Arrears Management

1. ______ _________ Arrears Management Know When to Hold … and Know When to Fold.

2. What would you rather have?

3. Strategy 1 – Avoid Arrearages Avoid Unrealistic Orders Defaults Presumed Income Nominal Orders Step Orders Unmodified orders

4. Strategy 2 – Compromise Debt Debt Compromise Interest and fees Accord and Satisfaction

5. How much to accept? Repayment Period Acceptable Settlement 1-3 years 80% of arrears 3-5 years 75% of arrears 5-10 years 60% of arrears 10+ years 50% of arrears • Factors indicating a higher settlement amount: • Non-custodial parent has ready cash; • The arrearage is less than $1,000; • IRS and state tax refund offsets are likely. • Factors indicating a lower settlement amount: • Non-custodial parent has little or no work history; • IRS and state tax refunds are unlikely (self-employed); • Non-custodial parent has no income per 1099 list; • Non-custodial parent is in poor health; • Non-custodial parent has new dependents; • Non-custodial parent has little potential for future payments; • Non-custodial parent’s only source of borrowing is relatives; • Case is arrears only and enforcement limitation has lapsed.

6. Managing Expectations Whereabouts of Non-Custodial Parent Income of Non-Custodial Parent

7. Strategy 3 – Close Case Case Closure See factors for lower settlements

8. Appendix

9. Arrears Forgiveness in Pennsylvania May 25, 2011 John Graham, Director Westmoreland County DRS An Ace in the Arrears Management Deck

10. Pa. R.C.P. 1910.19(f) • Amended Pennsylvania Rules of Civil Procedure • Court given administrative power to modify or terminate financial obligations • Effective May 19, 2006 • Explanatory Comment • County-specific implementation

11. Factors for Application • Order no longer able to be enforced under State law • Obligor is unable to pay • Has no known income or assets • No reasonable prospect that will be able to pay in foreseeable future • Common types of cases • Obligor incarcerated • Obligor disabled

12. Implementation – Case Identification • Identification of cases • Automated system alerts • CP or NCP reporting • Enforcement action • State reports • Introduced in 2009 • Performance Improvement Module (PIM) • Automated Case Closure/Order Modification (ACC/OM)

13. Implementation – Case Identification • Checklist to assure court the DRS recommendation was sound

14. Due Process Provisions • 60-day advance notification • Ability for CP/State to contest • Conference/hearing to resolve contest • NCP required to report changes • Case reviewed upon NCP having employment, income, or assets • NCP fraud or misrepresentation • Prior order/arrears may be reinstated

15. Monitoring the Non-Financial Obligation • Routine periodic review • Notification upon any of the following: • Incarceration updates • NDNH and SDNH hits • FIDM information • CSLN matches • Receipt of SSA or SSI benefits • State reports • Cases with active NFOBs

16. Other Cards in Play • Encourage obligor participation • Appointment reminder calls • Child Support Web site • IVR and Customer Service Units • Allow telephone testimony • Extend the helping hand: • Amnesty programs • Employment and training • Reentry efforts

17. Other Cards in Play • Avoid Build-Up of Arrears – Intervene Early • Complete genetic testing at initial conference • Notify NCP to be prepared to pay at conference • Provide NCP with temporary payment coupon • Phone reminder following conference • Prompt enforcement action • Maintain same payment for faster arrears payoff • Leverage automated tools to efficiently manage cases/resources

18. Other Cards in Play • Establish a realistic, enforceable order • Prior to proceeding • Obtain income/asset information • Focus on present ability to pay • If EC appropriate • Comply with Pa. R.C.P. analysis • Establish default order as last resort

19. When and How to Up the Ante? • Contempt or modification? • Maximize administrative and judicial modification options to keep order realistic/enforceable • Coercive enforcement • Contempt • Sentencing Order • Payment Plan

20. Results Note: Highest total collections were in 2008 at 1.67 billion.

21. Results Note: Highest full-time equivalent staff was in 2008 at 3,036.

22. Come to the Table with a Full Deck A multi-faceted approach to arrears management is the only way to win this game!

23. Follow the Boardwalk --to Effective Arrears Forgiveness StrategiesMay 2011 Nancy Thoma Groetken Regional Program Manager Federal Office of Child Support Enforcement nancy.thomagroetken@acf.hhs.gov (816) 426-2270

24. The Chips are Stacked • At the end of FY 2010, the amount of child support debt owed nationally is $110 Billion, up 2.4% from FY 2009 • Arrears are up about 31% over the last 10 years from $84 billion in FY 2000 • Collections decreased in 2009 for the first time in OCSE history, but in 2010 are up slightly -- $26.6 billion collected in FY 2010

25. The Chips are Stacked • Debt management has become an integral part of child support programs. • In 2007, the Office of the Inspector General for the U.S. Department of Health and Human Services found that child support agencies in 20 states operate fully implemented or pilot state debt compromise programs, and another 23 states settle state debt on a case-by-case basis.

26. The Chips are Stacked • Debt management projects have had varying degrees of success. Some have shown that reducing debt owed to the state can unburden noncustodial parents who have accumulated it far above their ability to pay. • Findings from a University of Wisconsin Institute of Research on Poverty (IRP) evaluation of one debt leveraging program— designed to help noncustodial parents reduce large support debts and increase their support payments— suggest considerable promise for this approach.

27. The Chips are Stacked • The Urban Institute conducted a series of studies in 12 states, which found that most child support debt is owed by low-income noncustodial parents. • Emerging research from the University of Wisconsin IRP suggests that higher arrears substantially reduce formal earnings for noncustodial parents that struggle with maintaining jobs—and consequently reduce child support payments for their families.

28. Debt Compromise • Programs: • Best Practices • & Child Support • Outcomes Center for Policy Research is in the Game • In 2008, the Center for Policy Research of Denver (CPR), CO, proposed to conduct a project to help states and local jurisdictions reduce delinquencies by developing and/or revising arrears compromise policies , implementing them, and assessing their impact. • OCSE awarded a SIP grant to Center for Policy Research (CPR) July 2008 through June 2011

29. Debt Compromise • Programs: • Best Practices • & Child Support • Outcomes The Rules of the Game • Project included identifying states with arrears compromise programs that were interested in: • identifying best practices, • revising or expanding their program, and/or • evaluating their program

30. The Players • California COAP • Illinois Project Clean Slate • Maryland PIP • Minnesota SHLIF • Hennepin CO, MN • Ramsey CO, MN • New Mexico Fresh Start • North Dakota • Vermont Project AIM • Washington DC Fresh Start

31. The Rules of the Game … • CPR started by gathering information from all of the projects on: • criteria for case eligibility, • debt compromise terms, • staffing and training, • corrective actions for those who fail to comply, and • program evaluation.

32. The Rules of the Game… • Information was compiled and published in a format that allowed for ease in comparison and contrast across the sites. • A two-day meeting was held in June 2009: • shared the information with participants from all of the sites, • gathered their recommendations on best practices, and • determined how to proceed to gather empirical information on program outcomes

33. The Players Meet • Representatives from several sites identified debt compromise best practices and discussed features of the different programs • Items discussed included: • Program Goals • Scope & Sources of Program Authority • Target Populations • Recruiting, Screening, Enrolling • Types of Arrears Forgiven • Communicating about the Program • Structuring Forgiveness • Program Staffing & Monitoring

34. Learn from the Players – Best Practices in Program Design • FIRST: Clarify program goals • Goals will help you decide eligibility criteria, recruitment, and the scope of the program • Consider different programs for different populations • One-time payments versus regular, on-going payments • Adopt a uniform approach, but allow for flexibility • Uniform programs treat everyone equally and are easier to explain; flexibility allows programs to respond to obligors on a case-by-case basis • Establish realistic expectations • Don’t aim to generate big revenue for the state • Establish simple rules, procedures, and ledger adjustments • Find a legislative champion

35. Learn from the Players - Best Practices for Project Procedures • Use a variety of methods to identify suitable cases • Automated system, CBOs, worker nominations, word-of-mouth referrals, general publicity • Maximize administrative procedures • Agreements must be approved fast using administrative procedures • Enhance automated systems to track cases • Create system-generated alerts rather than relying on manual monitoring techniques

36. Learn from the Players - Best Practices for Project Procedures • Develop a simplified method of modifying orders • Having obligors modify their orders before they enroll in a program may help them be successful in making payments • Suspend compromise agreements when circumstances change, and give obligors additional chances • Build in mechanisms from obligors to rehabilitate if they miss a payment, and allow the agreements to suspend if an obligor loses his/her job • Reduce or eliminate interest charges • Interest charges are typically seen as a “negative” that contributes to the generation of arrears. However, the forgiveness of interest can be used as a payment incentive

37. Learn from the Players - Best Practices for Working with Others • Consult with advocacy groups • Fatherhood groups, reentry programs, financial literacy, and legal services can help with project design and recruitment • Involve the court constructively • Judges can assist with program recruitment at specialized dockets • Develop effective partnerships with workforce programs • Employment is critical to the success of programs that tie forgiveness to future payments. Relationships with employment programs should be pursued. • Consider contacting custodial parents about arrears owed them • Programs that outreach to CPs say they are pleased to get some form of payment. • Some CPs have voluntarily forgiven arrears owed to them, further unburdening NCPs and facilitating improved co-parenting and father involvement

38. Learn From the Players – MOST IMPORTANTLY… • Everyone agrees, preventing arrears by getting orders right in the first placeis the absolute best practice! • Setting orders based on the actual income of the parent, acting early when a payment is missed and adjusting orders timely when appropriate all contribute to managing arrears.

39. More about the Players…. • California: Compromise of Arrears Program (COAP) is a statewide, statutory settlement program that targets arrears-only and current-support cases with uncollectible state debt of $501 or more. • Illinois: Project Clean Slate is a legislative incentive program that targets noncustodial parents with any amount of state-owed debt, who can document that debt accrued while they were formerly incarcerated, disabled, or under- or unemployed.

40. More about the Players…. • Maryland: Child Support Payment Incentive Program (PIP) is a legislative incentive program that targets noncustodial parents who have state debt with gross income below 225% of the federal poverty level. • Minnesota: Strategies to Help Low Income Families (SHLF), an arrears management approach in Hennepin County, and also in Ramsey County are part of a statewide, statutory effort to encourage county child support agencies to prevent and address arrears. The two counties operate settlement programs and workers have discretion to target arrears-only and current-support cases with TANF arrears with factors that limit the NCP’s ability to pay.

41. More about the Players... • New Mexico: Fresh Start/Arrears Management Program is a statewide legislative settlement program that targets cases with emancipated dependents, which only owe state arrears with balances of $1,000 or more. • North Dakota: A statewide debt write-off policy permits compromise of interest on assigned arrears and any interest on unassigned arrears accrued after July 1, 2005.

42. More about the Players… • Vermont: Project Aim (Account Intervention and Management) targets noncustodial parents who have not made any payments in 12 months and accepts a reduced amount in exchange for a lump-sum payment or regular payments of arrears over time. • Washington, D.C.: Fresh Start Program for Noncustodial Parents targets cases with child support arrears exceeding $1,000, with no voluntary payments in the last 36 months, and with automatic eligibility for noncustodial parents who were incarcerated when any arrears accrued.

43. Important Meeting Results… • Several of the participating sites reported making revisions in their debt compromise programs as a result of the CPR meeting in June 2009. • Several asked for help in activities aimed at making the programs more visible to the child support population. • Sites offering debt compromise in exchange for payment of current support also were interested in learning more about NCPs who succeed in the program, and the payment behaviors associated with program participation.

44. What is the Next Hand to be Played? • Results and outcomes are what we really want • Evaluation goal: identify program features associated with strong outcomes • CPR is working with five project sites to gather data: - California - Minnesota - Illinois - Washington D.C. - Maryland

45. A look at the next card • CPR developed a standardized data gathering tool to use across the sites • Data being collected includes: • information about the participants, the details of their participation, • the terms of their arrears compromise agreement, • and their pre- and post-agreement payment history. • Analysis will determine the effectiveness and results from the various approaches on different types of cases and participants with varying circumstances

46. A Look at the Next Card… • The results of the CPR work will fill in some of the information gaps on what works and why with supporting empirical evidence. It will supplement and enhance what others have already studied, including the OIG study. • It will provide the first empirical look at the characteristics of obligors who participate in these programs, and detailed information on their payment performance and compliance.

47. A Look at the Next Card… • The data will include the source of each payment - voluntary, wage withholding, unemployment benefits, other involuntary – to yield information on changes in employment status which may affect payment compliance.

48. For More Information Now • To get more information go to the OCSE PAID Workplace under Research/Grants and Reports sub-folder labeled Debt Compromise Program: Best Practices and Child Support Outcomes. • Included there is a copy of the Conference Summary and a variety of materials gathered by CPR from 14 other state and local debt compromise programs.

49. More information is Coming • The final report is not yet ready and data gathering is still going on in one or two of the sites. • As results are available, expect to hear more in upcoming conferences, meetings or conference calls.

50. Follow the Boardwalk --to Effective Arrears Forgiveness Strategies QUESTIONS?