Glossary

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ACCELERATION is declaring the full amount of a debt due and payable in

the event that a debtor defaults on the terms of an

installment payment agreement. Acceleration is permitted

in accordance with an acceleration clause included in the

agreement.

ACCOUNT SERVICING includes monitoring the status of accounts of indebtedness,

monitoring records of current debts, billing for amounts

due, collecting amounts due, handling debtor

correspondence, performing follow-up functions, and

providing accurate reporting of debt portfolios.

ACCRUE is the process of increasing account value, usually

associated with interest or other time-dependent increments

of account value.

ACTIVE COLLECTION means that the debt is being collected through the use of all

appropriate debt collection remedies, including but not

limited to, demand letters, credit bureau reporting, offset,

garnishment, foreclosure, litigation, and referral to the

Department of the Treasury (Treasury) for collection

(known as cross-servicing).

ADMINISTRATIVE COSTS/

LATE CHARGES are additional costs incurred in processing and handling a

debt because it has become delinquent. Costs should be

based on actual costs incurred or cost analyses which

estimate the average of actual additional costs incurred for 

particular types of debt at similar stages of delinquency.

Administrative costs should be accrued and assessed from

the date of delinquency (see “Delinquent”).

ADMINISTRATIVE OFFSET is to withhold money payable by the Government to or held

 by the Government for a person or entity in order to satisfy a 

debt that the person or entity owes.

ADMINISTRATIVE WAGE

GARNISHMENT (AWG) is a process whereby a Federal agency issues a wage

garnishment order to a delinquent debtor’s non-Federal

employer. No court order is required. The employer

withholds amounts from the employee’s wages in
Glossary

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compliance with the order and pays those amounts to the

Federal creditor agency to which the employee owes a

debt.

APPRAISAL is a formal valuation of property, made by a competent

authority.

ASSET is any item of economic value either physical in nature

(such as land) or a right to ownership, expressed in cost or 

some other value, which an individual or entity owns.

AUTOMATIC STAY IN

BANKRUPTCY is the statutory court order that prohibits a creditor from

pursuing further collection action against a debtor while the

debtor’s bankruptcy is pending.

BANKRUPTCY is a legal procedure for dealing with debt problems of 

individuals and businesses; specifically, a court case filed

under one of the chapters of title 11 of the United States

Code (Bankruptcy Code).

BARRING DELINQUENT

DEBTORS is a statutory requirement under the Debt Collection

Improvement Act of 1996 that prohibits persons delinquent

on a Federal non-tax debt from receiving Federal financial

assistance in the form of a Federal loan, or a federally

guaranteed or insured loan.

CENTRALIZED OFFSET or Treasury Offset Program (TOP) is a process that allows

agencies to submit delinquent debts to one centralized

location, Financial Management Service, for collection

through the offset of all eligible Federal payments.
Glossary

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CLAIM is interchangeable and synonymous with the term “debt,”

for purposes of this document (see “Debt”).

Alternative meanings of the word “claim” include a request

(1) submitted by a lender for Government payment of a

defaulted guaranteed loan; (2) filed with the Department of 

Justice for the pursuit of litigation and/or enforced

collection of an account; or (3) filed with an agency for the

payment of an amount considered due to the submitting

individual or organization, such as for medical insurance.

CLAIMS COLLECTION

LITIGATION REPORT (CCLR) is a Department of Justice form for use in referring debts to

the Department of Justice for litigation and enforced

collection. The CCLR is also used for the referral of debts

to the Department of Justice for its concurrence on a

proposed compromise, suspension or termination of 

collection action.

CLOSE-OUT is one of two classifications of write-off. An agency closes

out a debt when it determines that further debt collection

actions are prohibited (for example, a debtor is released

from liability in bankruptcy) or the agency does not plan to

take any future actions (either active or passive) to try to

collect the debt. At close out, an agency may be required

to report to the IRS the amount of the debt as potential

income to the debtor on IRS Form 1099.

COLLATERAL is any property pledged as security for a loan.

COLLECTION is the process of receiving amounts owed to the

Government, such as payment on a debt.

COMMERCIAL is an adjective used to signify a business activity,

regardless of whether that activity has been undertaken by 

an individual or business. For example, a loan to a farmer

to purchase additional land for farming would be

considered a commercial loan.
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COMPROMISE is to accept less than the full amount of the debt owed from

the debtor in satisfaction of the debt. Also referred to as 

“settlement.”

CONSUMER is an adjective used to signify a personal activity. For

example, a loan to a farmer to buy a personal residence

would be considered a consumer loan.

CREDIT is a promise of future payment in kind or in money given in

exchange of present money, goods, or services.

CREDIT BUREAU

(aka CREDIT REPORTING

AGENCY) is a private sector entity which collects financial

information on debtors and whose reports on debtors reflect

information received from the public and private sectors.

CREDIT EXTENSION involves the review and approval of requests for short and

long-term credit.

CREDIT MANAGEMENT/

DEBT COLLECTION CYCLE is the complete credit process which is composed of four

phases; credit extension, account servicing, delinquent debt

collection, and termination/write-off/close-out/discharge of 

indebtedness.

CREDIT REPORT is a document issued by a credit bureau containing data

about the credit history of a person.

CREDIT REPORTING

AGENCY See “credit bureau.”

CREDITOR AGENCY refers to a Federal agency that is owed money by a person.

CROSS-SERVICING is the process whereby agencies refer delinquent Federal

nontax debts to Fiscal Service for collection. Fiscal 

Service applies a variety of collection tools once agencies

refer their debts.
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CURRENTLY NOT

COLLECTIBLE is one of two classifications of write-off. At the time of 

write-off, an agency should classify the debt as Currently

not collectible (CNC) when it intends to continue cost

effective debt collection action.

DEBT is interchangeable and synonymous with the term “claim,”

for purposes of this document. It refers to an amount of 

money or property which has been determined by an

appropriate Federal official to be owed to the U.S. from

any person, organization, or entity other than another

Federal agency.

Included as debts are amounts due the U.S. from loans,

fees, duties, leases, rents, royalties, services, sales for real

or personal property, overpayments, fines, penalties,

damages, taxes, interest, forfeitures, and other sources.

DEBT COLLECTION describes the efforts to recover amounts due after the

debtor fails to make the payment. This activity includes the

assessment of the debtor’s ability to pay, the exploration of 

possible alternative arrangements to increase the debtor’s

ability to repay and other efforts to secure payment.

DEBT COLLECTION

STRATEGY is an organized plan of action incorporating the various

collection tools to be used by an agency to recover debt.

Each agency should establish and implement effective

collection strategies that suit the agency’s programs and

needs.

DEFICIENCY represents that portion of a loan which remains outstanding

after collateral property has been liquidated (converted to

cash) and applied to the outstanding balance.
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DELINQUENT A debt becomes delinquent when (1) payment is not made

by the due date or the end of the "grace period" as 

established in a loan or repayment agreement, in the case of 

debt being paid in installments (the date of delinquency is

the payment due date); or (2) payment is not made by the

due date specified in the initial billing notice, in the case of 

administrative debts such as fines, fees, penalties, and

overpayments. The due date is usually 30 days after the

agency mailed the notice. The date of delinquency for

administrative debts is the date the agency mailed or 

delivered the billing notice.

DEMAND LETTER is a written notification sent by the agency to the debtor to

notify the debtor of the debt’s delinquent status when the

debt is not resolved after the initial contact with the debtor.

The demand letter may include notice of various debt

collection tools that could be used to collect the debt, as 

well as opportunities to avoid the debt collection actions.

DISCHARGE is to satisfy a debt as a legal obligation through the

performance of the obligation(s) imposed under the debt

instrument, such as to pay the debt in full, or through

another action such as a compromise.

DISCHARGE IN

BANKRUPTCY is a release of a debtor from liability for certain debts. A 

discharge in bankruptcy prevents the creditors owed those

debts from taking any action against the debtor or the

debtor’s property to collect the debt.

DISCHARGE OF

INDEBTEDNESS is an amount of a debt which will not or cannot be collected

from a debtor and is defined as income to the debtor that

may be taxable under the Internal Revenue Code. There

are eight identifiable events under IRS regulations that

trigger reporting discharge of indebtedness to IRS on 

Form 1099-C.
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DISPOSABLE PAY is an amount of a person’s wages based on subtracting from

gross pay certain statutory or regulatory deductions from

gross pay (such as income taxes). Disposable pay is used to

determine the amount which can be offset from a Federal

Salary, and is used to determine the amount which may be

collected from a debtor’s non-Federal pay through

administrative wage garnishment.

DUE PROCESS in the context of Federal debt collection, the constitutional

right of “due process” requires an agency to provide

debtors with notice of, and the opportunity to dispute, a

debt or intended debt collection action. The Fifth

Amendment to the United States Constitution provides that

no person shall “be deprived of life, liberty or property

without due process of law. . . .”

FEDERAL CLAIMS

COLLECTION STANDARDS are the Governmentwide debt collection standards

published jointly by Treasury and the Department of 

Justice in Title 31 of the Code of Federal Regulations

(CFR), Parts 900 through 904 (31 CFR Parts 900 – 904).

FINANCIAL ADVISOR assists and represents the interests of an agency during a

portfolio sale.

FORECLOSURE is a legal proceeding to terminate a mortgagor's interest in

property, instituted by the lender (the mortgagee) either to

gain title or to force a sale in order to satisfy the unpaid

debt secured by the property.

IRS FORM 1099-C/

CANCELLATION OF DEBT is the form a creditor uses to report to the Internal Revenue

Service a discharge of indebtedness.

INSURANCE is a type of guarantee in which any agency pledges the use 

of accumulated insurance premiums to secure lenders

against default on the part of borrowers. “Loan insurance”

is considered the equivalent of a “loan guarantee.”
Glossary

G-8

INSTALLMENT LOAN/

AGREEMENT represents an obligation to repay monies borrowed or owed 

in more than one payment at fixed intervals over time.

INTEREST is a sum paid or calculated for the use of capital. Financing

interest is the charge assessed as a cost of extending credit

as distinguished from additional interest which is the charge

assessed on delinquent debts in order to compensate the

Government for the time value of money owed and not paid

when due. Additional interest is accrued and assessed from

the date of delinquency.

JOINT AND SEVERAL

LIABILITY is liability shared by two or more parties, where each party

is individually responsible for the entire obligation or debt.

LATE CHARGES are the amounts accrued and assessed on a delinquent debt;

the term includes administrative costs, penalties, and

additional interest.

LEGALLY ENFORCEABLE is a condition precedent for a debt being eligible for referral

to Fiscal Service for collection action. A debt is considered

legally enforceable for purposes of referral for crossservicing if there has been a final agency determination

that the debt is due and there are no legal bars to one or

more of the collection actions to be taken by Fiscal 

Service.

A debt is considered legally enforceable for TOP purposes 

if there has been a final agency determination that the debt

is due and there are no legal bars to collection through the

offset of Federal payments.

LETTER OF AGREEMENT is a document that details the terms of the cross-servicing

arrangement between Fiscal Service and the agency

referring debts to Fiscal Service.
Glossary

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LIABILITY represents an amount owed (i.e., payable) by an individual

or entity, such as for items received, services rendered,

expenses incurred, assets acquired, construction performed, 

and amounts received but not yet earned.

LITIGATION means any lawsuit or other resort to the courts to determine

a legal question or matter. Litigation may be used, where

appropriate, to enforce collection on a debt.

LIQUIDATION is the process of converting collateral to cash in order to

pay all or a portion of the debt.

LOAN is an extension of credit in exchange for a promise to repay

the amount of funds available for disbursement after they

have been disbursed. The amount of funds disbursed is to

be repaid (with or without interest and late fees) in

accordance with the terms of a promissory note and/or

repaymentschedule.

Direct Loan is an obligation created when: the Government agrees to

disburse funds and contracts with the debtor for repayment,

with or without interest; the Government acquires a

guaranteed loan in satisfaction of a default or other claim; a

Federal agency purchases non-Federal loans through

secondary market operations; or an agency sells assets on 

credit terms of 90 days or more.

Guaranteed loan is a contingent liability created when the Government

assures a private lender who has made a commitment to

disburse funds to a borrower that the lender will be repaid

to the extent of the guarantee in the event of default by the

debtor.

LOAN-TO-VALUE RATIO represents the proportion of the amount of a loan to the

value being pledged to secure that loan. It is derived as 

follows: total financing costs (i.e., the market value of the

collateral plus the financed portion of any closing costs, 

insurance premiums, or other transaction-related expenses

less the borrower’s cash down payment) divided by the

market value of the collateral.
Glossary

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LUMP SUM PAYMENT is a single nonrecurring payment on a debt. This term is

used most often when a payment is made to pay a debt in

full.

NON-CENTRALIZED OFFSET is ad hoc offset on a case-by-case basis. An agency should

use centralized offset (Treasury Offset Program) to

effectuate offset except in certain limited circumstances as 

explained in Chapter 6.

OFFSET See “Administrative Offset” above.

PASSIVE COLLECTION means that the debt is no longer being actively collected;

that is, the debt remains secured by a judgment lien or other

lien interest, has not been removed from the Treasury

Offset Program (TOP) or is otherwise being collected by 

offset; and/or is scheduled for future sale.

PENALTY is a charge assessed on delinquent debts to discourage

delinquencies and encourage early payment of the

delinquent debt in full. The rate to be assessed is set by 

law at no more than 6% per year and is assessed on the

portion of a debt remaining delinquent more than 90 days, 

although the charge will accrue and be assessed from the

date of delinquency.

PERSONAL PROPERTY consists of tangible, movable assets, such as automobiles,

planes, and boats.

PRE-AUTHORIZED DEBIT is a form of payment which allows the agency to debit the

bank account of a borrower/debtor as a result of a prior

agreement between the borrower/debtor and the agency on 

a pre-determined schedule consistent with applicable laws.

PREPAYMENT is a partial or full repurchase or other advance deposits of 

outstanding loan principal and interest by the

borrower/debtor. The repurchase often may be made at a

discount from the current outstanding principal balance.

PRINCIPAL is the amount owed to the Government by a borrower or 

other debtor which excludes interest, penalties,

administrative costs, loan fees, and prepaid charges.
Glossary

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PRIVATE COLLECTION

AGENCY is a private sector entity whose primary business is the

collection of delinquent debts.

PROOF OF CLAIM FORM is an official form submitted in a bankruptcy proceeding

describing the reason a debtor owes a creditor money.

REAL PROPERTY consists of tangible, non-movable assets, such as land and

buildings.

RECEIVABLE is an amount owed the Government by an individual,

organization, or other entity to satisfy a debt or claim. 

Examples of receivables generated by Government

activities include amounts due for taxes, loans, the sale of 

goods and services, fines, penalties, forfeitures, interest,

and overpayments of salaries and benefits.

RECOUPMENT is a special type of offset of a payment made under a

contract to collect a claim arising under the same contract.

RECURRING PAYMENTS for the purposes of centralized offset, recurring payments

are those payments made to individuals that are expected to

be paid to the payee at regular intervals, at least four times 

annually. Recurring payments do not include payments

made pursuant to a contract, grant agreement or 

cooperative agreement.

REPAYMENT AGREEMENT establishes the terms and conditions governing the recovery

of a debt. Repayment agreements should be written or 

reduced to writing as soon as possible after such an

agreement is reached.

RESCHEDULING is a change in the existing terms of a loan, specifically

those that reflect repayment of the debt.
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ROUTINE USE is a use identified in an agency’s Privacy Act system of 

records notice that describes to whom information

pertaining to individuals may be disclosed and for what

purpose. One or more routine uses may be necessary to

authorize the disclosure of information about an individual

debtor for delinquent debt collection purposes.

SALARY OFFSET is the process of collecting a delinquent Federal nontax

debt from a Federal employee’s current pay without his or 

her consent. Salary offset should be accomplished through

centralized offset, unless centralized offset is unavailable.

SECURED DEBT is a debt for which collateral has been pledged.

SERVICER is an entity under contract to a lender or agency to perform

account servicing functions.

SUSPENSION OF

COLLECTION ACTION is to place active collection action temporarily in abeyance

due to the existence of a particular set of circumstances.

Suspension of collection action is most appropriate in those

cases where an agency has reason to believe that the

suspension will enhance the chances of recovery, or, at

minimum, will not endanger the recovery of the debt.

SYSTEM OF RECORDS is a term under the Privacy Act of 1974 that describes a

group of records under the control of an agency from which

information about individuals is retrieved by the

individual’s name or other personal identifier. When an

agency has a “system of records,” certain requirements and

restrictions delineated in the Privacy Act of 1974 apply to

the collection, maintenance, use and dissemination of the

records and information.

TAXPAYER IDENTIFYING

NUMBER (TIN) is the Social Security Number (SSN) for individuals or the

Employee Identification Number (EIN) for business 

organizations or non-profit entities.
Glossary

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TERMINATE COLLECTION

ACTION is a decision to cease active collection action on a debt, in

accordance with criteria set out in the Federal Claims 

Collection Standards, because such collection action is not

economically worthwhile or is otherwise inappropriate. The

program decision to terminate collection action and the

accounting decision to write-off a debt often coincide,

however, the determinations to terminate collection action

and to write-off a debt are made for different reasons, and

where appropriate and consistent with the agency's debt

collection strategy for a particular class of debts, may be

made at different times.

TREASURY REPORT ON 

RECEIVABLES DUE FROM

THE PUBLIC (TROR) is the Department of the Treasury’s only comprehensive

means for periodically collecting data on the status and

condition of the Federal Government’s non-tax debt

portfolio, in accordance with the requirements of the Debt

Collection Act of 1982 and the Debt Collection

Improvement Act of 1996 (DCIA). The information

contained in the report is obtained from the various federal

agencies and is disseminated to Congress, the Office of 

Management and Budget, agency Chief Financial Officers,

the Federal Credit Policy Working Group, other officials

and representatives of Federal and state organizations,

private sector organizations, and the public.

WORKOUT GROUP is a group established within an agency, whose sole

purpose is to resolve or attempt to resolve troubled debts.

WRITE-DOWN is an action taken rather than write-off where an agency

reduces the value of a debt for accounting purposes to its

collateral’s net realizable value. The agency may not writedown non-collateralized debts.

WRITE-OFF is an accounting action that results in reporting the

debt/receivable as having no value on the agency’s

financial and management reports. The agency does not

need DOJ approval to write-off a debt since the agency is

only adjusting its accounting records.