Forensic Accountant

Irina Anissimova, CPA, CFF

Random Thoughts

Payments towards support arrears

Posted on August 18, 2015 at 7:45 PM

 

From CA Code of Civil Procedure.

In plain English:

If a debtor is in arrears and pays some amount towards the satisfaction of the debt, in all situations except support arrears the amount of payment is first applied to accrued interest and then to the principal of the debt.

If the money is paid towards support arrears, it is first applied towards the principal and then to accrued interest.

In the first situation interest keeps accruing because when the payment is not sufficient to cover both interest and principal, there always remains some principal amount to accrue interest on.

In the second situation accrual of interest may stop because the principal is paid off, which freezes the debt. There is also a "technical" question of how to collect interest on the debt that has already been paid.

Legal interest rate is 10% (simple interest) which means that quite often after several years the amount of accrued interest becomes comparable to the principal of the debt.

Why is the law favoring deadbeat dads who do not want to support their children? Or were the legislators thinking about their own support arrears to their wives when they introduced this exception in 2009?

Original text:

Section 695.220.

Money received in satisfaction of a money judgment, except a money judgment for support, is to be credited as follows:

(a) The money is first to be credited against the amounts described in subdivision (b) of Section 685.050 that are collected by the levying officer.

(b) Any remaining money is next to be credited against any fee due the court pursuant to Section 6103.5 or 68511.3 of the Government Code, which are to be remitted to the court by the levying officer.

(c) Any remaining money is next to be credited against the accrued interest that remains unsatisfied.

(d) Any remaining money is to be credited against the principal amount of the judgment remaining unsatisfied. If the judgment is payable in installments, the remaining money is to be credited against the matured installments in the order in which they matured.

Section 695.221.

Satisfaction of a money judgment for support shall be credited as follows:

(a) The money shall first be credited against the current month's support.

(b) Any remaining money shall next be credited against the principal amount of the judgment remaining unsatisfied. If the judgment is payable in installments, the remaining money shall be credited against the matured installments in the order in which they matured.

(c) Any remaining money shall be credited against the accrued interest that remains unsatisfied.



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