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Bad Debt Overview

Bad Debt overpayments are created when a receipt (CFFRP) that has issued to the custodial person (CP) or non-custodial parent (NCP) is later removed from the case or moved to a different balance type. The most common reasons for bad debts include:

  • IRS take-backs
  • Insufficient funds or stop pay for payment
  • Incorrect Family Group Number (FGN)
  • Incorrect balances and/or balance types

There are five types of bad debts:

  1. CP Bad Debt: These occur when a IV-D receipt that was previously issued to a CP is adjusted.
  1. Non IV-D CP Bad Debt: These occur when a Non IV-D receipt that was previously issued to a CP is adjusted.
  1. Interstate Bad Debt: These occur when a receipt is adjusted that previously issued to another state.The three types of bad debts above could occur when a receipt is moved to another case or another CP, refunded to an NCP, retained for state reimbursement, or a check returned from a bank unpaid (e.g., stop pays, insufficient funds).
  1. Miscellaneous Bad Debt: Miscellaneous Bad Debts occur when an overpayment is created against a party other than the NCP, CP, or another state. For example, if CSS received funds from an employer in error and refunded it back to them, but the funds to Child Support Services (CSS) are later revoked for reasons such as NSF, Stop Pay, etc.
  1. NCP Bad Debt: These occur when an NCP has received an issuance to which they were not entitled.

    • Refunding a tax payment and then receiving an IRS take-back on the same payment
    • Refunding a payment to an NCP and later realizing that it should have been logged to a different NCP’s case.

For bad debt overpayments, send a Finance Action Request to adjust the receipt and issue the funds to the correct party. When the receipt is adjusted, a Bad Debt is automatically created.

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