TN 2018 Legislation: New Interest Rates on Child Support Arrears
New legislation changed the rates of interest courts can order on child support arrears, again. Public Chapter 1049 was signed into law on May 21, 2018, amending Tennessee’s child support law. All of the statutory interest rate changes for arrears went into effect on July 1, 2018.
Interest on Child Support Arrears
In Tennessee law, every child support order is automatically a judgment against the payor. Likewise, any unpaid child support that is past due, called arrears, is also an automatic judgment. T.C.A. § 36-5-101(f)(1)(A). The judgment for arrears accrues interest at a certain rate. The challenge for parents under the amended statute is in determining how much the rate of interest will be on arrears in their cases. Much will depend upon their circumstances and the type of child support case they have.
Three provisions added as T.C.A. § 36-5-101(f)(1)(B) changed the permissible rates of interest on child support arrears, or back child support. The judge does not have discretion to exceed the interest rate caps now in place under the amended statute. What follows is a brief summary of those three provisions.
4% Cap on Interest Rate for Child Support Arrears
Interest on child support arrears accrued at the rate of 12% per year up until April 17, 2017. For arrears to continue accruing any interest at all on or after that date, the court must make written judicial findings. In making its determination, consideration is given to “any factors the court deems relevant.” The highest rate of interest the court can set on or after April 17, 2017, is 4% per year. (Read about the 4% rate change in Arrears Interest on Back Child Support Lowered: New Tennessee Law in 2017.)
Different rates of interest on arrears are possible depending upon whether the parents have a non-IV-D child support case or an IV-D child support case. The “IV” refers to the Social Security Act’s Title IV which provides grants to states in these matters. Take a look.
6% Cap on Interest Rate for Non-IV-D Child Support Arrears
In non-IV-D cases, the default rate of interest on arrears arising on and after July 1, 2018, is 6% per year. The court does have discretion to reduce the interest rate, even eliminate it. In making a determination, the court looks to what is “deemed appropriate under the circumstances” and may consider any relevant factor. Although this statutory provision does not specifically require the judge make written findings, it is likely to be interpreted that way. We’ll have to wait and see.
0% Interest Rate for IV-D Child Support Arrears (Absent Written Findings)
In IV-D cases where the state is involved, the default rate of interest on arrears accruing on or after July 1, 2018, is 0% per year. Importantly, the amended statute does not prevent the judge from ordering interest. The court may order an annual rate of interest at 6% or less, but only upon making written findings that interest is to accrue. In setting an interest rate, consideration is given to “any factors the court deems relevant.” If there are no written judicial findings, then the interest rate should default to 0%.
Whenever child support arrears begin to mount, the risk of paying significant interest on those arrears increases, too. You may be able to get the rate of interest reduced, even reset to zero, if modified orders are entered. Talk to your attorney.
