When a court sets child support, they are not just looking at the income of both of the parents. The judge also has the legal ability to evaluate both parents’ assets. If one parent receives a large personal injury settlement, they are concerned that it could reduce the amount of child support that they receive. This consideration is often a factor in how a parent will decide to structure their settlement. While personal injury settlements could impact child support, they will never eliminate it entirely.
At the same time, the parent who is paying child support is concerned that their settlement can be taken to pay support arrears, which can reduce the value of the check that they receive. When one has been injured and is expecting a settlement check, they should consult with a lawyer beforehand, so they can understand how it may impact their child support.
What’s In This Guide:
- Can Child Support Take a Personal Injury Settlement?
- Can Personal Injury Settlements Affect Child Support?
- Texas Law and Personal Injury Settlements in Child Support
- Getting a Fair Child Support Award With a Personal Injury Settlement
- Is a Personal Injury Settlement Considered Income for Child Support?
- When the Recipient of Child Support Receives a Personal Injury Settlement
Absolutely. Your personal injury settlement proceeds can end up going to pay child support in several ways. First, if you owe back child support, the proceeds could be used for those payments. There would be a lien placed against the settlement that would need to be paid before you can receive your own payments. The first liens against the settlement are from medical providers, who are paid back for the care. Thus, back child support will not leave you without medical care. However, the part of the child support that represents lost income is very much on the table.
You need to raise this issue with your attorney when they are negotiating your settlement. You may want to structure the settlement so that it does not give you all the money at once, preventing it from being seized to pay back child support. Doing so will give you a chance to catch up on payments. Your attorney can try to argue on your behalf that the amount of the lien should be reduced. A judge may be persuaded if you are left without enough money to live after the lien is enforced. Nonetheless, this issue is something that must be addressed.
Even though they come as the result of an accident, and they are paying a person back for losses, a personal injury settlement can impact child support. These settlements represent a sudden influx of money that changes someone’s financial situation. Child support awards are based on each parent’s situation at the time that the court assesses the amount. When there are changed circumstances, the court may modify the order and change the payments. If one parent is behind on their child support payments, the settlement can be garnished.
Except for when a parent has not made payments, it does not seem fair that settlements could raise or lower child support. After all, personal injury settlements are compensation for damages that have been suffered. They are hardly a financial bonanza. Every dollar that the accident victim receives represents harm that they have experienced. Nonetheless, courts are often looking at the numbers (regardless of why the accident victim has received money), and this fact is something that people need to anticipate when they are negotiating a settlement. Large settlements may result in a modification hearing that can raise or lower child support, depending on who has received the settlement.
Like every other state, Texas uses child support guidelines to determine what one parent needs to pay the other. This formula plugs in the income of each of these spouses to arrive at a number, which may then be adjusted based on other expenses that the parents pay. In addition, Texas law also allows for aggressive enforcement when one parent does not fully meet their child support obligations, including things like garnishment of wages, seizing a tax refund, or taking any other source of money that the non-paying parent has coming to them.
When it comes to the child support guidelines, income can have a very broad definition, depending on the circumstances. It would include money that was earned from work, and it may include wages that you could have earned that the insurance company is paying you. Some judges may look at other sources of money and consider them to be income because they are funds that you have available. When one parent has a sudden influx of money, it changes the financial balance between the two of them and could lead to a recalculation of child support.
If you are the parent receiving child support, you can anticipate that the paying parent will do what they can to reduce the amount that they pay. On the other hand, if you are paying child support, you do not want to be assessed with a very large payment because of the money that you have received. After all, the lost wages that you have received are just paying back for what you could have earned and are not the windfall that they seem to be. If you are paying child support, you do not want to have to spend money that you need to live. If you are receiving child support, the personal injury settlement is not the windfall that the other parent may claim it is.
Regardless of which side you are on, you should have a personal injury lawyer who understands the implications of a personal injury settlement. It is not always just about the dollars and cents of the settlement agreement itself. There are other things to consider, such as your child support situation.
Some parts of a personal injury settlement are considered income for purposes of child support. A personal injury settlement consists of several elements. One of them is lost income and wages. The accident victim is compensated for the money that they have lost in the past and what they may not make in the future. In that regard, the part of the settlement that pays for lost income would be considered as earnings. However, since this compensation is for money that the accident victim would have earned anyway, it would not materially change the amount of a child support payment.
However, the amount paid for medical bills would not be considered as income because that is money that does not go into their pocket. Instead, it is paid to medical professionals. The issue that may be up to the court’s discretion is whether a pain and suffering award would affect child support. Compensation is paid in a lump sum, and it raises the accident victim’s net worth. Some pain and suffering awards can reach into the six figures and beyond, potentially lowering the amount of child support that is received because the accident victim has a much higher net worth.
A rise in income by the receiving parent may be the reason for the court to entertain a modification motion from the parent who is paying the child support. The question is what parts of the personal injury settlement would be considered as income. However, judges are not obligated to view the entire settlement as income, and they have some discretion in how they apply child support formulas.
Not all of the personal injury settlement will be considered income, although some parts of the settlement are clearly noted as income. There is a much higher likelihood that a monthly structured settlement check would be considered income than a one-time lump sum payment, although that would be up to the judge. However, a lump sum payment would go into your bank account, and a court would consider your net assets in addition to your income stream. Remember that lost wages replace what you could not earn, so they may not measurably change your situation.
Each child support case has its own unique factors that the court would consider, which is why you need an attorney who can help you plan before you agree to a settlement agreement.
There are many uncertainties when it comes to child support. Your personal injury settlement or the fact that the other parent receives one may completely change your support situation (or it may not), which is why you need the advice of an experienced attorney who understands not only the mechanics of a settlement but how it can affect other parts of your life, such as child support. The Patel Law Firm is here for you and can advise you when you have questions. Contact us online or call us today at (361) 400-2036 to discuss your case and learn more about how we can help. Settling a personal injury claim is not always as simple as agreeing on an amount of money and signing the contract. You should have an attorney who can look ahead and see what other issues you may face.