Wisconsin Lawyer: Wisconsin Lawyer December 1998: Administrative Enforcement: A New Tool to Collect Support Arrears:

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December 01, 1998

Wisconsin Lawyer December 1998: Administrative Enforcement: A New Tool to Collect Support Arrears

Administrative Enforcement: A New Tool to Collect Support Arrears

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Payers who fall behind in their child support or maintenance obligations may be subject to new administrative actions to force them to pay up, like restrictions on or loss of their professional, recreational, or operator's licenses and levies or liens against their personal or real property.

As of May 1, 1998, the State of Wisconsin has many more tools available to collect support arrears. These new tools include the right to suspend, revoke, limit, or refuse to renew many licenses and the right to levy or take a lien against property held by the payer, including personal property, bank accounts, real estate, lump sum pension payments, settlements or judgments, and other property. This article provides an overview of the new mechanisms available, how they will work, and what the family lawyer needs to know to protect the client against whom these actions may be taken.

This legislation was introduced originally as Assembly Bill 651 to effectuate the requirements of a federal law known as PRWORA - the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.¹ PRWORA also made changes to the law concerning establishment of paternity, which is not discussed in this article. The bill as passed is 1997 Wisconsin Act 191 (the Act).

Effect on professional and recreational licenses

Babyshoes The Act amends the Wisconsin laws to permit a licensing board or agency to refuse to issue, revoke, deny the renewal of, limit, or suspend almost all types of licenses including professional licenses and recreational licenses.²The licenses include, but are not limited to driver's licenses, almost all professional and occupational licenses, fishing and hunting licenses, and many others. The license holder or applicant will be subject to the law if he or she is delinquent in making court ordered payments of child support, family support, maintenance, birth, medical or other expenses related to child or spousal support, or fails to comply, after appropriate notice, with a subpoena or warrant relating to paternity or child support proceedings.

This new system requires the Department of Workforce Development (the department or DWD), which is in charge of collecting child support including arrears, to enter into a memorandum of understanding with the licensing agencies, with the Wisconsin Supreme Court for law licenses, and with the Lac du Flambeau Band, to determine the circumstances and procedures under which a license may be revoked, suspended, denied, or limited.³ The suspension or limitation may not exceed five years for a delinquency in paying support or six months for failure to comply with a subpoena or warrant.⁴

Certainly, the practice of suspending, revoking, or refusing to renew a driver's license or a professional license, such as a license to cut hair or practice law, would seem counter-productive to the desire to collect child support. As the accompanying article indicates, the State Bar of Wisconsin Family Law Section Board of Directors made many efforts to modify this law, with some success. The DWD has issued a proposed administrative rule, DWD 43, to define when a license may be suspended, denied, or limited. Under the proposed rule, the threshold for such action occurs when 300 percent of the monthly support amount is overdue.⁵

Before the DWD can certify to a licensing agency or board that a payer is delinquent, the department or child support agency must notify the payer, by regular mail at his or her last known address, that this certification will occur.⁶ The notice must contain information that: the certification will occur and when it will occur; upon certification and for up to five years, the license or credential may be revoked or limited, etc.; any license the individual holds may be affected; an occupational license may be available; the certification will not be made if the individual pays the delinquency in full or makes alternative payment arrangements; and the payer may make a written request to the court that made the original support order or judgment, with a copy to the child support agency, for a hearing within 20 business days of the notice.⁷

If the payer requests a hearing, it must be scheduled within 10 business days after receiving the request.⁸ The only issues that may be considered at the hearing are whether the child support arrearage is owed and whether the alternative payment plan proposed by the department or agency is reasonable.⁹If the court determines that the proposed repayment plan is not reasonable, it may impose its own alternative payment plan.¹⁰ If such an order is made, the payer's name may not be placed on the certification list. If no hearing is requested, the result of the hearing is adverse to the payer, or the payer does not comply with the court's payment plan, then the payer's name must be placed on the list.¹¹ A second similar notice then must be sent to the payer stating among other things that the individual's name has been placed on the list, at which time the payer again has 20 business days to request a hearing.¹² If no hearing is requested or the hearing result is adverse to the payer, then the license sanctions will apply.

Clearly, the payer must take heed of the initial notices to avoid what may become a snowball effect of administrative enforcement procedures. If the administrative procedure to revoke, suspend, limit, or refuse a license is enforced, the payer may not be able to engage in the livelihood from which he or she derives the income to pay support, including arrears.

Administrative procedures to seize property

To proceed with the administrative procedures to seize property, the DWD must notify the delinquent payer that he or she will be placed on a list known as a lien docket. Those individuals whose names appear on the lien docket will be subject to the new enforcement procedures, including levies against financial accounts and liens against personal and real property. A person will be listed on the lien docket under the proposed DWD rule when the "lien eligible amount" in one or more of the payer's court cases equals or exceeds the "lien threshold."¹³ An individual will receive notice by regular mail that he or she will be listed on the lien docket. That payer will have the right to make a written request for a hearing within 20 business days of receiving that notice.¹⁴ If a hearing is not requested, the person's name will be placed on the lien docket.

The "lien eligible amount" is defined as "the amount in a court case that is eligible to be placed on the lien docket."¹⁵ In most cases the lien eligible amount is the arrearage amount less the current monthly support charge, if any.¹⁶ The "lien threshold" will vary depending upon whether the department chooses to seize a bank account, put a lien on property, or take another action. In most cases the lien threshold will be met, and the payer's name will be placed on the lien docket, if the arrearage owed equals or exceeds the monthly amount due or $500, whichever is greater.¹⁷

If a payer receives notice that his or her name will be placed on the lien docket, the payer should immediately request a hearing - especially if the payer disputes the arrearage amount. Once on the lien docket, the state has a myriad of mechanisms available to it to seize the payer's property. In some instances, such as for financial accounts, the department is permitted to seize first and notify the payer later.

Baby shoes Notices to be sent by mail. The notices may be mailed to the payer's last known "verified" mailing address as provided by the payer pursuant to section 767.263(2) of the Wisconsin Statutes. The rule requires that the department use due diligence to obtain the payer's address if the mailed notice is returned.¹⁸ If the last known mailing address is "unverified," which term is not defined in the rule, or a written notice sent to a payer's last known verified mailing address is returned, then the department must contact the postmaster to attempt to verify the mailing address.¹⁹ If the postmaster cannot verify the last known mailing address or provide a new address, the department is permitted to send notice to the payer's current employer as provided by the payer.²⁰ If the notice sent to the last known employer is returned, then the department "shall use diligent effort to obtain a mailing address for the payer."²¹

The proposed administrative rule defines diligent effort for each of the administrative enforcement actions. The department must contact the relevant financial institution or agency, if there is one, or the state licensing agency or board in a case involving a license action, to attempt to verify the payer's address. In addition, under some circumstances the department or agency must use the automated federal, state, and local locate resources to obtain the payer's current mailing address.²²

Threshholds for administrative action

After the payer is on the lien docket, if the department chooses to use an action to seize property, it may proceed administratively to seize the payer's bank accounts, personal property or real property, or intercept lump sum settlement, judgment, or pension payments.²³ An arrears threshold applies to begin each type of administrative enforcement action. For financial accounts, the threshold for an action to levy is 300 percent of the monthly amount due or $1,000, whichever is greater.²⁴ For real and personal property, the threshold amount is an arrearage (lien amount) that equals or exceeds 600 percent of the monthly amount due.²⁵ In each of these cases, the amount due for percentage or combined percentage and fixed amount support orders is the amount that is expected each month under the order or judgment. It will be very important for attorneys to establish the expected monthly amount of a percentage or combined percentage and fixed amount order at the time of the initial order or judgment. For lump sum payments the threshold is met when the payer is placed on the lien docket.²⁶

Financial institutions must cooperate with the DWD

After the payer is on the lien docket, the department will run a financial records match. Financial institutions must cooperate with the department in cross-referencing the names of their account holders to determine whether any are on the lien docket.²⁷ Once a match has been made, the department can decide whether to proceed with the administrative action to seize that particular account if the payer's lien amount meets the threshold. If the department proceeds with seizure of a financial account, it must again give notice. ²⁸ The proposed rule provides, however, that the department may not seize an account unless the payer's total balances in all financial institutions, minus the $5 levy fee and any early withdrawal penalty, exceed $500 at the time of levy. ²⁹ The department may seize only the funds that exceed $500.

Under the proposed rule a joint account holder with the payer may request a hearing, and the department may not seize that portion of the account in excess of $500 that the court determines is attributable to the contributions of the joint account holder. ³⁰ The proposed rule requires the department to assume that the payer's interest in property other than financial accounts, if jointly held, is 50 percent of the property's fair market value. ³¹

The department cannot seize the payer's personal property unless the lien amount exceeds $500 and the equity value in the property exceeds $500. ³² The department cannot seize the payer's real property unless the equity in the property minus expected levy fees exceeds 20 percent of the property's fair market value and the lien exceeds $5,000.³³ The statute details how the department may execute against and sell the personal or real property. ³⁴ If the other requirements are met, then the department may proceed with its administrative enforcement action against any assets that meet these seizure threshold requirements.

Beginning administrative seizure actions

The procedure for beginning the administrative enforcement action is similar to that for placing the payer on the lien docket. Notice will be sent by regular mail to the payer's last known address. ³⁵ The payer will have 20 days to object to the enforcement action by requesting a hearing. In the case of financial accounts, however, the department will send a notice to the institution with instructions to prohibit closing the account or withdrawals until further notice. ³⁶ No later than the next business day, notice will be sent to the payer and others with an ownership of record for the account.³⁷ The entire account will be frozen during the period necessary for the payer or others to request, and receive the result in, a hearing. The hearing must be held within 45 days of the request for hearing. ³⁸ If the payer or another account holder does not request a hearing, the funds will be disbursed to the department on the 21st day. Obviously, this puts a burden on the payer to request the hearing within the 20 days or lose the funds, which will be frozen until a hearing is held. It also may cause serious cash flow problems for any small business in which the payer has an interest if the business's financial accounts are frozen for 45 days or more.

Although it may take longer for the department to actually obtain possession of real estate or personal property, the payer has the same 20 days to request a hearing. At the hearing for each of these enforcement proceedings the statute limits the court's review to whether the amount the department claims the payer owes is correct and to whether the alternative payment plan the department proposes is reasonable.

Alternative payment plans

The proposed rule provides that the payer may negotiate an alternative payment plan with the child support agency to stay the administrative enforcement action. ³⁹ The payer may submit a request within 10 business days of the date of certain notices to the child support agency to negotiate that plan. ⁴⁰ The payer may request a court hearing on the reasonableness of any alternative payment plan within 20 business days after the date of certain notices. ⁴¹ If a hearing is requested, the administrative enforcement action is stayed until either a plan has been entered or a court has determined the reasonableness of the plan. ⁴²

If the child support agency and the payer are unable to reach an alternative payment plan, the court has the discretion to set a payment plan. ⁴³ If the court does not set such a plan, the child support agency may continue with the administrative enforcement action.⁴⁴

Such an alternative payment plan may incorporate a lump sum payment, a periodic payment on arrearage, or both. ⁴⁵ Any such payment plan, however, cannot cause the payer's gross income to go below the poverty line. When establishing the alternative payment plan the child support agency is to consider the factors used by a court under Chapter 767 in determining whether the use of percentage standards is unfair to the child or any of the parties.⁴⁶ If the child support agency determines that the alternative payment plan would be unfair to a child or any of the parties, the administrative enforcement action must be suspended.⁴⁷ Such an alternative payment plan can be renegotiated at the written request of the payer or child support agency if the requesting party can show a substantial change of circumstances. A substantial change of circumstances includes, but is not limited to: a change in the payer's income or assets, a change in the payer's earning capacity, or any other factor the child support agency determines is relevant.⁴⁸

Financial record review requests

The statute provides that the payer is entitled to a record review process to determine whether the amount of the arrears as stated by the department is accurate.⁴⁹ This record review, however, is in addition to and not in lieu of the hearing procedure. Under the proposed administrative rule, the payer may request a financial record review and court order review within 10 business days of the date of the notice of lien. ⁵⁰ The purpose of that review, which is to be at no cost to the payer, is to determine whether the record is correct. The review will cover only the period of time since the last judicial review or order by the child support agency. Upon request of such a review, the child support agency must provide the relevant payment records to the payer. The payer then has 20 days after receiving those records to provide a written statement of any alleged error to the child support agency. ⁵¹ If the payer provides such a statement of error, the child support agency has 60 days after the date of the payer's request for the financial record review to determine whether the lien against the payer is in the correct amount. ⁵² If the payer disagrees with the record review conclusion, he or she has only five business days to request a hearing before a commissioner or judge, which hearing must occur within 15 days. ⁵³ If an error is found, the department must remove the lien from the docket or adjust the amount of the delinquent obligation.

There is no provision to stay the request for a hearing based upon either notice of placement on the lien docket or notice of administrative enforcement action while the financial records review is being conducted. Therefore, attorneys should request both the financial record review and a hearing to review the correctness of the applicable notice, whether it is to place the payer on a lien docket or certification list, or proceed with administrative enforcement.

Notices, liability, and limited protections

There are multiple instances under the statute and the rule that require the department to send notices to the payer or others. These include, but are not limited to: when the payer's name is to be added to the lien docket or the certification list, when the payer's name actually has been placed upon the lien docket or certification list, when the department intends to proceed with a levy or a lien against the payer's property, and when such a levy or lien actually has been taken. In each of these instances, the notice requirements are different. A payer's attorney should review the particular notice requirements to determine that they have been met. The administrative procedure can fail for lack of proper notice. In addition, the time requirements are not the same in every instance. Therefore, the timeliness of the notices or the request for a hearing under a notice should be reviewed carefully in the statute or rule.

The financial institution incurs no liability for information disclosed as required by the statute, either in response to a request under section 49.22(2m)(a) or an administrative subpoena under section 49.22(2m)(b) and (bc).⁵⁴ Failure of the financial institution to respond to that subpoena or request for information, however, can result in a forfeiture by the person or institution to whom the request is directed. ⁵⁵ Under the administrative rule, the penalty for failure to comply with a request for information or administrative subpoena will not exceed $25, unless the failure to comply is a result of the payer's intentional conduct to hide information, falsify information, or provide incomplete information, in which case the forfeiture may be as much as $500.⁵⁶ In addition to providing the department with the authority to issue such subpoenas and request such financial information, the proposed rule would require the payer to agree to provide the child support agency with a full financial disclosure statement of income and assets when negotiating any payment plan. ⁵⁷

Babyshoes The only real protection for nonpayers, who claim that their property has been wrongfully levied or liened against, aside from requesting a hearing, is to bring an action against the state in the Dane County circuit court. ⁵⁸ If in such an action it is determined before the sale of the property that it has been improperly levied upon, the court can enjoin enforcement of the levy and return the property. ⁵⁹ The court also may order other relief to protect the interests of the other owners, such as partition of the property. ⁶⁰ If the property has been sold, the court may grant a money judgment for the amount of money obtained by levy.⁶¹

The department rule also provides some protection for abused spouses. It provides that if the agency is aware that the payer is subject to a protective order, such as a domestic violence injunction with respect to the payee or a child, or the agency has reason to believe that the payee or child in any of the payer's court cases may be physically or emotionally harmed by the payer, then the department shall provide written notice to the payee in all of the payer's court cases when administrative enforcement is initiated against the payer. ⁶² The notice must be sent to the payee within five business days of the notice being sent to the payer. ⁶³ This does not, however, stay any such enforcement action. The burden is on the payee to inform the department or child support agency that the payee is likely to be physically or emotionally harmed by the payer in cases where there is no injunction or where the department or agency has no knowledge of such an injunction.

PRWORA, as implemented by1997 Act 191 , includes many other changes to the law that are not dealt with here. These include an obligation for employers to report all new hires, numerous requirements that Social Security numbers be provided by payers and others who deal with payers, and additional information that must be provided by employers concerning a payer's earnings.

Conclusion

While the use of administrative enforcement techniques such as those described above may well lead to the collection of significantly more child support, the protections for payers are limited. As practicing family lawyers know, the last known mailing address in the court file frequently may be inaccurate. Serious due process concerns are raised by this type of notice. In order to meet due process requirements, the notice must be meaningful. PRWORA, however, permits notice by regular mail.

Hickey

Margaret W. Hickey, U.W. 1986 cum laude, practices primarily family law at the Milwaukee law firm of Becker & Hickey S.C. She serves on the State Bar Family Law Section Board of Directors.

In addition, the KIDS system upon which the record for support arrears will be based, often is inaccurate. Therefore, payers and their counsel will need to be particularly vigilant upon receiving the initial notice. A hearing should be requested if the notice appears to be inaccurate either in substance or in procedure. As part of this process, the payer also should request a record review, including review of the court orders, to determine whether they were accurately entered in the KIDS system. The record review is one of the few opportunities where payers may be able to correct errors in the record without undue legal cost.

Public hearings on the final administrative rules have been held, and the Department of Workforce Development expects to implement the final rules soon. In the meantime, the DWD has implemented the emergency rules as of October 1998. The statutory changes described here already are in force. Collecting support in 1999 and beyond will be completely different from any procedures previously known.