Article by Betsy G. Ramos

New Jersey recently passed a law requiring that a judgment for child support shall be a lien against the net proceeds of any settlement of a lawsuit, civil judgment, civil arbitration award, inheritance or workers’ compensation award. This law went into effect as of August 14, 2000 and would cover all settlements disbursed after that date.

“Net proceeds” is defined as any amount in excess of $2,000 payable to the prevailing party after costs such as attorneys fees, witness fees, court costs, fees for health care providers, Medicaid liens, reimbursement of a workers’ compensation lien, and other costs are deducted. “Prevailing party” does not include a minor child, partnership, corporation, limited liability partnership, financial institution or government entity.

Before distributing the net proceeds, the prevailing party must provide the attorney, insurance company or agent responsible for the final distribution of such funds with a certification that includes the prevailing party’s full name, mailing address, date of birth and social security number. The attorney representing the prevailing party must then initiate a search of child support judgments, through a private judgment search company that maintains information on child support judgments, to determine if the prevailing party or beneficiary is a child support debtor. If the prevailing party is not represented by an attorney, the judgment search must be initiated by the opposing attorney, insurance company or agent before the proceeds are distributed.

After conducting the search, the judgment search company must provide a certification to the attorney, insurance company, or agent whether or not the prevailing party is a child support judgment debtor. The fee for a judgment search may not exceed $10 for each name to be searched. If the certification shows that the prevailing party is not a child support debtor, the net proceeds may be paid to the prevailing party immediately. However, if the search reveals a child support judgment, the Probate Division of the Supreme Court must be contacted to arrange for satisfaction of this judgment.. The attorney, insurance company or agent must notify the prevailing party of the intent to satisfy the child support judgment prior to the disbursement of any funds to the prevailing party. Upon receipt of a warrant of satisfaction for the child support judgment, the balance of the settlement, judgment or award may be paid.

Thus, pursuant to this new law, it is incumbent on either the plaintiff’s attorney or the insurance company or agent, if the plaintiff is not represented, to order a child support judgment search and to arrange for the satisfaction of any judgment, if the search reveals one. Based on this statute, it appears that the plaintiff’s attorney, the insurance company or agent who disburses the settlement proceeds could have liability for the amount of any such judgment, if it is not satisfied prior to the disbursement of the net proceeds.

The practical effect of this statute may be to increase the amount of certain settlements so that any outstanding child support judgment is satisfied, similar to the necessity of satisfying a workers’ compensation lien out of a third party settlement. In addition, this law may delay the closure of some claims or suits until a judgment search is conducted and any outstanding judgment is satisfied.

This article was written by Betsy G. Ramos, Esq., Chairperson of Capehart Scatchard’s Litigation Department. Should you have questions or like more information, please contact Mrs. Ramos at 856.914.2052, by fax at 856.235.2786, or by e-mail at bramos@capehart.com.

© 2000 Capehart & Scatchard, P.A.