Calculating Interest on Child Support Arrears

Child Support Calculators

There are two kinds of child support calculators. One type of calculator determines the current monthly amount the obligor owes to the obligee. This amount will change as the obligor’s income changes. The Texas Attorney General’s office hosts this kind of calculator on their webpage.

The second type of calculator determines the interest on backpay. An excellent product for calculating interest on child support arrears is Legal Math. Legal Math has many features and is able to take into account irregular payments and changing current child support obligations.

There are other considerations when calculating interest on child support arrears. First, Texas law has used different interest rates. Second, section 157.265 of the Texas Family Code applies simple interest rather than compound interest to child support arrears. Third, judgments confirming arrears lump the principle and interest into one figure.

Texas History of Interest Rates on Child Support Arrears

The following history is recorded in Castle v. Harris, 960 S.W.2d 140, 143 (Tex. App.–Corpus Christi 1997, no pet.) and In re M.C.C., 187 S.W.3d 383, 384 (Tex. 2006).

Effective on September 1, 1991, the Texas legislature implemented its first statute establishing interest on child support arrears. Section 14.34 (“Accrual of Prejudgment Interest on Child Support”) established that an unpaid child support obligation would accrue at the rate of 10% compounded monthly. Act of June 16, 1991, 72d Leg., R.S., ch. 467 §§ 1,6, 1991 Tex. Gen. Laws 1693, 1695.

Effective September 1, 1993, the legislature changed the interest rate from 10% compounded monthly to 12% simple interest per year. Act of May 15, 1993, 73d Leg., R.S., ch. 150 §§ 1,3, 1993 Tex. Gen. Laws 302.

Effective April 20, 1995, the legislature replaced section 14.34 with section 157.265 (“Accrual of Interest on Delinquent Child Support”) continuing with the interest rate of 12% simple interest per year. Act of April 20, 1995, 74th Leg., R.S., ch. 20 §§ 1, 4, 1995 Tex. Gen. Laws 113, 184, 282.

Effective January 1, 2002, the legislature changed the interest rate from 12% simple interest per year to its current rate of 6% simple interest per year. Act of May 18, 2001, 77th Leg., ch. 1491, § 1, R.S., 2001 Tex. Gen. Laws 5294.

These interest rate statutes apply prospectively but not retrospectively. In re M.C.C., 187 S.W.3d 383, 384 (Tex. 2006); In re A.R.J., 97 S.W.3d 833, 834-35 (Tex. App.–Dallas 2003, no pet.). This means that overdue child support payments are governed by the interest rate that was in effect at the time the child support payment became due.

Simple vs. Compound Interest

Section 157.265 of the Texas Family Code applies simple interest rather than compound interest to child support arrears. This means that interest only accumulates on the principle. Interest does not accumulate on the previously accumulated interest. An exception to this rule, however, is when a court makes a determination on the child support arrears.

Judgments Confirming Arrears Lump the Past Principle and the Past Interest into One Figure

Judgments determining the child support arrears often do not distinguish between how much of the judgment amount is principle and how much is accumulated interest. In these cases, the practice is to treat the judgment amount as the new principle.

Formulas for Calculating Interest on Child Support Arrears

If you have to calculate more than a couple months of interest, having a program may be faster than calculating interest by hand. The formula for calculating interest on child support arrears is

Interest = the principle x the interest rate x the number of days since the last transaction / the number of days in that year.

This method of calculating arrears benefits the obligee because interest accumulates each day. The Lubbock Attorney General’s Office, on the other hand, uses a different method of calculating interest. The OAG only calculates interest one time per month. This method benefits the obligor because the obligor could potentially receive 30 days of no interest every month on the payment amount.

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