated the short sale, it’s easy to jump at the first relief without considering the long-term consequences. Don’t get me wrong, the short sale was probably still my best option, but I would have handled the taxes differently. I wish I had slowed down and asked myself questions, not yes/no questions, but open questions like: What do I need to know about a short sale?

That’s the thing about crisis: It seems like the time to act fast. Maybe, that’s really the time to slow down and do research. To ask an expert. To ask yourself: how will this affect me two years from now, when I come home from vacation, tanned, happy, and newly in love? How will this affect me when I’m almost-financially-secure again? How might this affect me in eight years or eighteen? In the moment when it’s hardest to think about long-term, we sometimes most need to.

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