Can Personal Injury Settlements Affect Child Support in Texas?

When someone has been injured in an accident and receives a personal injury settlement, the money is intended to cover medical expenses, lost wages, pain and suffering, and other losses. But what if the victim is paying child support? Can personal injury settlements affect child support in Texas?

The short answer is yes. However, the specifics of how and to what extent depend on various factors, including whether you are behind on your child support payments. In this article, our experienced attorneys explain how personal injury settlements affect child support in Texas and what you should do if you need assistance with a child support lien or modification due to a personal injury settlement.

How Personal Injury Settlements Affect Child Support

If you receive a personal injury settlement and you owe back child support, you can expect your child support obligation to be paid out of your settlement before you receive any money. This is because Texas law gives a priority lien to unpaid child support. This means that the state has first rights to any funds owed for past-due child support.

But what if you are not behind on your child support payments? The fact that you received a personal injury settlement does not automatically mean your child support payments will increase. A modification to your existing child support agreement must be requested (usually by the other parent) and approved by the court. If a modification is not sought and you don’t owe back child support, your child support payments will remain the same.

Let’s examine both scenarios—garnishment with child support liens and modification due to increased income—in more detail.

Child Support Liens On Personal Injury Settlements

It is not uncommon for people who are injured in an accident to struggle financially. This can lead to difficulties in meeting their child support obligations. When a parent who owes back child support receives a personal injury settlement, part of the settlement can be garnished or seized to cover the overdue payments.

In Texas, under Section 157.317 of the Texas Family Code, the state can place a lien on the settlement proceeds from personal injury claims. This means that before the parent receives any money from the settlement, the owed child support may be subtracted from the total amount. Here’s how child support clients work on personal injury settlements.

1. Identification of Liabilities: Once a personal injury settlement is awarded, the court or the child support enforcement agency identifies any existing child support arrearages (past-due payments) associated with the recipient of the settlement.
2. Placement of a Lien: The state places a lien on the settlement proceeds. This legal claim on the funds ensures that before any disbursement is made to the injured party, the amount owed in back child support is first subtracted from the total settlement.
3. Garnishment of Funds: The mechanism of garnishing the settlement involves legally redirecting part of the settlement to satisfy the debt of back child support. The entity managing the settlement, such as an insurance company or a law firm handling the personal injury claim, is typically instructed to withhold the owed amount and directly transfer it to the child support enforcement agency.
4. Disbursement of Remaining Funds: After the child support lien is satisfied, any remaining funds from the settlement are released to the recipient. This ensures that the parent meets their child support obligations without further delay, potentially alleviating some financial challenges they face post-accident.

Applying a child support lien on a personal injury settlement carries both legal and financial implications. Legally, it enforces that parental responsibilities cannot be evaded, even amidst personal financial gain or recovery from injury. Financially, it prioritizes the welfare of the child over the financial gain of the parent, ensuring that the child support payments are made promptly, thereby reducing the potential financial hardship experienced by the custodial parent and the child.

Modification of Child Support After a Personal Injury Settlement

In cases where a parent receives a substantial personal injury settlement, there may be a presumption that their financial circumstances have improved, potentially leading to an increase in child support payments. However, this is not automatic. For child support payments to be adjusted, the following steps typically occur:

1. Request for Modification: The custodial parent or their lawyer must formally request a modification of the child support order. This request is usually submitted to the court that issued the original child support order.
2. Court Evaluation: The court will then evaluate the request, considering the parent’s new financial status, including any significant income from the settlement. The court must determine whether there has been a material and substantial change in the circumstances of the child or the non-custodial parent that warrants a revision of the child support payments.
3. Decision on Modification: If the court finds that the non-custodial parent’s financial situation has significantly improved, it may increase the child support payments. However, if the settlement is deemed non-recurring or designated for specific expenses related to the injury (like medical bills or disability-related costs), the court might decide not to adjust the child support payments.

It’s important for parents to understand that receiving a personal injury settlement does not automatically change child support obligations. Legal processes and considerations are involved to ensure that any adjustments are fair and reflect the current needs and resources of all parties involved. This approach helps maintain stability for the children supported by these funds and acknowledges the complex nature of personal and financial recovery following an injury.

Are Personal Injury Settlements Considered Income?

In Texas, personal injury settlements are generally not considered income for the purpose of calculating child support. Child support calculations typically focus on what is considered “net resources,” which include wages, salary, commissions, tips, overtime, and bonuses, among other types of income.

However, the portion of a personal injury settlement that represents lost wages might be considered part of the obligor’s net resources for calculating child support, since lost wages replace regular income that would have been counted towards child support obligations. The parts of the settlement intended for pain and suffering, medical bills, and attorney fees are not usually included as income for these calculations.

It’s important to consult with a legal professional or a family law expert to understand how these specifics might apply in a particular case, as individual circumstances can vary.

How Do Insurance Companies Discover Child Support Liens and Attach them to Injury Settlements?

In Texas, when an individual has a child support lien due to unpaid child support, insurance companies typically discover these liens through several mechanisms before disbursing funds from a personal injury settlement:

1. State Lien Registry: Texas maintains a child support lien docket, which is a public record of all child support liens. Insurance companies can access this docket to verify if there are any outstanding child support liens against an individual before settling a claim.
2. Notification from the Attorney General’s Office: The Texas Attorney General’s Office, which oversees child support enforcement, often notifies relevant parties, including insurance companies, of any existing child support liens. This ensures that the insurance company is aware of the lien before they issue payment.
3. Legal Requirement for Disclosure: Individuals involved in a personal injury lawsuit or settlement may be legally required to disclose any child support obligations during the legal process. Failure to do so can result in legal penalties.
4. Due Diligence by the Insurance Company: Insurance companies typically perform a due diligence process before disbursing settlement funds. This process includes checking for any liens or other legal encumbrances that may affect the settlement amount.

Once a child support lien is discovered, the insurance company is legally obligated to satisfy the lien from the settlement proceeds before disbursing the remainder to the claimant. This ensures that back child support is paid in accordance with state laws, helping to enforce child support obligations and protect the interests of children.

Does My Attorney Have to Pay My Child Support Lien First?

In Texas, if you have a child support lien and are receiving a personal injury settlement, your personal injury attorney is legally required to ensure that any existing child support liens are paid from the settlement funds before you receive any money. This obligation arises because Texas law clearly prioritizes satisfying child support debts.

Here’s how it generally works:

1. Notification and Verification: Once your attorney is informed of or discovers a child support lien—either through notification by the Texas Attorney General’s Office or through their own due diligence—they are required to verify the amount of the lien and ensure that it is valid.
2. Withholding and Payment: If there is a verified child support lien, your attorney must withhold the amount of the lien from your settlement proceeds. The attorney then pays that amount directly to the state child support enforcement agency or through the court, as directed.
3. Release of Funds: Only after the child support lien is satisfied can your attorney disburse the remaining settlement funds to you.

The process is designed to ensure that legal obligations for child support are met before the settlement recipient receives their portion. This legal requirement helps protect the financial interests of the children involved and ensures that child support laws are enforced. Failure by an attorney to comply with these requirements can lead to serious legal consequences, including potential disciplinary action.

Can a Child Support Lien Be Negotiated?

In Texas, while the amount of child support owed as per court orders is generally non-negotiable, certain aspects related to the enforcement of child support liens might be subject to negotiation. However, these negotiations usually don’t involve reducing the amount of child support owed. Still, they may involve the repayment terms or how a child support lien is applied to a specific settlement.

Here are a few scenarios where negotiation might be possible:

1. Payment Plan Arrangements: If the lien amount is substantial, it might be possible to negotiate a payment plan with the state’s child support enforcement agency. This would allow the responsible parent to satisfy the lien over a period of time rather than through a single lump sum from a personal injury settlement.
2. Release or Adjustment of the Lien: In some cases, if the settlement funds are needed immediately for critical expenses (such as medical bills related to the injury), it may be possible to negotiate the terms under which the lien is applied. This could involve requesting the child support enforcement agency to temporarily lift or adjust the lien to allow for the payment of urgent expenses.
3. Legal Disputes Over the Lien: Legal proceedings might be necessary if there is a dispute regarding the validity or the amount of the lien. In such cases, negotiation can occur in the context of a broader legal challenge to the lien itself.
4. Settlement Allocation: Sometimes, negotiation with the opposing party in the personal injury case about how the settlement is categorized can influence the impact of a child support lien. If portions of the settlement are allocated to non-wage compensatory damages like pain and suffering, these might not be subject to a lien, depending on the specifics of Texas law and the nature of the lien.

To navigate these negotiations, working with a knowledgeable attorney who understands family law and personal injury law in Texas is crucial. They can help you understand your options and represent your interests effectively in negotiations or court proceedings, if necessary.

Legal Implications for Failing to Back Pay Child Support After a PI Settlement

Failing to account for child support in a personal injury settlement in Texas can have significant legal implications, primarily because it can lead to a violation of state laws regarding child support obligations. Here’s what might happen:

1. Legal Enforcement Actions: If the child support lien is not satisfied from the settlement proceeds, the Texas Attorney General’s Office, which enforces child support orders, can initiate legal actions to recover the owed amounts. This could include garnishing wages, seizing bank accounts, or taking other collection actions against the individual.
2. Interest and Penalties: Unpaid child support accrues interest in Texas, and failing to pay can lead to additional financial penalties. These costs can add up over time, increasing the overall debt beyond the original child support arrears.
3. Contempt of Court: Not adhering to a court order, including payment of child support, can be considered contempt of court. This can result in various penalties, including fines or even jail time, depending on the severity and duration of the non-compliance.
4. Impact on Settlement Distribution: If a personal injury attorney improperly distributes settlement funds without accounting for a child support lien, they could face legal and professional consequences. This might include disciplinary actions from the bar association, lawsuits for malpractice, or other legal claims from the affected parties.
5. Loss of Licenses: In Texas, failure to pay child support can lead to the suspension of various state-issued licenses, including driver’s licenses and professional licenses, which can impact one’s ability to work and earn income.

To avoid these implications, individuals receiving a personal injury settlement must disclose any existing child support liens and ensure they are addressed in the distribution of the settlement funds. It’s also advisable to work with an attorney familiar with both personal injury and family law in Texas to ensure compliance and avoid potential legal issues.

Speak to Experienced Attorney Today.

At Varghese Summersett, we have both a family law division and a personal injury division – each with their own dedicated team of attorneys. Because you may need both – a personal injury lawyer and a family lawyer – we are uniquely situated to handle any issue that arises from personal injury settlement proceeds and child support.

If you need assistance with a child support lien or modification due to a personal injury settlement, our experienced attorneys are here to help. Contact us today at 817-203-2220 for a consultation and learn more about how personal injury settlements affect child support in Texas.