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Electronic Deposit of Government Benefits has Negative Consequences

A new requirement that all government benefits be deposited electronically into recipients' bank accounts will potentially and inadvertently force some 275,000 Americans into destitution.

By March 2013, all federal government benefit checks, including Social Security, disability and veterans' benefits, will be electronically deposited in the bank accounts of recipients or distributed on a pre-paid debit card. While the new requirement will save the government over a $1 billion over ten years, it could leave low-income recipients with child support debt without any income.

How the Process Works

States have long been able to garnish up to 65 percent of federal governments benefits awarded to people who have a backlog of missed child support payments before checks are sent out. The state then keeps the money as payment for welfare benefits it provided to the recipients' children to make up for the missed child support payments.

Though states can take a majority of an award, current recipients who receive paper checks still receive the other 35 percent, which they can cash to use as modest income, even if their bank accounts have been frozen by the state in an effort to collect child support debts.

These paper checks will not exist when the new law goes into effect next March. Without the checks, the state can garnish 65 percent of benefits prior to their being deposited, then freeze the bank account, including the remaining 35 percent of federal benefits, of the recipient who owes child support payments, leaving many low-income recipients with no income.

Unintended Consequences for Vulnerable Populations

Sadly, the new requirement negatively affects parents who are prevented from earning an income due to disability, institutionalization or imprisonment. Often, the children of these parents are already grown. In fact, the money the state collects does not go to the children but to the state as payment for child support debt.

Legal aid attorneys and other lawyers who represent low-income benefit recipients worry that the new requirement will leave those that are already vulnerable with no income. Often, the individuals who owe the most in child support are already impoverished. A Department of Health and Human Services (DHHS) survey of parents who owed $30,000 or more in child support found that 75 percent of participants earn $10,000 or less each year. The DHHS does not believe that states should pursue child support debt collection so forcefully that parents lose their only income.

All children deserve the financial support necessary to help them grow into functioning adults and custodial parents have the right to the support necessary to raise their children. Unfortunately, the new law will not directly help the children of low-income parents and may send over a quarter million recipients into destitution.

If you or a loved one receives federal benefits and are worried about having all of your benefits withheld when the new law takes effect, please contact an experienced family law attorney to explore your legal options.

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