More than 1,000 families who were victims of a company accused of illegally siphoning from child support checks could be seeing their share of a $913,866 settlement with the state of Virginia.
According to court papers, victims will recoup 55 percent of the money that Texas-based Supportkids Inc. was accused of stealing from checks.
Supportkids filed for bankruptcy soon after the lawsuit was filed. Fortress Value Recovery Fund, a New York-based hedge fund that had invested money in Supportkids, seized many of the company's collection contracts and accounts on the eve of the bankruptcy.
Another private child support collection company from Texas bought Supportkids' remaining assets and assumed the name Supportkids Services Inc. The successor company signed a legal agreement not to engage in illegal collection activities in Virginia.
Attorneys for the state of Virginia filed a motion in Richmond (Va.) Circuit Court this week seeking an order to allow the Virginia Division of Child Support Enforcement to begin cutting the checks. A judge must sign an order authorizing distribution of the funds.
The lawsuit, filed in 2008, claimed Supportkids illegally used misleading "withholding orders" that appeared to be government-issued to get child support payments withheld from noncustodial parents' paychecks. The company allegedly extracted fees often exceeding 35 percent.
Thomas M. Wolf, a private attorney who represented the state in the case against Supportkids told the Associate Press on Friday that he expects the unopposed motion to cut the checks to be granted soon. Individual payments will range from $1.53 to $12,637 for a family in Scottsville, Ky., according to an exhibit attached to the motion.