Should I borrow against back child support I’m due?

By Dave Ramsey

Should I borrow against back child support I’m due?

Dear Dave,

I am a divorced single mother. I was recently laid off and I’m owed child support that is $20,000 in arrears. I received a flyer in the mail about getting loans on notes. Since unemployment doesn’t cover what I was making, I called the loan number to get more information. They said they have investors who will advance me the money owed on the child support and then they would collect the money from the father. I’ve got a funny feeling about this. What do you think?


Tampa, Fl.

Dear Sonya,

There is a way for the company to do this. However, for them to make any money on this deal they would have to buy the note from you for a discounted amount – say $10,000 cash – then they collect the $20,000 from him. They make $10,000.

I used to buy real estate notes. For instance, if you sold your home and personally held the mortgage, and someone was paying you monthly on that mortgage, then I could buy that note from you. But I wouldn’t pay you full face value for it because I wouldn’t make anything on it. I’d just have my money out there collecting on your interest rate for it. In your case, child support doesn’t have interest due, so they’re going to deeply discount it because there’s nothing to put a lien against except his hide and that’s not really collectable. If it was, you wouldn’t be owed $20,000.

If you do this deal, you’re going to be giving up a lot of the money, but if he’s not paying anyway you haven’t really lost anything. However, be sure that if you do this you have an attorney or someone look at it with you because it’s going to be a multi-thousand dollar transaction. Get some legal advice. Sometimes these things are done “with recourse” which means if they can’t collect it from him you have to pay it – and you don’t want to do that.


How long do I owe money from client’s overpayment?

Dear Dave,

I used to do business with a major city in the Southeast. There was a lot of red tape just to get the business started – running invoices back and forth and things like that. Every now and then they would show up and overpay me or underpay me. This went on for about a year and a half and I’ve since stopped doing business with the city. In fact, I’ve stopped doing business all together.

Is there a time limit on settling the account with them? For instance, I once wrote them a check for an overpayment. A year later they still have not cashed that check.


Louisville, Ky.

Dear Nathan,

The first thing I’d do is notify the city that if they don’t cash the check immediately it’s probably not going to be any good because you’re about to close the account. Let them know that if they need another check, if they’ve lost the original, that’s fine, but you need those people to get their act together. Technically, you wrote them a check because you owed them money, so morally you should pay them. But it’s aggravating that they haven’t cashed the check in a year. However, if you do close the account you should probably make sure you have that money available to give them since you owe it.

Could they come back at you for the money later? Sure. You owe it. Is there a statute of limitations or time limit on the debt? That depends on the state in which the transaction occurred. You’d really have to consult an attorney, but my guess is the check isn’t big enough to warrant going to war over. Instead I’d try to force their hand by telling them to cash the check and if they don’t, I’d close the account.


Disclaimer: Questioner’s identities have not been verified by Dave $ays column or this Website.


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