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A personal injury settlement can impact child support if the parent is in arrears or if there is a significant increase in income. If the parent is in arrears on child support, a lien may be placed against the settlement. The court may require the lien to be satisfied before settlement monies can be released to the injured party. If the settlement is considered income, the parent’s amount of child support could be increased.
Effect of a Personal Injury Award on Income
There is an assumption that when an injury hinders the parent’s ability to work, a decrease in child support would follow because of the loss of income. A portion of the settlement covers lost wages, which is viewed as regular income. Therefore, that amount could be factored into the calculations used to determine how much child support the parent is required to pay.
A parent who pays child support is required to notify the court that handled his or her support case that he or she is receiving a personal injury settlement. Most states consider a personal injury settlement to be a form of personal income.
What if a Lien is Placed on Injury Award?
The injury award may be held as collateral until any late or outstanding child support payments are paid. This is done in the form of a lien that will need to be satisfied. However, for a person who has suffered a loss of income after an injury, it could be impossible to satisfy the lien without first receiving the injury award. In this circumstance, the personal injury or divorce lawyer may be able to negotiate with the court to pay a lesser amount to release the lien. The remaining amount would need to be paid once payment of the settlement is made.
Impact on Future Child Support Payments
There is a possibility that the court may increase the amount of child support that will have to be paid depending on the size of the settlement. When a substantial amount is awarded above the actual amounts given to compensate lost wages and medical bills, the remainder could be factored into consideration for future support payments. Any fees owed to the attorney that handled the personal injury are subtracted from that remainder to prevent creating new debt while paying existing debt.
