Frequently Asked Questions for Cross-Servicing
Or, read FAQs about Administrative Wage Garnishment.
The requirement to “transfer” a debt means the agency must refer the debt to Fiscal Service (or, in some cases, another Treasury-designated debt collection center). After referral, Fiscal Service (or the debt collection center) becomes responsible for collecting the debt.
In general, federal agencies must refer any debt over 120 days delinquent.
After transferring a debt, the agency is still responsible for reporting a debt on the Treasury Report on Receivables and Debt Collection Activities.
A third party acting as an agent for the government may be a contractor, a state agency, or another federal agency.
Yes, the following types of debt are excluded from mandatory transfer Fiscal Service:
- Debts that are in litigation or foreclosure
- Debts that will be disposed of within 1 year of becoming eligible for sale under an asset sales program.
- Debts that will be disposed of later than 1 year under an asset sales program, and that is consistent with an asset sales program.
- Debts that will be disposed of later than 1 year under an asset sales program, and that is on a schedule established by the agency and approved by the Director of the Office of Management and Budget (OMB).
- Debts that have been referred to one of Fiscal Service’s private collection contractors for collection for a period time determined by Fiscal Service.
- Debts that have been referred to a Treasury-designated debt collection center with the consent of Fiscal Service and for a period of time determined by Fiscal Service.
- Debts that will be collected by an agency through internal offset if that offset is enough to collect the debt within 3 years of time the debt first became delinquent.
The Secretary of Treasury may also exclude another specific type of debt at the request of the head of an executive, legislative, or judicial agency.
A debt is “in litigation” in either of these situations:
- The agency has referred the debt to the Department of Justice for litigation.
- The debt is the subject of pending court proceedings (including bankruptcy proceedings), regardless of whether the debtor, the agency or another party started the proceedings. The agency has the authority to litigate and a complaint has been filed.
A debt is “in foreclosure” if (1) collateral securing the debt is subject to foreclosure proceedings in court or the agency has issued a foreclosure notice for the collateral; AND (2) the agency expects the proceeds from sale of the collateral will pay off the debt.
If the debt is still valid and delinquent, the agency must transfer the debt to Fiscal Service within 30 days of the final decision or the debt’s return to the agency.
If a debt is in an administrative appeal process, the agency waits for the process to be finished and the amount due to be fixed.
If the debt is still valid and delinquent at the end of the appeal process, the agency must transfer the debt to Fiscal Service within 30 days of the debt’s return to the agency.
Fiscal Service realizes the date of transfer for debts that have gone through an appeal may be later than the transfer date set by the law and regulations.
The date of delinquency for the debt is still the date that the original payment was due.
If the individual is still in bankruptcy, debts owed by the individual should not be referred to Cross-Servicing even if the debt is not included in the bankruptcy, unless the agency has obtained relief from the automatic stay.
Yes. Debts discharged in bankruptcy should be reported on a 1099C. IRS then determines whether there is any tax consequence.
If the debt is still valid and legally enforceable, DMS may try to collect the debt. However, if the debtor has not been afforded due process in more than 5 years, DMS recommends that the Creditor Agency send additional due process notices before using any debt collection tool that requires due process, such as offset or credit bureau reporting.
- “Write-off” is an accounting concept that allows agencies to accurately reflect the value of their receivables on their books. The write-off of a debt is simply the removal of the debt from the agency’s accounting and records.
Generally, write-off is mandatory for debts delinquent more than two years. Agencies should continue collection efforts after the agency writes off a debt, unless it determines that suspension or termination of debt collection action is appropriate. When writing off a debt, agencies classify the debts as either “currently not collectible” or “closed-out.”
- “Currently not collectible” is a classification of write-off that indicates that the agency will continue its collection efforts after write-off.
- “Closed-out” is a classification of write off that indicates that the agency has terminated both active and passive debt collection activity.
- “Termination of collection action” means that the agency has determined that it has authority under the Federal Claims Collection Standards to cease active collection efforts for the foreseeable future. Termination of active collection does not preclude passive collection efforts, such as offset or credit bureau reporting. It also does not prevent an agency from pursuing active collection if there is a change in the debtor’s status or if a new collection tool becomes available.
- “Discharge” is a term which can have different meanings, depending on the context.
- A discharge in bankruptcy generally means that the agency no longer has a right to pursue the collection of the debt, and that collection action should be terminated.
- In the context of the requirement to report a discharge of indebtedness to the Internal Revenue Service on a Form 1099-C, it generally means that an identifiable event has occurred. The reporting of a discharge of indebtedness on a Form 1099-C generally does not affect the rights of a creditor to collect a debt.
For additional information about these terms, see Chapter 7 of Managing Federal Receivables or Part IV: Chapter F of the Treatise on Federal Nontax Debt Collection Law.
Fiscal Service’s consent for the types of accounts that may be referred to Treasury-designated debt collection centers will be given to the debt collection center when Treasury grants the designation.
Fiscal Service has authority to act in the government’s best interest to service, collect, compromise, suspend, or terminate collection action on debts transferred to it under applicable law.
Fiscal Service Contact Information
Debt Recovery Analyst: