§ 5.7 Child Support Claims and Limited Income Withholding Orders ("LIWOs")

• Jurisdiction: Arizona

§ 5.7 - Child Support Claims and Limited Income Withholding Orders ("LIWOs")

One of the newest frontiers in connection with third-party interests in Arizona are child support collections through "limited income withholding orders" ("LIWOs"). LIWOs are administrative remedies issued pursuant to A.R.S. § 25-505 by the Arizona Department of Economic Security ("ADES") or by its agent to collect child support arrearages.

a. The Scope of LIWOs

A "duty to pay [child] support does not exist unless a judgment, decree or order creates it." E.g., Lamb v. Superior Court, 127 Ariz. 400, 402, 621 P.2d 906, 908 (1980). LIWOs are statutory mechanisms for ADES to administratively collect unpaid support arrearages created by a judgment, decree or order; LIWOs are not "liens." That is, they are not "security interests," they are akin to garnishment or attachment orders.

In relevant part, § 25-505 provides ADES or its agent may issue LIWOs to any "payor or other holder of a . . . lump sum payment that is owed or held for the benefit of an obligor" owing outstanding child support. A.R.S. § 25-505(A) (emphasis added). A "lump sum payment" is broadly defined as including "insurance settlements" or "personal injury awards." A.R.S. § 25-505(E).

The terms "payor" and "holder" are not defined. But the overall context of the statute suggests that a "payor" includes a tortfeasor or insurance company, and a "holder" includes an injured person's personal injury attorney in possession or control of a "lump sum payment."

Service of a LIWO upon a personal injury attorney in possession or control of a lump sum payment, as described below, would trigger ethical obligations under Rule 42, Ariz. R. Sup. Ct., E.R. 1.15. See infra § 9.2. Absent service of a LIWO, infra § 5.7(b)(i), a child support obligation is like a judgment creditor; it would not be a matured legal or equitable interest in the proceeds of a personal injury...