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Department of the Interior

Effective Date: 12/6/94

Series: Financial Management

Part 344: Debt Collection

Chapter 5: Standards for Suspending or Terminating Collection Action

Originating Office: Office of Financial Management

5.1 Scope and Application. This Chapter describes the standards used for the suspension or termination of collection action by bureaus with respect to claims for money or property arising out of activities of the U. 5 Government The basis for these standards are found in 31 U.S.C. 3711(a)(2) and 4 CFR 105.

A. Claim does not exceed $100.000 The Assistant Secretaries have been delegated the authority to suspend or terminate collection action under this Chapter (See 205 DM 7). The following guidelines are established for this action:

(1) Bureaus with receivable balances exceeding $50 million Assistant Secretaries are authorized to suspend or terminate collection action with respect to claims of the United States for money or property which do not exceed $25,000, exclusive of interest, penalties, or administrative charges.

(2) Bureaus with receivable balances under $50 million Assistant Secretaries are authorized to suspend or terminate collection action with respect to claims of the United States for money or property which do not exceed $10,000, exclusive of interest, penalties, or administrative charges.

(3) Limitation. The authority to suspend or terminate collection action is limited to $5,000 when an Assistant Secretary has an uncorrected material weakness related to debt management.

(4) Claims Exceeds Delegated Authority. Suspension or termination of amounts in excess of the delegated authorities reflected in 5.lA(l),(2) and (3) are referred to the Solicitor for concurrence

B. Claims Exceeds $100 000. The Department of Justice (Justice) has the sole authority to suspend or terminate collection action when a claim exceeds $100,000, exclusive of interest, penalties, and administrative costs. Referrals to Justice must be made using the Claims Collection Litigation Report (344 DM 6.2). Referrals should specify the reason for the bureau or office recommendation and be accompanied by a recommendation from the Solicitor.

5.2 Suspension of Collection Activity.

A. Inability to Locate Debtor. Collection action may be suspended temporarily when the debtor cannot be located after diligent effort, and there is reason to believe that fixture collection action may be sufficiently productive to justify periodic review and action on the claim. Consideration must, however, be given as to the size and the amount which may be realized. The following sources may be of assistance in locating missing debtors: telephone directories; city directories; postmasters, driver=s license records: automobile title and license records; State and local governmental agencies; the Internal Revenue Service (4 CFR 102. 1 8 and 344 DM 2.16); other Federal agencies; employers, relatives, friends; credit agency skip locate reports; and credit bureaus. Suspension should not defer the early liquidation of security as payment for a debt. A reasonable effort should be made to locate missing debtors in advance of the applicable statute of limitations. Such action will permit timely filing of a suit if such action is warranted. If the missing debtor has signed a confess-judgment note and is in default, referral of the note for the entry of judgment should not be delayed because of the debtors missing status.

B. Financial Condition. A bureau may suspend collection action temporarily when: (1) the debtor has little or no equity in realty or personal property; (2) the debtor is unable to make payments on the bureau=s claim or to effect a compromise at the time but the debtors future prospects justify retention of the claim for periodic review and action, and (3)

(a) the applicable statute of limitations has been tolled or started running anew; or

(b) future collection can be effected by offset despite the statute of limitations, with due regard to the 10-year limitation prescribed by 31 U.S.C. 3716(c)(1); or

(c) the debtor agrees to pay interest on the amount of the debt on which collection action will be temporarily suspended, and such temporary suspension is likely to enhance the debtor=s ability to fully pay the principal amount of the debt with interest later.

C. Request for Waiver or Administrative Review. If the statute under which a waiver or an administrative review is sought prohibits the bureau from collecting the debt prior to consideration of the request for waiver or review, collection action must be suspended. (See Califano v. Yamasaki, 422 U. S. 682 (1979). Collection cannot be resumed until either (I) the bureau has considered the request or (2) the applicable time limit for making the request as prescribed by regulations has expired and the debtor, upon proper notice, has not made such a request. If the applicable waiver or review statute does not require all requests to be considered, and does not prohibit collection action pending consideration of waiver or review request (see 5 U.S.C. 5584), collection action may be suspended pending bureau action on the waiver or review request based upon appropriate consideration on a case-by-case basis, as to whether:

(1) there is a reasonable possibility that a waiver will be granted, or that the debt (in whole or in part) will be found not owing from the debtor;

(2) the Government=s interest would be protected, if suspension were granted, by reasonable assurance that the debt would be recovered if the debtor does not prevail; and

(3) collection of the debt will cause undue hardship.

D. Refund Action. Collection action should be suspended when applicable statutes and regulations would not authorize a refund by the bureau to the debtor of amounts collected prior to consideration of the debtors waiver/review request.

5.3 Termination of Collection Activity. An official with proper delegated authority (see 205 DM 7) may terminate collection activity and consider the file on the claim closed when:

A. It becomes clear that the Government cannot collect or enforce collection of any significant sum from the debtor having due regard for (1) the judicial remedies available to the Government, (2) the debtors future financial prospects, and (3) the exemptions available to the debtor under State and Federal law,

B. Bureaus should consider the following factors among others in determining the debtors inability to pay: (I) age and health of the debtor, (2) present and potential income, (3) inheritance prospects; (4) the possibility that assets have been concealed or improperly transferred by the debtor; and (5) the availability of assets or income which may be realized by judicial proceedings. Termination of a claim is also an option when the bureaus are unable to locate the debtor and (I) there is no security available for liquidation; (2) the applicable statute of limitations has run, and (3) the prospect of collecting by offset, notwithstanding the bar of the statute of limitations, is too remote to justify retention of the claim

C. Cost of collection will exceed recovery;

D. The claim is legally without merit; or

E. There is not sufficient evidence to prove the claim, the necessary witnesses are unavailable, and efforts to induce voluntary payment are unavailing.

5.4 Transfer of Claims. A claim is sent to GAO for its advice when a bureau is uncertain about whether a claim should be suspended or terminated. The Solicitor may refer a claim when a significant enforcement policy is involved in reducing a statutory penalty or forfeiture to judgment, or when recovery of a judgment is a prerequisite to the imposition of administrative sanctions (such as suspension or revocation of a license or the privilege of participating in a Government sponsored program) even though consideration might otherwise be given to terminating collection activity. A bureau will refer all claims on which it holds a judgment by

assignment or other means to Justice for further action if renewal of the judgment lien or other judicial proceedings are justified under the standards of this Chapter.

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12/6/94 #3439

Replaces 12/6/94 #3027