Frequently Asked Questions About Debt Collection Laws

We have written the Treatise on Federal Nontax Debt Collection Law. This treatise provides legal background on the collection of nontax debts owed to the United States.

You can also consult our listing of legal resources.

The definition of "debt" can depend on the circumstances. As used in federal debt collection, the term "debt" or "claim" means any funds or property that an appropriate official of the federal government has determined that a person, organization, or entity except another federal agency owes to the United States. See 31 U.S.C. § 3701(b).

The amount does not have to be litigated or adjudicated before being considered as a debt.

Seven examples:

• Funds that someone owes for loans that the government made, insured, or guaranteed, such as direct or guaranteed loans to students, SBA loans, HUD loans. This can include amounts due after a foreclosure or after the sale of collateral.
• Expenditures of non-appropriated funds, such as the value of an object stolen from a military commissary.
• Overpayments, including payments disallowed in an audit by an Inspector General, such as salary or benefit overpayments, duplicate payments, or misused grant funds.
• Any amount that a law says the government may collect for the benefit of any person, such as an FTC consumer redress.
• The unpaid share of any non-federal partner, such as a state or local government, in a program that involved a federal payment and a matching or cost-sharing payment by the non-federal partner. For example, a state's share of a benefit matching program.
• Any fines or penalties that an agency assesses, such as civil monetary penalties or OSHA fines for mine safety violations.
• Other money or property that someone owes to the government, such as license fees or FOIA fees.

Yes. When an agency satisfies someone's debt by selling a property on which it holds a mortgage, the agency must subtract the price it got from the total of the debt owed to the agency. The difference (deficiency) is a debt that the debtor still owes to the agency.

A debt is delinquent if it has not been paid by the payment date or by the end of any grace period contractually provided.

The date of delinquency

• for a loan or installment payment is the payment due date
• for an administrative debt is the date specified in the agency's first written demand for payment

Interest and penalties generally start to accrue from the date of delinquency. Moreover, agencies are generally required to refer debts to Fiscal Service’s delinquent debt collection programs by 120 days (or, in some cases, 180 days) of delinquency.

Yes. Agencies must get the TIN from any individual or entity that is considered to be "doing business" with the government, where "doing business" is defined as doing something that might give rise to a receivable. See 31 U.S.C. § 7701.

Examples of individuals or entities who would be doing business with an agency include:

• lenders and servicers under federal guaranteed or insured loan programs
• applicants for and recipients of federal licenses, permits, right-of-way grants, or benefit payments
• contractors
• anyone owing fines, fees, royalties, or penalties to the agency

Yes. Agencies must include a TIN on all payment vouchers. See 31 U.S.C. §§ 3325(d), 7701 and 31 CFR § 285.5(e)(8)(i).

Generally, yes. Agencies must report delinquent commercial and consumer nontax debt to credit bureaus. See 31 U.S.C. § 3711(e), I TFM 3-4000, and OMB Circular A-129, Section IV.B.4.

Generally, yes. An agency may get a credit report or comparable credit information, such as a summary report, on any individual or entity that owes a delinquent debt, to help the agency with collecting, compromising, or ending collection action on a claim. See 31 U.S.C. § 3711(h).

Generally, yes. Agencies must assess interest and penalties on delinquent debt that any debtor (including, but not limited to, individuals, businesses, and state or local governments) owes. See 31 U.S.C. § 3717.

Yes. Before sending a debt to the Treasury Offset Program, the agency must send the debtor a letter telling the debtor:

• how much the debt is
• what the debt is for
• that the agency intends to collect the debt by withholding money from federal payments
• that the debtor can inspect and copy the relevant records
• that the debtor can ask for a review of the debt in the agency
• that the debtor can set up a written payment agreement with the agency to pay off the debt in installments

Yes. When a payment is offset to satisfy a delinquent debt, the official in charge of the offset must send the debtor a letter telling the debtor:

• that a payment was intercepted (the payment was offset)
• the description of the payment that was offset
• the amount of the offset
• which agency asked for the offset
• a contact name and contact information at that agency for the debtor to ask about the debt

The offset is still valid even if the notice never reaches the debtor.

Yes. When a payment is offset to satisfy a delinquent debt, the official in charge of the offset must send the debtor a letter telling the debtor:

• that a payment was intercepted (the payment was offset)
• the description of the payment that was offset
• the amount of the offset
• which agency asked for the offset
• a contact name and contact information at that agency for the debtor to ask about the debt

The offset is still valid even if the notice never reaches the debtor.

Yes. Any federal payment may be offset unless specifically exempt by law or by the Secretary of the Treasury.

Yes. The agency must deny federal financial help to a debtor who is delinquent on a federal nontax debt unless the head of the agency waives this requirement.

The head of the agency may delegate the authority to waive this requirement only to the agency's Chief Financial Officer or Deputy Chief Financial Officer.

The debtor can

• pay the delinquent debt in full, or
• start a payment plan to repay the debt in installments.

Yes. The Treasury Offset Program (TOP) can work with states (including the District of Columbia, American Samoa, Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico) to collect overdue (delinquent) debt owed to them.

We can offset federal tax refunds to settle delinquent debts for child support, state income tax obligations, and unemployment compensation.

The regulation that allows Treasury to offset federal tax refunds for delinquent state income tax obligations and delinquent unemployment compensation debts is 31 CFR § 285.8.

States may also participate in the State Reciprocal Program, where TOP collects delinquent debt owed to the states by offsetting federal nontax payments (except benefit payments).

For more information, see the TOP page on State Programs.