Interest rate on payment of arrears

[v3ktors]

I think this is a relatively simple question...but perhaps not. Is there a standard approach used for payment of arrears (either for support or s 7 expenses) on a payment plan approach as opposed to a lump sum? Is interest typically included, or is it case-by-case? If interest is applied, is there a basis for how much interest can be applied?


Thx

[Stillbreathing]

If you are with FRO there is a standard interest rate and formula for calculating arrears. You have to complete the form yourself as well as the calculations using their formula then submit it to them. If you don’t they will not go after the interest. Even then you have to hound them and they may still ignore any interest owing. Also, unlike your bank , they din’t Start calculating interest until the payer is one month late. Ridiculous but true.

[v3ktors]

Does that apply in the case where you're owed some amount of money in arrears...say $10,000, and you agree that the arrears can be paid back in monthly amounts of $100 until the arrears are fully paid. Would FRO apply an interest rate in this case?


Alternatively, could you have an agreement or order whereby you're paid back $100 monthly until the entire arrears are paid in full, with an annual interest rate of say 5%, which would in effect, increase the length of time for the arrears to be paid in full? If this were possible, I think that the interest rate would not be included in any documents from FRO, but rather would just increase the length of time that the $100 monthly payments would be made.

[rockscan]

If you have it in your agreement that there is a payment schedule then I dont think you can claim interest if they are making those payments. Most interest line items in agreements specify interest is owing on default payments. FRO has the same process regarding interest which applies to payments not made.

For instance, my partners agreement clearly states that interest is owed at a specific amount on arrears that have not been paid. Which means if he fell into arrears because he wasnt making payments, interest would be owing.

If you and your ex have agreed that they are in arrears and owe ten grand payable at 100 a month then there is no clause on interest. Its not like a loan.

Im not a lawyer though, thats just my understanding of the interest on cs payments.

[v3ktors]

Thanks for the replies. At this moment, there is no agreement or order yet in place, but I suspect that a settlement offer will be presented. I expect that the monthly arrears payments will go through FRO, so I don't expect issues with missed or delayed payments. Instead, where I am coming from is that the arrears arise from payments that should have been made over the past three years (so the payments are already late). In lieu of a lump sum payment right now to make up for the arrears, I am agreeable to a payment plan, but if that payment plan takes years to complete the arrears amount, then it doesn't seem fair that some sort of interest is not applied. An interest payment would also put some onus on the payor to pay more quickly if able to.

[rockscan]

How did it become what should have been paid? Was the person not paying or you failed to agree on an amount?

I ask because my partner has been unable to pay the proper amount of cs because his ex refused to update FRO and is dragging their feet on the court process. He was ready, willing an able to pay his proper cs but was prevented from doing so. It would be unfair to add interest to the amount as it was her fault not his.

Which means in your case, if it was simply a delay because of the court process then interest would be unfair. If it was all because of neglect on their part then interest would be a reasonable request.

[v3ktors]

I agree that in your case, it would not be fair. In my case, it has been a case of my ex refusing to pay the proper cs or contribute anything towards s. 7 expenses, even after advising my ex of these discrepancies when they arose.

[v3ktors]

P.S. Up until now, nothing has gone through FRO...so there was no reason why the appropriate payments were not forthcoming.

[Stillbreathing]

Unfortunately the word “settlement” is an oxymoron when it comes to arrears in Cs or other monies owed. Lawyers and judges will try to persuade the person who is owed money to accept less than they are legally entitled to ( never mind what you are entitled to plus interest). For example, if your ex owes you 100,000 in arrears they may try to get you to accept 10,000. Their reasoning would be it’s in the past, there is no order for enforcement and it’s more likely you would actually get your hands on any money. Surprisingly enough the same lawyers do not use this line of reasoning when you owe them money! Settlement is a term whose true meaning is the financial ripping off of the person who is owed money in a divorce by use of coercion, and disrespecting their legal entitlement .

The only way you will likely get interest is if collection is through FRO and then only on a moving forward basis if at all.

[kate331]

I have to agree with Stillbreathing. I think racking up arrears is to the payers advantage as there is a real possibility they will be negotiated down. Then recipients always have to weigh the cost of legal fees vs the actual support you may receive.

I'd like to know the cost to taxpayers who now have to support some of these children through social services. That would be an interesting study. Fixing one system would help the other, imo. From what I have read 80% of FRO payers are in arrears.

[Tayken]

I'd like to know the cost to taxpayers who now have to support some of these children through social services. That would be an interesting study. Fixing one system would help the other, imo. From what I have read 80% of FRO payers are in arrears.

It actually isn't that hard because of the majority of child support is paid voluntarily without the need of FRO.

The reason you see so much about FRO is because it is for the very small % (1-4%) of the population of child support payers that would not pay otherwise. It is a classic case of the highly-conflicted in our society consumers the majority of our resources.

Furthermore, FRO only reports on the problems... There are probably 20 situations for every 1 bad FRO case where the parents don't need (or want) FRO involved in their lives.

The biggest issue at FRO is that payers who work for cash or are self-employed take up significant amounts of time.

The only time FRO should be involved in a matter is when someone is consistently not paying CS or refuses to. FRO should be for the 1-5% of the times they are needed.

With electronic money transfers (email money transfers) and other modern systems to do this... Parents who don't have issues should not be using FRO.

Good Luck!
Tayken

[kate331]

I got the info here:

http://www.cbc.ca/news/canada/manito...port-1.2782955

80% of Court Orders through FRO in Ontario are in arrears and
$3.7B is owed in Canada

My thought is that money owed is putting a strain of Social Services such as Social Housing and Subsidized Daycare,

I do agree that parents that dont need the FRO shouldnt use it but how can you change that?

[Tayken]

The interest rate on arrears are not worth any sort of battle. I would ignore the issue and just get the capital collected. Unless the arrears are in the million+ range then it may be worth it.

Most arrears are <10k. Interest on 10k is a joke these days. Especially at the 3% they are awarded on.

[Tayken]

80% of Court Orders through FRO in Ontario are in arrears and $3.7B is owed in Canada

That number has been disputed and the article is from 2014. At that time the FRO system was being investigated in Ontario and was found to be over charging people.

https://www.ctvnews.ca/canada/frustr...ents-1.2839241

So a lot of the number was the result of improper calculations on the part of FRO.

My thought is that money owed is putting a strain of Social Services such as Social Housing and Subsidized Daycare.

I don't think it has a significant impact. Child Support is fractional in what the real cost of raising children is. No one lives off child support and generally if you are in need of social services the parent of the children is not some crazy 150,000+ income earner not paying child support.

Just punch incomes into mysupportcalculator.ca and see what they spit out. Start with the average income for a Canadian (51,000). Which for 1 child is 470 in CS or a whopping $5640. That won't lift anyone in poverty out of poverty. They will still need social services.

You want to improve the situation. Learn to develop software. Average income for a software developer is 100,000+. You won't even want the $5640 from the other parent.

[rockscan]

True story...my father refused to pay cs and ss when we were teens and there was no FRO back then. The court rolled the cs amounts into ss right as we turned 18. We found out last year that his CPP and OAS were being garnished by FRO and sent to my mother. I couldnt figure out why he was still working under the table for cash. Goes to show you that FRO is still able to find some deadbeats but only if it involves government sources!