Wednesday, March 4, 2009

Collecting Child Support: Prejudgment Interest

What is prejudgment interest? Indiana law allows for interest on a judgment and some times for judgment for the period preceding judgment. Why is this so? Think about the time that person A denies person B money owed to them. Why should person B not get some compensation for their time spent waiting for their money?

The law leaves to the trial court's discretion to add prejudgment interest to the judgment for child support. The specific statute is IC 31-16-12-2

The court may, upon a request by the person or agency entitled to receive child support payments, order interest charges of not more than one and one-half percent (1 1/2%) per month to be paid on any delinquent child support payment. The person or agency may apply for interest if support payments are not made in accordance with the support order. Accrued interest charges may be collected in the same manner as support payments under IC 31-16-9.
As added by P.L.1-1997, SEC.8.
That 1.5 % per month comes to 18% per year. Think about that for a minute: $18.00 dollars added yearly on every $100.00 owed or $180.00 for every thousand dollars.

McGuire v. McGuire, 880 N.E.2d 297 (Ind.App. 2008) gives some definition to a trial court's discretion:
First, although [petitioner's] delay in raising the issue of child support arrearage does not bar her claim, the court may properly consider the delay when making the discretionary decision whether to award prejudgment interest. In fact, Ind.Code § 31-51-4-8(b) provides that “the court shall exclude from the period in which prejudgment interest accrues any period of delay that the court determines is caused by the party petitioning for prejudgment interest.” The trial court certainly could deny prejudgment interest based on [petitioner's] acquiescence in [respondent's] proportional reductions and her delay in seeking enforcement.Whited, 859 N.E.2d at 664-65.

Mother waited nearly ten years from Daughter's emancipation to file an action regarding Father's arrearage. It appears Father had not paid child support for a number of years prior to Daughter's emancipation. Accordingly, we cannot find the court abused its discretion by concluding prejudgment interest was inappropriate based on the number of years Mother acquiesced in Father's failure to pay. See id.4.

Those thinking about waiting to collect child support would do well to think on that last paragraph I just quoted.

As a practical matter, I have not asked for prejudgment interest and I have never seen anyone ask for prejudgment interest. I say practical matter because the problem is one of practicality: the hard cases for collecting child support will not be fazed by having prejudgment interest added to the child support orders.

On the other hand, I think judgment interest may be more of a impetus for getting delinquent child support payments made more timely.

No comments: