Enforcing child support with child support liens and QDROs in Texas

Unpaid child support is a serious problems for many families where the child support may be the difference between keeping food on the table or lights on in the home. Enforcing child support in court can be a challenge when the child support obligor hides money, dodges process servers, or does not have the income stream to pay child support. There are a wide range of remedies available under the Texas Family Code to enforce child support orders and recover unpaid child support. Two of those remedies are child support liens and qualified domestic relations orders (QDRO) which are different methods to obtain existing financial assets and income streams to pay current or past due child support. These two remedies are similar but differ on key aspects. Today’s post will discuss the two remedies and how they can help recover unpaid child support.

Child support is typically paid through an income withholding order issued by a family court

When a Texas family court orders child support in a divorce with children or child custody case typically the judge also signs an income withholding order. An income withholding order is an order to the employer of the parent owing child support (the obligor parent) to deduct child support from the parent’s paychecks. An income withholding order (IWO) only keeps child support current as long as the obligor makes enough money and the obligor continues working at an employer who received an IWO.

If the obligor falls into arrears and owes unpaid child support then the parent owed child support (the obligee parent) must pursue ways to obtain unpaid child support. The obligee may receive help from the Texas Attorney General’s child support registry or a local county or district domestic relations agency.

Child Support Liens under the Texas Family Code

One way to recover unpaid child support if the obligor has financial assets is by obtaining and perfecting a lien on those assets. Texas is a debtor friendly state; however, child support liens are one of the few types of liens that cannot be erased by bankruptcy or avoided under state law. A child support lien attaches to the assets and often can result in the court ordering liquidation of those assets to satisfy the lien. A child support lien can attach to a civil case like a personal injury claim in addition to existing financial assets.

Obtaining and enforcing a child support lien is not an easy task. Chapter 157 of the Texas Family Code includes the enforcement provisions for unpaid child support, including child support liens. To obtain a child support lien the obligee, or a government agency on behalf of the obligee, must initiate a child support enforcement proceeding. There are several tools available to enforce payment of unpaid child support but a court must firm confirm the arrearage owed in an order. The child support lien can then be created but the process is just getting started.

After creating a child support lien the lien must attach to the financial assets of the obligor. The lien may have to be filed with county property records or served on entities holding the assets. The obligee can leave the lien attached to the assets until the obligor chooses to sell or the obligee (or more likely the obligee’s attorney) can institute additional proceedings to obtain additional orders to liquidate the assets. Then the obligee must follow the correct procedures to take possession and sell the assets.

Most obligors in Texas with unpaid child support liens do not have bank accounts to empty so satisfying a lien can be difficult or impossible if no assets can be found. Many employees have 401k plans, pensions and other retirement assets which could satisfy a child support arrearage but because federal and Texas laws protect these assets they often cannot be reached by a child support lien issued by a Texas court.

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What is a QDRO?

Employer-sponsored retirement plans are almost always protected from creditors, including obligee parents, to ensure retirees do not reach an age where they cannot work and have their retirement savings disappear. Private employer plans are usually protected under the Employee Retirement Income Security Act (ERISA) which is a complex law protecting governed plans from creditors and even most state court orders. Federal and state employer plans are protected under separate federal and state laws respectively. Under these laws and plan rules the employees often cannot withdraw funds to pay unpaid child support without special court orders known as a qualified domestic relations order or QDRO.

A QDRO is a court order that orders the plan administrator to transfer ownership of some of the employee’s plan assets to another person. It may require the plan to disburse those assets subject to the plan disbursement rules. QDROs are common in divorces to divide retirement assets as part of the property division but they can be used in Texas to satisfy child support orders and spousal maintenance orders.

Child Support QDROs in Texas

Texas courts can order a QDRO to pay past due or ongoing child support. These orders can transfer lump sums to the obligee or divide an income stream of pension payments between the obligor and obligee. QDROs even for child support are complicated orders because they must follow obscure retirement plan rules and statutory requirements. QDROs that fail to weave through these requirements may be unenforceable. Despite the complexity of obtaining an order they are powerful tools to recover unpaid child support.

There are several benefits to using a QDRO to satisfy a child support arrearage. Until the plan administrator disburses assets to the obligee the plan administrator must hold the assets. The obligor has no ability to capture the assets (absent a court order) and the plan administrator can be held liable if it wrongly disburses assets to the obligor. A QDRO can give an obligee opportunities to keep the retirement assets in a pre-tax status until retirement and allocate the obligee’s own money towards supporting the child. This can be a good opportunity if the obligee lacks access to a good retirement plan at work.

Although powerful tools the obligee should carefully consider the value of a QDRO to satisfy a child support arrearage. The plan rules may restrict the method or timing of payments which may require delaying decades until the employee reaches retirement age. The plan rules may reduce payments if taken early which can deeply reduce the amount of money actually received by the obligee. Retirement plan assets are often pre-tax so any disbursement will be taxable to the recipient so tax considerations must be made to ensure the obligee does not receive less after-tax than the amount owed. Calculating these amounts often requires tax and retirement plan experts to develop the QDRO language and calculation.

2021 Texas statute on child support QDROs

In 2021 the Texas Legislature revised the Texas Family Code to clarify the rules for family courts to order child support QDROs. The 2021 statute did not create new orders or rules for QDROs–it clarified a previously murky and complex area of the Texas Family Code to assist judges and attorneys with obtaining child support QDROs.

Child support QDROs have been permitted under the Texas Family Code for a long time although the legal rules around it were not well defined and at times challenged by obligors. Obligors, often through their attorneys, challenged technical legal requirements to issue orders and the extent to which the Texas Family Code actually permitted these orders to exist. ERISA rules around QDROs are extremely complex and challenges to child support QDROs can end up in federal courts. Some judges understandably worried about signing orders that might violate a statute and force the parties into complicated and expensive appeals.

The 2021 statute makes clear that family courts have the authority to issue child support QDROs and a roadmap for how to render those issues in the confines of family law. This statute will help obligees receive unpaid child support and encourage obligors to pay child support as it is due. The statute does not alleviate the problems of dealing with complex plan rules and benefit law but improves Texas law and leaves it to attorneys to address these others issues for clients.

Can you have a child support lien and a QDRO at the same time?

Yes. Both liens and QDROs are legal tools to extract money or assets from one party to another to satisfy a legal debt. Under the Texas Family Code an obligee can deploy multiple tools for recovery of unpaid child support at once. An obligee (and their attorney) can pursue a QDRO but also try to lien other assets at the same time. If the child support arrearage is large it may be necessary to pursue both at once.

There are legal, ethical and strategic concerns to using several unpaid child support enforcement mechanisms at once. A party can only recover on a legal debt once so if the QDRO satisfies the child support arrearage then the lien cannot also be pursued and vice versa. Pursuing recovery multiple times on the same debt can create legal problems for the obligee and if an attorney assists in the process the attorney can be at risk both legally and ethically as a member of the bar. Once a QDRO divides plan assets the plan administrator generally cannot undo that without a corrective second QDRO from the court which requires a lot of extra work and expense. Deciding how to recover unpaid child support in an enforcement requires a lot of careful planning and should be done with the help of an experienced family law attorney.

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