Chapter 6 Delinquent Debt Collection

6-1 

Overview 

Agencies should have fair but aggressive programs to recover 

delinquent debt, including defaulted guaranteed loans acquired by 

the Federal Government. Each program should include a debt 

collection strategy, consistent with governmentwide and agency 

requirements, to restore the delinquent debts to current status or, if 

unsuccessful, maximize collection on the agency's accounts. The 

strategy should further promote the resolution of delinquencies as 

quickly as possible, since the ability of an agency to collect its 

delinquent debts will generally decrease as the debts become older. 

The strategy should take into account that debts within the 

jurisdiction of the bankruptcy courts are subject to the provisions 

of the United States Bankruptcy Code (see page 6-57). When a 

debtor has filed for bankruptcy protection, legal counsel should be 

consulted prior to continuing any collection activities, including 

those described in this Chapter. 

This Chapter describes the collection techniques and tools 

available to assist agencies in collecting delinquent debts, and 

supplements the debt collection requirements contained in statutes 

and regulations. In this Chapter, a Federal agency that is owed a 

debt is sometimes referred to as a “creditor agency.”

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Debt Collection Rules and Guidance Hierarchy

This Chapter is divided into three parts: 

Part I, Managing Delinquencies, provides information on debt 

collection strategies and principles; 

Part II, Debt Collection Tools and Programs, discusses 

delinquent debt collection tools, such as cross-servicing (transfer 

of debts to Bureau of the Fiscal Service (Fiscal Service) for 

collection), offset, administrative wage garnishment, collateral 

liquidation, and litigation; and

Part III, Miscellaneous Topics, describes several techniques an 

agency uses to support the debt collection process. 

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This Chapter applies to debts owed to the United States, including 

loans, fines, penalties, overpayments, and fees, but does not apply 

to the collection of Federal tax debts, debts owed by Federal 

agencies, or debts owed by foreign countries. Debts based in 

whole or in part on conduct in violation of the antitrust laws or 

involving fraud, the presentation of a false claim, or 

misrepresentation on the part of the debtor or any party having an 

interest in the claim must be referred to the Department of Justice 

(DOJ) for action. At its discretion, DOJ may return the debt to the 

agency for handling in accordance with the procedures described 

in this Chapter. 

The policies and procedures detailed in this Chapter do not create 

any right or benefit, substantive or procedural, enforceable at law 

or in equity by a party against the United States, its agencies, its 

officers, or any other person. The failure of an agency to comply 

with any of the provisions in this Chapter shall not be available to 

any debtor as a defense, except as otherwise allowed by law. 

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Part I – Managing Delinquencies

Background 

Delinquency Defined. A debt becomes delinquent when: 

 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 a debt being paid in installments.

The date of delinquency is the payment due date.

Example: Borrower’s loan payment is due January 1. The 

loan agreement allows a grace period of 15 days, meaning 

that the lending agency will not assess late charges or 

declare the loan delinquent if the payment due on January 1 

is made before January 16. If Borrower makes his or her 

payment before January 16, the loan is not delinquent. 

However, if Borrower fails to make a payment by January 

16, then the loan is delinquent and the date of delinquency is

January 1 (the payment due date). 

 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 is the date the agency mailed or delivered the

billing notice.

Example: Agency discovers that duplicate payments were 

made to beneficiary and seeks to recover the overpayment. 

On March 1, the Agency mails a notice to beneficiary 

informing him about the overpayment. The notice states 

that payment must be made by March 31 to avoid 

assessment of late charges and enforced collection action. If

beneficiary pays the amount requested before March 31, the 

debt is not delinquent. However, if beneficiary fails to pay 

by March 31, then the debt is delinquent, and the date of 

delinquency is March 1 (the date of the initial notice about 

the debt). 

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Debt Collection Improvement Act of 1996. T h e Debt Collection 

Improvement Act of 1996 (DCIA) provided Federal agencies with a 

variety of delinquent debt collection tools. The DCIA: 

centralized delinquent debt collection at the Department of the 

Treasury (Treasury), requiring Treasury to pursue delinquent debts 

that are not actively being collected by Federal creditor agencies, a 

program known as “cross- servicing”; 

established a centralized offset process at Treasury, known as the 

“Treasury Offset Program”; authorized Treasury to manage a 

governmentwide, performance-based private collection agency 

contract for referral of delinquent debts for collection; 

 requires Federal agencies to report delinquent consumer debts

to credit bureaus;

 permits Federal agencies to administratively garnish the wages

of non-Federal employees; and

 requires credit-granting agencies to bar debtors from

receiving Federal direct, guaranteed, or insured loans until

their delinquent debts owed to the United States are

resolved.

Debt Collection Statutes. A list of the Federal statutes applicable 

to governmentwide debt collection is found at Appendix 4. 

Governmentwide Debt Collection Regulations. The following 

regulations apply to governmentwide debt collection: 

 The Federal Claims Collection Standards (FCCS) are the

governmentwide debt collection standards published jointly

by Treasury and DOJ in Title 31 of the Code of Federal

Regulations (CFR), Parts 900 through 904 (31 CFR Parts

900 – 904);

 The debt collection regulations issued by Treasury’s Fiscal

Service at 31 CFR Part 285 govern Treasury’s crossservicing procedures; Treasury’s centralized offset program,

including administrative, tax refund, and salary offset

programs; administrative wage garnishment; and, the

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barring of delinquent debtors from receiving Federal loans 

and loan guaranties; and 

 Salary offset regulations published by the Office of

Personnel Management at 5 CFR Part 550.

 The Office of Management and Budget (OMB) has issued

OMB Circular No. A-129, “Policies for Federal Credit

Programs and Non-Tax Receivables.”

 The Treasury Financial Manual Chapter I TFM 4-4000, "Debt

Management Services Collection of Delinquent Nontax Debt."

Governmentwide Debt Collection Guidance. Fiscal Service has 

issued this document and other debt collection guidance, such as the 

“Guide to the Federal Credit Bureau Program” and the “Treatise on 

Federal Nontax Debt Collection Law.”

Debt collection statutes, regulations, and guidance are found at the 

Fiscal Service website at 

https://fiscal.treasury.gov/debt-management/legal-authorities/debtcollection-authorities.html Agency and program-specific statutes,

regulations, and policies are not covered in this Chapter, but they 

also govern the debt collection programs of a specific agency. 

Agency personnel should contact agency counsel for information 

about agency-specific laws and requirements.

Key Debt Collection Principles 

Federal agency personnel who collect debts for the government 

should understand the following key principles: 

Agency Regulations. Regulations are rules and procedures governing 

an agency’s programs or administrative processes. In many cases, an

agency is required to publish rules and procedures in the Federal 

Register. After publication in the Federal Register, regulations are 

codified in the Code of Federal Regulations (CFR). Federal Register 

and CFR documents may be accessed online at 

www.gpoaccess.gov/fr/index.html.The governmentwide regulations 

mentioned above (Part I, Background) provide general rules and 

standards for a Federal agency to follow when using various debt 

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collection tools. Each agency must promulgate its own debt 

collection regulations. An agency should adopt the governmentwide 

debt collection rules and standards for its own programs, when

appropriate. Additionally, an agency’s rules and standards should 

cover any additional debt collection tools the agency intends to use. 

Agency counsel should be consulted to determine when an agency’s

rules and procedures must be published in the Federal Register.

Program Goals and Debt Collection. Delinquent debts arise from 

various Federal Government programs and actions. For some types 

of debts, the government’s interests may be best served by resolving 

debts in a way that achieves an important goal of a specific program.

For example, it may be in the government’s best interest to lower a 

debtor’s monthly payments to allow a debtor to remain in his or her 

own home, keep a business, or to recover from a disaster. An

agency may agree to reduce fines and penalties in exchange for the 

correction of the health and safety violations that triggered the debt. 

Perhaps it is in the government’s interest to compromise a medical 

profession debt if the debtor completes a service agreement that

would allow the medical needs of an underserved community to be 

met. An agency should determine early in the debt collection 

process (normally, in the first 60 days) whether a debtor is willing 

and able to work with the agency to achieve the important 

government objective associated with the debt. If not, the agency’s

primary objective should be to maximize the collection of the debt 

and minimize potential losses. 

Due Process. 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.... ” 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. 

 Notice must include the amount and type of debt owed, and

the actions to be taken by an agency to collect the debt, such

as adding interest and late charges, offset or garnishment,

foreclosure of collateral property, and credit bureau

reporting. Opportunity to dispute the debt or the adverse

collection action to be taken includes, at a minimum, an

opportunity for the debtor to challenge (1) the existence of

all or part of the debt, and/or (2) whether the agency has met

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the statutory or regulatory prerequisites for using the 

collection action mentioned in the notice. 

The minimum “due process” required is generally established by the 

statutes that authorize the use of a specific debt collection tool or by

implementing regulations. As the chart below indicates, the notices 

and opportunities to be provided to the debtor are not uniform for all 

debt collection actions and tools. Additionally, an agency, through 

its regulations and procedures, can require administrative processes 

in excess of the minimum due process standards (that is, processes 

that are more beneficial to the debtor). 

Minimum Due Process Requirements

Debt Collection Tool Notice Opportunity to Dispute

Non-centralized 

administrative offset

Prior to offset, no specific 

time frame

Review with an agency official

Salary offset (noncentralized) 30 days prior to offset

Hearing with hearing official 

not under the control of the 

agency

Tax refund offset 60 days prior to offset Review with an agency official

Treasury Offset Program

(TOP) (centralized offset

includes administrative, salary

& tax refund offset)

60 days prior to submitting 

the debt to TOP

Review and/or hearing, as 

appropriate

Administrative wage 

garnishment

30 days prior to 

garnishment

Hearing with agency official or 

any qualified individual

Credit bureau reporting

60 days prior to report to 

consumer credit bureau Review with an agency official

Additional details on due process requirements are discussed later in

this Chapter. 

Privacy Protections. Many of the debt collection tools discussed in 

this Chapter require disclosure of personal information concerning 

debtors to individuals and entities outside the creditor agency. For 

example, disclosures of information about debtors might be made to

Fiscal Service for offset or cross-servicing, to private collection 

agencies, to credit bureaus, to employers to effectuate wage 

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garnishment, and/or to DOJ for litigation or concurrence in the 

agency’s termination of collection action. 

The Privacy Act of 1974 provides certain protections for individuals 

whose information is contained in records maintained by the Federal 

Government. Among other things, an agency may not improperly 

disclose information about individuals whose records are maintained 

in a “system of records” (a group of records where information about 

an individual can be accessed by name or personal identifier, such as

a taxpayer identification number). An agency is required to publish 

notices in the Federal Register to identify its systems of records and 

to describe permissible disclosures, known as “routine uses,” for 

those records. 

When implementing its debt collection strategy, an agency should 

review its debtor records and consult with agency counsel to 

determine if: 

 the records are a “system of records” as defined in the

Privacy Act;

 a system of records notice has been published in the Federal

Register and updated, where necessary; and

 the routine uses listed in the system of records or other

legal authorities permit disclosures necessary for all

appropriate debt collection tools and to prevent and

identify improper payments or awards to delinquent

debtors.

Within governmentwide rules and standards and an agency’s own 

statutory authority, an agency has some flexibility in determining 

what collection techniques and tools to use and in what order. The 

best mix of tools for collecting delinquent debts at one agency may 

vary from that of another agency. However, all agencies must 

comply with Federal laws that require the use of certain debt 

collection tools, such as cross-servicing, offset, and credit bureau 

reporting. 

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Determining the Appropriate Collection Technique to Use

Key factors to consider when determining the technique or tool to 

use include: 

 whether the agency is required by law to use the debt

collection tool;

 the size and age of the debt;

 the type of debt, particularly whether commercial or

consumer;

 the availability of the debt collection tool. For example,

the Treasury Offset Program is not available until the

agency knows the debtor’s taxpayer indentification number

(TIN);

 the requirements for use of the debt collection tool, such as

minimum dollar thresholds;

COLLECTION 

TECHNIQUES

Late 

Charges

Litigation

Liquidating 

Collateral

Cross-servicing

Private Collection 

Agencies

Treasury Offset 

Program

Non-centralized Offset 

including Internal 

Offset

Agency Workout 

Group

Credit Bureau 

Reporting

License 

Revocation

Barring 

Delinquent 

Debtors

Acceleration

Rescheduling Compromise

Administrative 

Wage 

Garnishment

Installment 

Payments

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 whether one tool can be used concurrently with another

tool, such as private collection agencies and the Treasury

Offset Program;

 the time and resources required to use the collection

tool; the feasibility of using each tool, including any

legal or contractual constraints; and

 the cost of each tool relative to the size of the debt. Costs

include administrative costs, as well as fees charged by a

private collection agency, Fiscal Service, or DOJ. The

agency should weigh costs against the probability of

collecting the debt.

Establishing a Collection Strategy 

A 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. Collection 

strategies must meet all statutory requirements. A collection 

strategy will facilitate debt collection by providing a systematic, 

uniform method for collecting accounts. 

An agency should first seek to collect delinquent debts in one lump 

sum. If a debt cannot be collected in a lump sum, an agency should 

next attempt to collect the full amount in installment payments 

within a reasonable time (generally, less than three years). Finally, 

if a debt cannot be collected in full in a lump sum or through

installments, an agency should consider partial collection of the debt 

through a compromise agreement. 

Debt collection strategies will be based on the decisions made by an 

agency in determining what tool or technique to use at different 

points in the debt collection cycle. An agency’s strategies will take 

into account that debts over 180 days delinquent must be referred to

Fiscal Service for cross-servicing and offset. If an agency relies on 

Fiscal Service to submit debts for administrative offset on the 

agency's behalf, the agency must transfer the debts to Fiscal 

Service no later than 120 days delinquent. An agency should 

periodically (e.g., every three to five years) evaluate the soundness 

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of its strategies and collection activity. Samples of collection 

strategies are contained in Appendix 5. 

Collection Action Documentation 

During the debt collection phase of the credit cycle, the agency will 

build upon the documentation created during its credit extension and 

account servicing activities. It is essential that the agency continue 

to document all agency contacts with a debtor and actions taken to

enforce collection in order to protect the government's interests. 

Documentation will also be critical if the agency decides to pursue 

litigation and for subsequent agency decisions to write-off and

ultimately close-out a debt. An agency’s automated systems may be 

used to document contacts with the debtor and other debt collection 

activities so long as the manner in which the information is retained 

is sufficient for evidentiary purposes in a court or administrative 

proceeding. See Appendix 6 for a list of collection activities that 

should be documented. 

An agency should also consider using digital imaging as a way to 

maintain copies of debt collection documentation. Digital imaging 

allows an agency to electronically maintain copies of documentation 

in various formats. 

Agency Workout Groups 

Agency workout groups are established for the sole purpose of 

resolving troubled debts, primarily loans. As such, agency workout 

groups should have the authority to decide on appropriate actions 

necessary to maximize debt recovery, including rescheduling debt. 

Strategies developed by workout groups should be case specific;

however, the workout group should establish policies which outline 

options for handling different debt problems. The agency may want to

establish a workout group if the volume and amount of its debts are 

large enough to warrant a special “problem account” department or if

extraordinary effort or special expertise is required to enforce 

recovery. A workout group consists of loan officers, legal staff, and 

accounting personnel. Team members should have working 

knowledge of and abilities in the following areas: 

 credit management and debt collection;

 business law;

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 accounting;

 agency policies and procedures;

 liquidation proceedings;

 collateral appraisal;

 communication and interpersonal skills; and

 management policies and procedures.

Contact With the Debtor 

Contact with the debtor is critical because contact: 

 provides the debtor with notification of the existence of the

debt and the amount of the debt if the debtor is otherwise

unaware (for example, a beneficiary receives a benefit

payment for more than the amount statutorily authorized, or a

person is liable to the Federal Government for property

damage but the amount of damage has not been determined);

 provides the debtor with the opportunity to repay the debt in

full, or, if the debtor cannot pay the debt in full, to work out

a satisfactory repayment arrangement with the agency;

 provides the debtor with information on the agency’s

policies regarding accrual of interest, penalties, and

administrative costs;

 if in writing, can provide evidence of due process compliance

when the letter advises the debtor of the agency’s intent to

use certain debt collection tools, as well as any rights the

debtor may exercise to avoid the use of the debt collection

tools;

 provides a means of responding to debtors who exercise

due process rights; and

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 for some programs, provides the opportunity to resolve the

debt by meeting a specific program objective or goal (such

as a medical professional complying with an agreement to

practice in an underserved area, or an employer correcting a

health and safety violation).

An agency must provide appropriate guidelines and training to its 

employees whose duties include contacting debtors. While Federal 

agencies are not subject to the Fair Debt Collection Practices Act 

(FDCPA), 15 U.S.C. § 1681 et seq., the FDCPA provides valuable 

guidance on appropriate practices in communicating with debtors 

and can be used as a source in developing an agency’s guidelines. 

See Appendix 7 for a sample list of appropriate practices. 

It is critical for an agency to take action on a delinquent debt 

immediately to prevent the delinquency from becoming more 

serious. Acting on the delinquency quickly will greatly enhance 

the probability that the delinquency can be “cured” or the debt fully 

collected. Within 20 days after the payment due date or at the end 

of any grace period contractually established, the agency should 

contact the debtor, by letter or phone, in an attempt to resolve the 

non-payment. The agency should utilize personal contact with the 

debtor when such practice has proven to be effective. It is critical 

that all contact with the debtor be documented in the account files. 

In the case of an administrative debt (for example, a fine, fee, 

penalty, overpayment, or other non-loan type of debt), the agency 

should have covered most of the items listed below in its initial 

billing notice, but may find it effective to contact the debtor to 

inform the debtor of the delinquency, remind the debtor of the 

agency’s policies and procedures for collecting a delinquency, 

renew the request for payment, and attempt to resolve the 

delinquency. Although form letters are useful and can be 

dispatched quickly, the agency may find that a personalized letter or 

a phone call is more effective in emphasizing the seriousness of a 

delinquency, especially for those debtors who are routinely 

delinquent. 

If the delinquency is not resolved after the initial contact with the 

debtor, the agency must notify the debtor of the debt’s delinquent 

status through a demand letter or dunning notice. One demand 

letter sent no later than 30 days after delinquency should be 

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sufficient. Except in rare circumstances, the agency should not 

send any more than two demand letters, no more than 30 days apart, 

as established in its debt collection strategy. The agency should 

terminate the process of sending demand letters at any time that it

determines that the letters are no longer serving any useful 

purpose. Any contacts beyond the first demand letter should be 

tailored to the circumstances of the debt, i.e., the size, type, and age 

of the debt, and the debtor’s response to the initial contact. Each 

succeeding demand for payment must be progressively stronger and 

firmer in tone. 

When not already covered in a prior invoice or letter, the demand 

for payment, which should be sent no later than 30 days after the 

date of delinquency, must include: 

 the status of the debt as overdue;

 the amount owed;

 the basis of the indebtedness;

 policies on assessing interest, penalties, and administrative

costs, and the applicable rates and amounts, especially if not

provided in a loan agreement;the agency’s intention to use

various collection tools to collect the debt, including

referral of the debt to Fiscal Service for collection (known

as “cross-servicing”), offset, private collection agencies,

administrative wage garnishment, and litigation. The

agency should not threaten to take a collection action it is

not authorized or does not intend to take;

 opportunities for the debtor to review the debt records,

contest the debt and provide evidence to support the

contentions, and enter into a reasonable repayment

agreement;

 the need for the debtor to make immediate payment or

contact the agency within a specified period of time from

the date of the demand letter in order to avoid enforced

collection; and

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 the name, phone number, and address of an individual to

contact within the agency to resolve the delinquency. It is

extremely important for a debtor to be able to contact a

person who is knowledgeable about the agency’s debt

collection policies and practices and who can respond to the

debtor’s questions and concerns.

In developing its demand letter procedures, an agency must 

consider that, for debts that will be referred to Fiscal Service for 

cross-servicing, the information listed in the Demand Letter 

Checklist found at Appendix 8 must be sent to the debtor at least 

60 days prior to referral.

If possible, the agency should respond to any communication from 

the debtor within 30 days. The agency should develop clear policies 

and procedures on how to respond to a debtor’s request for copies of 

records related to the debt, consideration for a voluntary repayment 

agreement, or a review or hearing on the debt. 

Assessing Interest, Penalties and Administrative Costs 

The Debt Collection Act of 1982, as amended (codified at 31 U.S.C. §

3717), requires agencies, unless expressly prohibited or restricted by

statute or contract, to assess three separate and distinct types of late 

charges on all delinquent debts, including debts owed by state and 

local governments. Late charges are categorized as interest, penalties, 

and administrative costs. 

(1) Interest, sometimes referred to as additional interest,

compensates the government for the loss of use of funds

when the debt is not paid timely and accrues from the date of

the delinquency. At a minimum, the interest rate will be set

at the same rate as Treasury's Current Value of Funds Rate

(prescribed and published annually by the Secretary of the

Treasury in the Federal Register and available on the Fiscal

Service website at

https://www.fiscal.treasury.gov/reports-statements/cvfr/ for 

the period in which the debt became delinquent. The rate is 

published annually, but is subject to quarterly revisions if the 

annual average changes more than 2%. The agency may 

assess a higher rate if necessary to protect the government's 

interests.

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The rate of interest remains fixed for the duration of the 

delinquency. The agency may not compound the interest or 

assess interest on administrative costs and penalties. 

(2) Penalties discourage delinquencies and encourage early 

payment of the delinquent debt in full. As set by statute, the 

penalty to be assessed to a delinquent debt is an amount not 

to exceed 6% per year. An agency should not charge a 

penalty of less than 6% without a compelling reason. 

Accruing from the date of delinquency, the penalty charge is

assessed on any portion of a debt that is outstanding for 

more than 90 days, including any interest and administrative 

costs. 

(3) Administrative costs cover the costs associated with 

collecting a debt from the date of the delinquency. The 

agency will set the amount at either the actual costs incurred 

for the individual debt or the average cost incurred at similar 

stages of delinquency for similar types of debt. Costs may be

assessed as a percentage of the amount collected. 

Administrative costs should include the staffing and 

resources costs incurred to recover delinquent debts and 

other costs associated with using various collection tools to 

enforce recovery, including, but not limited to, the costs of 

obtaining a credit report and collection fees charged by 

Fiscal Service, DOJ and private collection agencies. To the 

extent allowed by law, an agency should add to the debt 

as administrative costs all fees charged by Fiscal Service, 

DOJ, private collection agencies and other entities that

collect debt for creditor agencies. 

The agency will continue assessing these late charges at the rates 

established by the agency until final payment is received, unless 

debt collection activity is suspended or terminated, the debt is 

compromised, the late charges are waived, or the late charges are 

altered as the result of a court judgment. 

If a debtor defaults on an agreement to repay the delinquent debt, 

the agency should add all late charges to the principal amount. The 

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agency should start anew to accrue late charges, at the rate in effect 

at the time of default, on the new principal amount. 

Waiver of Interest, Penalties, and Administrative Costs. The 

agency is required to waive interest and administrative costs on a 

debt paid within 30 days of the date of delinquency. The agency has 

discretion to waive interest, penalties, and administrative costs in 

accordance with its regulations, either (1) pursuant to a compromise 

or settlement agreement, or (2) when collection of these charges is

against equity and good conscience or is not in the best interests of 

the United States. For example, a waiver may be appropriate when 

an agency cannot conduct a hearing within the statutorily required 

time frame (e.g., 60 days for salary offset). A waiver may be in

whole or in part for each separate type of charge. 

COLA Alternative to Assessment of Late Charges. In limited 

circumstances, an agency may increase an administrative debt by the 

cost of living adjustment (COLA) in lieu of charging interest, 

penalties, and administrative costs. The COLA alternative can be 

used only when: (1) the debt is an administrative debt (e.g., a fine, 

penalty, fee or overpayment), not a loan or debt arising from a loan 

guaranty; and (2) assessment of late charges is not cost effective or 

technically feasible, and a complete waiver of late charges is not 

supportable. Before using the COLA alternative, an agency should 

determine if charging interest alone and waiving penalties and

administrative costs could accomplish the same objective as using 

the COLA. Agencies should ensure that new debt collection 

systems are developed with the capabilities to assess late charges in

accordance with the requirements noted above, rather than using the 

COLA alternative. 

The COLA is the percentage by which the Consumer Price Index 

for the month of June of the calendar year preceding the adjustment 

exceeds the Consumer Price Index for the month of June of the 

calendar year in which the debt was determined or last adjusted. 

Increases to administrative debts using the COLA alternative shall 

be computed annually as of the date the COLA is published during 

each calendar year. 

Each agency must publish regulations establishing agency policy 

regarding the accrual and waiver of interest, penalties and 

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administrative costs, including the circumstances under which these 

charges will not be imposed when collection action is suspended

because of an appeal or other reason. An agency must inform 

debtors of its policies prior to accruing interest and other charges, 

either through incorporating the policies in a loan agreement or

through inclusion of appropriate language in the initial demand

letter.

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Installment Payments 

Whenever possible, an agency should try to collect an overdue 

debt in a single lump sum. In the event that the debtor claims 

financial inability to repay the debt in a single lump sum, the 

agency may consider collecting the overdue debt in installments. 

Before using certain collection remedies, such as offset and 

administrative wage garnishment, an agency must provide a 

delinquent debtor with the opportunity to enter into a reasonable 

repayment agreement. See Demand Letter Checklist at 

Appendix 8. 

Prior to entering into an installment agreement, an agency should 

obtain a financial statement or credit report to verify the debtor's 

claim of inability to repay in a lump sum. See Appendix 9 for a 

sample financial statement. Additionally, an agency should enter 

into such agreements only when there is evidence the debtor has 

(1) a willingness to abide by the terms of the agreement, including 

the repayment schedule; and (2) an ability to make the agreed upon 

payments. When determining the debtor's ability to pay, an agency 

should consider the following factors: 

 age and health of the debtor;

 present and potential income inheritance prospects;

 possibility of hidden assets or fraudulent transfers;

 assets/income available through enforced collection; and

 reasonable and necessary living expenses for the debtor and

the debtor's dependents.

An agency may wish to consult the Collection Financial Standards 

used by the Internal Revenue Service to determine reasonable 

amounts that an individual or family needs for living expenses. The 

Collection Financial Standards may be found at www.irs.gov.

Revised March 2015
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The installment agreement should provide for as large an initial 

lump sum payment as the debtor can afford. While payments 

normally should be sufficient in size and frequency to liquidate the 

debt in three years or less, a greater amount of time may be 

appropriate based on the size of the debt and the debtor’s ability to 

repay. The agency should seriously consider requiring the debtor to

use pre-authorized debit to make the required installment payments. 

The agency may also require the debtor to post new or additional 

collateral to secure the outstanding balance of the account, 

especially in cases where the debtor’s willingness to abide by the 

terms of the agreement is questionable, or where the amount of time 

to liquidate the account exceeds three years. 

The installment agreement will be a legally enforceable written 

agreement in which all the terms and conditions of the installment 

arrangement, including those governing the assessment of financing 

interest and late charges, are stated. The interest rate to be charged 

on installment agreements of one year or less is the Current Value of

Funds Rate in effect at the time of the agreement; for installment 

agreements of more than one year, the rate is the rate for a Treasury 

security of comparable length. If a debtor has defaulted under a 

previous repayment agreement, late charges that accrued but were 

not collected under the defaulted agreement must be added to the 

principal under the new agreement. The written agreement should 

provide for the acceleration of the debt (declaring the full amount of 

the debt due and payable) in the event that the debtor defaults. 

Where the term for payment of installments exceeds one year, an

agency should consider including a clause that allows the agency to

re-evaluate the amount of the installment payment on a periodic 

basis, with the goal of increasing the installment amount or 

requesting an additional lump sum payment, in order to collect the 

debt sooner. 

Revised March 2015
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Acceleration 

Acceleration of a debt occurs when an agency calls the full amount 

of the debt due and payable. When a debt is accelerated, the agency 

demands that the debtor pay the entire debt (both the delinquent and 

non-delinquent portions of the debt), and considers the total amount 

of the debt delinquent. The agency should delineate circumstances 

in which acceleration is appropriate and develop procedures to

incorporate acceleration into its debt collection activities. For 

example, acceleration is particularly appropriate when a debtor has 

failed to repay a debt in accordance with an installment agreement. 

Rescheduling 

Rescheduling signifies a change in the existing terms of a loan. An 

agency should consider rescheduling a debt when it has determined 

that the rescheduling is in the government's interests and that 

recovery of all or a portion of the debt is reasonably assured. 

As with installment payments, before rescheduling a debt, the 

agency should reassess the debtor's financial position and ability to 

repay the debt if rescheduled. The agency should also determine if 

it should require the debtor to use pre-authorized debit to make 

payment. As with any repayment arrangement, the terms and 

conditions of the rescheduling, including the acceleration clause, 

must be in writing and signed by the debtor. The agency should 

discourage informal workout arrangements with debtors. 

Each agency should establish uniform policies, procedures and 

criteria for rescheduling and other types of workouts for each 

program area. Its policies and procedures should provide for the 

recognition of gains and losses on rescheduled accounts in 

accordance with the provisions of OMB guidance and changes in 

subsidy amounts as required under the Federal Credit Reform Act. 

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Compromise 

An agency compromises a debt whenever it accepts less than the 

full amount of the outstanding debt in full satisfaction of the entire 

amount. 

A compromise may be considered (but is not required) when one or 

more of the following criteria apply: 

1. the debtor is unable to pay the debt within a reasonable

time period, as verified through credit reports or other

financial statements (see sample financial statement in

Appendix 9);

2. the agency is unable to enforce collection within a

reasonable time period. This may be the case when the

agency cannot determine the amount it may realize if it

forces the liquidation of available collateral;

3. the cost of collection does not justify enforced collection

of the full amount. An agency may compromise statutory

penalties, forfeitures, and claims established as an aid to

enforcement and to compel compliance, if the agency’s

policies in terms of deterrence and securing compliance will

be adequately served. Conversely, an agency may determine

that enforced collection is justified regardless of the cost in

Revised March 2015
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order to ensure compliance with the agency’s policies or 

programs; or 

4. there is real doubt concerning the government's ability

to prove its case in court. In this situation, the agency

may be in dispute with the debtor over the amount or have

serious concerns related to the agency's ability to legally

prove its case in court.

Using the Claims Collection Litigation Report, CCLR, an agency must 

refer compromise proposals where the principal amount of the debt 

exceeds $100,000 (or such larger amount as may be determined by the 

Attorney General) to DOJ for its concurrence in the compromise. The 

CCLR instructions can be found at: 

http://www.justice.gov/sites/default/files/jmd/pages/attachments/2014/

12/12/cclr_instructions.pdf

and the form at: 

http://www.justice.gov/sites/default/files/jmd/legacy/2014/05/26/cclrform-fillable.pdf. 

DOJ has delegated to Fiscal Service, the authority to compromise a 

debt with a principal amount of $500,000 or less when the debt is

being serviced by Fiscal Service in its Cross-Servicing Program. It is

not necessary for the agency to refer proposals for compromise that do

not meet the agency requirements for compromise and that the agency 

does not, therefore, intend or want to accept. 

Compromise agreements should be in writing and signed by the 

debtor and the agency, whenever feasible. The agency should 

discourage the use of installment agreements to pay compromises. 

If, however, an agency does accept an installment agreement, the 

agreement must provide that, in the event of default, the full amount 

of the debt (less any amounts paid) will be reinstated and 

immediately due and payable. To further protect its position, the 

agency may also ask the debtor to pledge collateral to secure the 

debt. 

Where two or more persons are jointly and severally liable on that 

same delinquent debt, an agency should ensure that a compromise 

with one debtor does not inadvertently release the agency’s claim 

against the remaining debtor(s). The amount of a compromise with 

one debtor shall not be considered a precedent or binding in 

Revised March 2015
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determining what the appropriate compromise amount and terms 

might be with other co-debtors. 

The agency needs to clearly indicate to the debtor that the 

compromise agreement applies to the amount of the debt and that 

the agency is not authorized to release the debtor from any other 

liabilities owed to the United States, including tax liability which 

may be incurred on the compromised amount. Depending on the 

type and amount of debt being compromised, the agency may be 

required to report the difference between the full amount of the debt 

and the amount paid by the debtor in a compromise agreement to 

IRS as potential income on Form 1099-C. See Chapter 7, 

Termination of Collection Action, Write-off and Close-out/ 

Cancellation of Indebtedness, for information on Form 1099-C 

reporting. 

Taking Action Against Co-borrowers/Guarantors 

An agency should take action to recover a debt from secondary 

debtors (co-borrowers or guarantors) when it becomes apparent that 

the primary debtor cannot or will not repay a debt. The agency 

should employ the same debt collection techniques and tools in 

pursuing secondary debtors as it uses for primary debtors. To 

successfully pursue secondary debtors, the agency must have 

obtained sufficient identifying information, including taxpayer 

identifying numbers, on all co-borrowers and guarantors. It is not 

necessary to allocate the amount of the debt among the secondary 

debtors in proportion to any investment or pursuant to any agreement 

or court order in a case to which the agency is not a party (for 

example, a partnership agreement or divorce judgment). Enforced 

collection should be taken against each debtor for the full amount of 

the debt, unless otherwise prohibited. In certain cases where a 

primary debtor has filed for bankruptcy protection, an agency may be

precluded from pursuing the non-bankrupt secondary debtor.

Whenever a debtor has filed for bankruptcy protection, an agency 

should consult with counsel to determine whether a bankruptcy stay 

is in effect and must be lifted before proceeding with collection 

action against a secondary debtor. 

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Application of Payments 

Except as otherwise contractually provided, payments made by a 

debtor towards a delinquent debt are applied to the outstanding 

balance of the debt in the following order: 

1. penalties;

2. administrative costs;

3. additional interest;

4. financing interest; and

5. principal.

If the debt is being collected by Fiscal Service through crossservicing or TOP, or if a private collection agency is collecting the 

payment for an agency, each payment will first be applied to the 

amount of the contingency fee due Fiscal Service or the private 

collection agency. The rest of the payment would then be applied as 

indicated, to liquidate in full penalties, other administrative costs, 

interest, and principal. Other than the application of payment of the 

aforementioned fees, the agency may alter this order of payment if it

determines that such a change is in the government's interests. 

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Part II – Debt Collection Tools and Programs

One of the major purposes of the DCIA is to “maximize collections 

of delinquent debts owed to the government by ensuring quick 

action to enforce recovery of debts and the use of all appropriate 

collection tools.” An agency is required to aggressively collect all 

debts arising out of the agency’s activities. If a debtor fails to pay or 

otherwise resolve a delinquent debt, an agency must react quickly to

determine the appropriate debt collection tools to be used to enforce 

collection. An agency may use more than one of the available tools 

at the same time in order to maximize its recovery on a bad debt. 

This part explains how to use the various debt collection tools and 

programs.

Transfer of Debts to Fiscal Service for Collection - CrossServicing. The DCIA requires that related debt collection activities be 

consolidated within the government, to the extent possible, to 

minimize the government’s delinquent debt collection costs. One way 

that the government’s delinquent debt collection operations have been 

consolidated is through the Cross-Servicing Program operated by 

Fiscal Service. Once an agency refers its delinquent debts to the 

Cross-Servicing Program, Fiscal Service then uses a variety of 

collection tools to collect the debt. Information on Fiscal Service’s 

Cross-Servicing Program is available on the Fiscal Service website at 

http://fiscal.treasury.gov/cross-servicing/ or by calling the CrossServicing Agency Liaison staff, Client Services Branch, at (800) 

858-0725. Fiscal Service will provide an overview of the debt 

collection services available to an agency and will assist the agency in 

taking the steps necessary to participate in the Cross-Servicing 

Program.

Debt Referral Requirements. An agency should send its 

delinquent debts to Fiscal Service as early as possible in the debt 

collection cycle. See Appendix 5 for sample debt collection 

strategies. If a debtor has not paid the debt, entered into a 

repayment arrangement, or otherwise resolved the debt within 60 

days after the agency’s last demand letter, the agency should refer 

the debt to Fiscal Service. The last demand letter, together with 

prior notices sent to the debtor, must include all of the items 

described in the Demand Letter Checklist (see Appendix 8). An

agency could refer its debts to Fiscal Service as early as 61 days 

Revised March 2015
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after the delinquency date assuming that the appropriate demand

letter was sent to the debtor on the delinquency date and that all 

other due process pre-requisites have been met. 

As required by the DCIA, an agency must refer any eligible debt 

more than 180 days delinquent to Fiscal Service for cross-servicing. 

At least 60 days before a debt is submitted to Fiscal Service, an

agency must have sent to the debtor one or more notices with the 

information in the Demand Letter Checklist in Appendix 8.

Therefore, to meet the statutory debt referral requirement, an agency 

must send the due process letter to the debtor as soon as possible, 

preferably no later than 60 days delinquent. 

The Digital Accountability and Transparency Act amended the DCIA 

to require agencies to notify Fiscal Service of all debts delinquent 120 

days or more for purposes of administrative offset. If an agency relies 

on Fiscal Service to submit debts for administrative offset on the 

agency's behalf, the agency must transfer the debts to Fiscal Service 

no later than 120 days delinquent.

A debt is eligible for referral to Fiscal Service for cross-servicing if

the debt is: 

 past due;

 legally enforceable;

 owed by an individual or entity (including a state or local

government) other than a Federal agency; and

 $25 or more (including interest, penalties and administrative

costs).

A debt is considered legally enforceable for purposes of referral to 

Fiscal Service 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, as described

beginning on page 6-28. 

Exceptions to Referral Requirements. A debt is not eligible for 

referral to Fiscal Service for cross-servicing if the debt is: 

Revised March 2015
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 not past due or legally enforceable;

 owed by a debtor who has died;

 owed by a debtor who has filed for bankruptcy protection

or the debt has been discharged in a bankruptcy

proceeding;

 owed by a Federal agency;

 the subject of an administrative appeal, until the appeal is

concluded and the amount of the debt is fixed; or

 less than $25 (including interest, penalties and

administrative costs).

An agency is not required to refer a debt to Fiscal Service for crossservicing if the debt is: 

 delinquent for 180 days or less, unless the agency relies

on Fiscal Service to submit debts for administrative

offset; in which case, the debt must be referred no later

than 120 days delinquent (however, an agency may send

such debts to Fiscal Service if they are otherwise eligible

for referral);

 in litigation, that is, the debt has either been referred to DOJ

for litigation, or is the subject of proceedings pending in a

court of competent jurisdiction, including bankruptcy and

post-judgment matters;

 in foreclosure, that is, the debt is secured by collateral that is

being foreclosed, either through a court proceeding or nonjudicially (see page 6-55 for information on liquidating

collateral)

 scheduled for sale within one year under an asset sales

program approved by OMB;

 at a private collection agency with the approval of Fiscal

Service;

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 at a Treasury-designated debt collection center;

 expected to be collected from payments issued to the debtor

by the creditor agency within three years of the date of

delinquency (commonly referred to as “internal offset”);

 less than $100 and the agency is unable to obtain the

debtor’s taxpayer identifying number; or

 otherwise exempt from the statutory referral requirement

by law or official action of Treasury.

Requirements for Agency Participation in Cross-Servicing. 

Chapter 4000 of the Treasury Financial Manual, Volume I, entitled 

“Debt Management Servcies Collection of Delinquent Nontax Debt,” 

describes the requirements for agency participation in the CrossServicing Program and is available on the Fiscal Service website at 

http://tfm.fiscal.treasury.gov/v1/p4/c400.html. 

Agency personnel should contact the Cross-Servicing Agency Liaison 

assigned to assist their agency or the Cross-Servicing Agency Liaison 

staff, Client Services Branch, at (800) 858-0725 for questions related 

to agency debts that have been referred to Cross-Servicing. 

An agency must provide the debtor with proper due process before 

submitting a debt to Fiscal Service for cross-servicing. This means 

that, at a minimum, the agency has sent the debtor one or more

demand letters with the information contained in the Demand Letter 

Checklist at Appendix 8, and has provided the debtor with the 

opportunity to dispute or challenge the debt. For each debt submitted 

to Fiscal Service for cross-servicing, an agency is required to certify 

that the debt is eligible for cross-servicing and all pre-requisites to

collection have been met. 

NOTE: Once a debt is referred to Fiscal Service, the agency must stop 

its own collection activity related to the referred debt. Any payments 

received by an agency for a debt that has been referred to Fiscal 

Service must be reported to Fiscal Service as a payment (not as an

adjustment to the debt balance) to allow Fiscal Service to properly 

assess its fees. 

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Debt Collection Actions at Fiscal Service . When a debt is

referred to cross-servicing for collection, the debt remains a debt 

owed to the referring agency and the referring agency shall continue 

to maintain all the official records, including accounting records, 

pertaining to the debt. 

Cross-Servicing Programs require agencies to complete a profile 

for each distinct program under which a debt may arise. The 

profile identifies points of contacts and defines how the agency’s 

debt portfolio will be serviced. It also specifies any unique laws 

that apply to an agency’s debts, Debts referred to Fiscal Service 

are subject to the following actions, as appropriate: 

 Treasury demand letter within five business days of referral;

 telephone calls between debtors and Fiscal Service personnel

and repayment negotiations;

 submission of debt to the Treasury Offset Program (TOP)

within 20 days of referral if the debtor’s taxpayer

identification number (TIN) is available. The debt remains

in TOP until the debt is returned to the agency (see page 6-

34 for a description of TOP);

 credit bureau reporting;

 referral to at least one private collection agency. In most

cases, the debt is referred to a second agency if the first one

is unable to resolve the debt;

 administrative wage garnishment, if the debtor is employed

by an entity other than a Federal agency;

 referral to DOJ for litigation; and

 unpaid debt is reported to the Internal Revenue Service as

potential income to the debtor on Form 1099-C.

Revised March 2015
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If a debtor offers to compromise a debt or enter into a repayment 

agreement, Fiscal Service decides whether such offer is acceptable 

based on the FCCS and the parameters set by the creditor agency, 

i.e., the terms under which Fiscal Service may compromise an

agency’s debts or enter into repayment agreements. An agency 

must respond timely, as referenced in the TFM Chapter 1TFM 4-

4000 to Fiscal Service’s request for approval of any compromise or 

repayment offers to ensure that valid offers are promptly acted upon 

by the government. 

While the debt is in the Cross-Servicing Program, Fiscal Service 

maintains debt balance information, collects the funds paid by the 

debtor, and returns the funds to the creditor agency for proper 

deposit and accounting. The creditor agency must maintain its

original debtor records and remains responsible for any and all 

financial reporting associated with the debt. The creditor agency is

responsible for the accuracy of the debt information submitted to

Fiscal Service, and must provide updates and corrections of debtor 

information on a regular basis. Among other things, the creditor 

agency must immediately notify Fiscal Service when it learns that a 

debtor referred to Fiscal Service has filed for bankruptcy protection. 

Agency personnel should contact the Fiscal Service liaison assigned 

to assist their agency or Fiscal Service’s Cross-Servicing Agency 

Liaison staff, Client Services Branch, at (800) 858-0725 for questions 

related to agency debts that have been referred to cross-servicing. 

Revised March 2015
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Cross-Servicing Fees. Fiscal Service charges fees to cover its costs 

for collections through cross-servicing. The fee is a percentage of 

all collections received from the debtor after the debt is referred for 

cross-servicing. Fees are collected from amounts recovered or 

billed to the creditor agency. The creditor agency should add this 

fee to the debt as an administrative cost to the extent allowed by 

law. 

Administrative Offset (Including the Treasury Offset Program) 

Administrative offset occurs when the government withholds or 

intercepts monies due to, or held by the government for, a person to 

collect amounts owed to the government. Offsets may occur 

against tax refund payments, salary payments, military and civilian 

retirement pay, contractor payments, grant payments, tax 

overpayments, benefit payments, travel reimbursements and other 

Federal and state payments. 

An agency may offset a debtor’s payments using two methods –

centralized offset via the Treasury Offset Program (TOP) operated 

by Fiscal Service and non-centralized offset, that is, ad hoc offset on 

a case-by-case basis. An agency should use TOP to effectuate 

offset except in certain limited circumstances as explained on page 

6-41.

Centralized Offset Through TOP

In 1996, the DCIA required agencies to submit eligible delinquent 

debts to Fiscal Service for administrative offset once the debt was 

delinquent 180 days or more. In 2014, the Digital Accountability and 

Transparency Act amended the DCIA to require agencies to notify 

Fiscal Service of all debts for administrative offset at 120 days 

delinquent. 

Agencies are encouraged to submit delinquent debts to TOP as early 

as 60 days after the required demand letter is sent to the debtor. (See 

the Demand Letter Checklist at Appendix 8.) For an agency that

refers its debts to Fiscal Service’s Cross-Servicing Program, Fiscal 

Service will submit the referred debts to TOP on behalf of the 

referring agency. 

Revised March 2015
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The information in this Chapter about TOP applies only to the offset 

of Federal and state payments to collect delinquent non-tax debts 

owed to the United States. The collection through TOP of Federal 

tax debts and state debts, such as delinquent child support and state 

income tax debts, is not discussed in this Guide. 

How TOP Works 

TOP allows agencies to submit debts to one centralized location for 

offset of all eligible Federal and state payments. Creditor agencies 

submit information about delinquent debts to Fiscal Service, which 

maintains the information in its delinquent debtor database. Federal 

payment agencies prepare and certify payment vouchers to Fiscal 

Service and other Federal disbursing agencies (such as the 

Department of Defense (DOD) or the United States Postal Service 

(USPS)). The payment vouchers contain information about the 

payment, including the name and taxpayer identification number 

(TIN) of the recipient. Before an eligible Federal payment is

disbursed to a payee, Fiscal Service compares the payment 

information with debtor information in Fiscal Service’s delinquent 

debtor database. If the payee’s name and TIN match the name and 

TIN of a debtor, the disbursing agency offsets the payment, in

whole or part, to satisfy the debt, to the extent allowed by law. 

In addition to offsetting eligible Federal payments, Fiscal Service has 

entered into reciprocal agreements with states, whereby states agree to 

offset certain payments to payees who owe delinquent nontax debts to 

the United States. In return, TOP offsets federal vendor and other nontax payments to payees who owe delinquent debts to state agencies. 

Fiscal Service notifies the debtor, the creditor agency, and the 

payment agency when an offset occurs. The debtor is instructed to

contact the creditor agency to resolve any issues related to the 

offset. An agency should respond promptly to a debtor’s questions 

related to TOP collections.

Fiscal Service transmits amounts collected through offset to the 

appropriate creditor agencies after deducting the fees that Fiscal 

Service charges the creditor agencies to cover the cost of 

conducting the offset through TOP. The creditor agency should 

add such fees to the amount of debt to the extent allowed by law. 

Fiscal Service maintains information about a delinquent debt in the 

Revised March 2015
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TOP delinquent debtor database and continues to offset eligible 

Federal payments until the debt is paid in full or the creditor agency 

suspends or ceases debt collection or offset activity for the debt. 

Debts Eligible for TOP. A debt is eligible for referral to TOP if 

the debt is delinquent and legally enforceable. 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. 

Exceptions to Referral Requirements. A debt is not eligible for 

referral to TOP if the debt is: 

 owed by a debtor who has filed for bankruptcy protection

or the debt has been discharged in a bankruptcy

proceeding;

 owed by a Federal agency;

 the subject of an administrative appeal, until the appeal is

concluded and the amount of the debt is fixed;

 less than $25 (including interest, penalties and administrative

costs); or

An agency should not refer directly to TOP those debts that have 

been referred to Fiscal Service or another Treasury-designated debt 

collection center for cross-servicing, or to DOJ for litigation. Fiscal 

Service, debt collection centers, and DOJ are responsible for 

submitting these referred debts to TOP on behalf of the creditor 

agency. Debts that are not referred to Fiscal Service for crossservicing may be eligible for TOP. If an agency does not submit its

debts to Fiscal Service for cross- servicing, agency personnel may

contact Fiscal Service’s Treasury Offset Program Division at (202) 

874-6810 for information on how an agency submits debts directly 

to TOP. 

An agency should carefully review its portfolio of debts that are not 

sent to Fiscal Service for cross-servicing and submit all TOPeligible debts for offset. Agency personnel should contact their 

agency’s legal counsel for questions regarding whether a debt is

eligible for referral to TOP. 

Revised March 2015
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Due Process Requirements. Before submitting a debt to TOP, an 

agency must provide due process to the debtor(s) owing the debt. If 

not already completed through the demand letter process, an agency 

must send notice to the debtor, at the debtor’s most current address 

known to the agency, at least 60 days in advance of referring the 

account to TOP. For information on how to obtain a current 

address, see “Locating the Debtor” on page 6-71. 

The Demand Letter Checklist at Appendix 8 includes the 

information that must be sent to the debtor prior to submitting a 

debt to TOP. For each debt submitted to Fiscal Service for TOP, an

agency is required to certify that the debt is eligible for TOP and all 

pre-requisites to collection through offset have been met. 

Types of Payments Eligible for Offset Under TOP. All Federal 

payments may be offset under TOP except as prohibited by law or

exempted by action of Treasury. This includes payments disbursed 

by Fiscal Service, DOD, USPS, and other government disbursing 

agencies. The following types of Federal payments are eligible for 

offset under TOP: 

 Internal Revenue Service tax refunds;

 retirement payments issued by the Office of Personnel

Management (OPM);

 vendor payments;

 Federal salary payments;

 travel advances and reimbursements;

 certain Federal benefit payments, such as Social Security

retirement and disability payments;

 grant payments; and

 active military and military retirement payments.

For some types of payments, the government may not offset the 

entire payment. Limitations apply to OPM retirement payments 

Revised March 2015
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(25%); Federal salary payments (15% of disposable pay); and social 

security, railroad retirement, and black lung benefit payments 

(15%). In addition, a debtor’s social security, railroad retirement, or 

black lung benefit payment may not be reduced to less than $750 per 

month after offset. These limitations apply to offset only. 

When a debtor’s payment is subject to reduction via other legal 

processes to collect debts, such as tax levy or garnishment, the 

debtor’s payment could be reduced by more than the limitation 

described here. 

In addition, Fiscal Service has entered into reciprocal agreements with 

states that agree to offset certain payments to payees who owe 

delinquent nontax debts to the United States. The amount of the offset 

is dependent on the state’s rules. 

Payments Exempt from Offset Under TOP. Federal law prohibits 

the offset of certain types of Federal payments. Additionally, Treasury 

has granted requests by Federal payment agencies to exempt from TOP 

other types of payments. A complete list of payments that are exempt 

from offset under TOP is available on the Fiscal Service website at 

https://fiscal.treasury.gov/debt-management/resources/guides-formsdownloads.html.

Special Provisions for Certain Recurring Payments. For certain 

types of Federal recurring payments, such as monthly retirement or 

social security benefit payments, TOP sends the debtor at least one 

warning notice before the offset occurs. The debtor is advised to 

contact the creditor agency to resolve the debt or to discuss alternatives 

to offset. An agency should be prepared to respond promptly to a 

debtor’s request to discuss alternatives to offset, especially in those 

cases where the debtor presents evidence of financial hardship. 

Offset of Federal Salary Payments Under TOP. Before Federal 

salary payments may be offset, the agency must send to the Federal 

employee/debtor, at least 30 days in advance, notice in writing of 

the intent of the agency to collect the debt by offsetting the debtor’s 

salary payments. The written notice must provide opportunities for the 

debtor to (1) inspect the relevant records, (2) enter into a written 

repayment agreement, and (3) to have an administrative hearing 

concerning the existence and amount of the debt and/or terms of the 

Revised March 2015
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repayment schedule. Additionally, if the debtor requests a hearing, 

the hearing official must be someone who is not under the control of 

the creditor agency. 

An agency may opt to temporarily exclude a debt from Federal 

salary offset if the agency has not completed the special due process 

pre-requisites for Federal employees. If, through TOP, the agency 

learns that the debtor is a Federal employee, the agency must 

provide the necessary due process immediately in order to certify the 

debt as eligible for Federal salary offset through TOP as soon as 

possible. 

TOP offsets of Federal salary payments are limited to 15% of a 

debtor’s disposable pay (as defined in 5 CFR Part 550.1103). For 

judgment debts, travel advance recoveries, and other debts that may 

be collected by offsetting more than 15% of a debtor’s Federal 

salary, the creditor agency must initiate non-centralized 

administrative offset, discussed below, by directly contacting the 

debtor’s employing Federal agency. 

TOP Fees: Fiscal Service charges fees to cover its costs for 

collections through TOP. The fee is set annually and is collected 

from amounts offset. The creditor agency should add this fee to the 

debt as an administrative cost to the extent allowed by law. 

Computer Matching and Privacy Protection Act of 1988. The 

Computer Matching and Privacy Protection Act of 1988 regulates 

certain matching activities of the Federal government where the 

intent of the match is to take an adverse action against an individual. 

The Act does not apply to tax refund offsets. In addition, the Act’s

requirements to enter into matching agreements and to provide postmatch notice and verification to the debtor have been waived for 

debts properly certified to TOP for offset purposes. 

Non-Centralized Administrative Offset 

In cases where offset through TOP is not available or appropriate, an

agency may request that another agency offset a Federal payment to

satisfy a debt. This type of ad hoc case-by-case offset is known as

“non-centralized administrative offset.” Another type of noncentralized administrative offset occurs when the payment agency is

the same as the creditor agency, referred to as “internal offset.”

Revised March 2015
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6-39 

Non-centralized offset can be used for internal offset, or when the 

payment to be offset is not processed through TOP or the creditor 

agency is unable to meet the 60-day notice requirement for debt 

submission to TOP (see Due Process Requirements, on page 6-36 

but is otherwise able to comply with the due process pre- requisites 

for offset (see “Minimum Due Process Requirements” on page 6-8). 

Agencies should be aware that some payment types that have been 

exempted from TOP by Treasury may be eligible for 

non-centralized offset. 

In order to use non-centralized offset, an agency must identify the 

payment that can be offset and the agency responsible for making 

the payment. Financial statements and copies of tax returns 

submitted by the debtor or credit reports may be a source of 

information about any relationship(s) between the debtor and other 

Federal agencies, which may help identify payments available for 

offset. For example, the creditor agency may learn that the debtor 

receives regular grant payments (that are not processed through 

TOP) from another agency. If the payment agency is not the same 

as the creditor agency, then the creditor agency should contact the 

payment agency directly and request the offset. Prior to requesting 

the offset, the creditor agency must certify to the payment agency 

that all due process pre-requisites have been met except as 

otherwise allowed by law. This means that the creditor agency has 

sent the debtor advance notice of the nature and amount of the debt 

to be collected and its intent to administratively offset payments to 

collect the debt. In addition, the notice must give the debtor the 

opportunity to: 

 make voluntary repayment;

 inspect and copy records related to the debt;

 request a review of the debt; and

 enter into a repayment agreement.

Prior notice and an opportunity for a review may be omitted, as 

authorized under an agency’s regulations, in cases when the agency 

first learns of the existence of a debt owed by a debtor when there is 

insufficient time before payment would otherwise be made to

provide notice and opportunity to the debtor. When omitted prior to 

Revised March 2015
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offset, the agency shall give the debtor notice and an opportunity for 

review as soon as practicable. The agency is required to promptly 

refund any money ultimately found not to have been owed to the 

agency. 

Another method of identifying payments available for offset is to 

conduct computer matches (outside of TOP) to determine if there is 

a payment available for offset. Before conducting such matches, an 

agency should consult with its legal counsel to determine if the 

computer matches contemplated are subject to the requirements of 

the Computer Matching and Privacy Protection Act. 

When evaluating the feasibility of pursuing non-centralized 

administrative offset, an agency may also take into consideration a 

debtor's financial condition and whether offsetting the payment 

would create significant financial hardship for the debtor and his/her 

family. The payment agency should honor the request of the creditor 

agency for offset or, at a minimum, put a hold on funds if feasible. 

Types of Non-Centralized Administrative Offset 

Examples of circumstances for which non-centralized offset would 

be appropriate include internal offset and the offset of contractor 

payments when the creditor agency is the same as the payment 

agency; collection of travel advances and training expenses through 

a Federal employee’s pay, retirement or other amounts due; offset 

of future retirement pay; and offset of Federal salary pay when 

offset is not available through TOP. 

Internal Offsets. An internal offset occurs where an agency that is 

owed a delinquent debt is also making one or more payments to its 

debtor and the agency determines that the payments can be offset to 

collect the debt. Internal offsets are most effective when the 

creditor agency routinely offsets its own payments made to its own 

debtors early in the collection process. An agency should 

incorporate internal offset in its debt collection strategy and provide 

notice of intent to collect the debt by offset at the earliest possible 

time.

Contractor Payments. An agency cannot offset a contract 

payment if the contract is being disputed under the Contract 

Disputes Act (CDA) or Federal Acquisition Regulations (FAR). 

Revised March 2015
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Once the dispute is settled under the CDA or FAR, then offset can 

be initiated against any balance of funds still owed the contractor. 

This does not preclude an agency from offsetting non-disputed 

contract payments to a contractor involved in a CDA adjudication. 

Recoupment is a special type of administrative offset, where, within 

the terms of a given contractual relationship, the agency can offset 

amounts it is owed against payments due the contractor for services 

rendered. 

Collection of Travel Advances and Training Expenses from 

Federal Employees. An agency should follow administrative offset 

notification requirements when attempting the collection of 

delinquent travel advances and training expenses -- not those 

associated with Federal employee salary offset. Once these 

notification procedures have been followed, the agency has the 

authority to withhold all or part of an employee/debtor's salary, 

retirement benefits, or any other amounts due the employee, 

including lump sum payments, to recover amounts owed. There are 

no statutory or regulatory limitations on the amount that can be 

withheld or offset. The agency should, in fact, withhold or offset as 

much as necessary to fully liquidate or satisfy the amount of the 

debt. 

Retirement Pay. Generally, administrative offset against a debtor’s

current civilian retirement pay [whether Civil Service Retirement 

Fund (CSRS) or the Federal Employees Retirement System (FERS)] 

is conducted through TOP. If the agency knows that the debtor will 

be receiving a retirement payment that is not available for offset 

under TOP, the agency must notify the Office of Personnel 

Management (OPM) of its intention to use its administrative offset 

authority to collect on the delinquent debt. OPM will respond by

“flagging” the account and will initiate offset when the debtor 

requests retirement pay or the release of the retirement funds (if the 

debtor is departing Federal service), regardless of the age of the debt 

itself. If the request for offset is outstanding for more than one year 

at the time the debtor files for retirement or requests the funds, then 

OPM will contact the agency to determine if the debt is still 

outstanding and the offset still valid, allowing enough time for the 

agency to contact the debtor to try to resolve the debt. In the case of

lump sum payments, OPM will offset up to 100% of the payment 

amount; if an annuity payment is involved and the debt is too large 

to collect in one offset, OPM will offset the dollar amount or 

Revised March 2015
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percentage requested by the agency, up to 50% of the amount of the 

payment. Agencies should use SF 2805, “Request for Recovery of a 

Debt Due the United States,” in making requests to OPM for these 

types of offsets (see CSRS and FERS Handbook, Chapter 4 - Debt 

Collection, available at www.opm.gov).

For offset against military retirement pay, the agency must contact 

each military service's finance and accounting center. 

Federal Employee Salary Offset. Federal employee salary offset 

should be conducted through TOP, except in three circumstances: 

(1) where the debtor is employed at the creditor agency, (2) salary 

offset cannot be accomplished through TOP because the debtor’s 

salary payments are not processed through TOP, or (3) the amount 

of offset can legally exceed 15% of the employee/debtor’s 

disposable pay. Only in these limited circumstances should an 

agency use non-centralized offset of the debtor’s Federal salary to 

recover delinquent debts owed by current Federal employees. The 

agency must comply with the provisions of the Privacy Act, as 

amended, and OMB guidelines on implementing the Privacy Act, as 

well as the salary offset regulations issued by OPM. 

If the agency does not know if the debtor is a Federal employee or 

does not participate in TOP, the agency can identify delinquent 

debtors who are Federal employees by matching its delinquent 

debtor files with current and retired employee files of OPM, the 

DOD's Manpower Data Center (DMDC), the USPS, or other 

control sources. Once a debtor is identified on such a file, the 

agency must: 

 provide due process notification to the debtor and request

voluntary repayment of the debt;

 if the debt is still unresolved, contact the agency employing

the debtor to arrange a salary offset, and certify the debt as

being delinquent; or

 contact OPM or the DOD for offset against retirement pay.

Under the following circumstances, the agency does not need to

provide a Federal employee with notice and an opportunity for a 

hearing prior to offset of Federal pay: 

Revised March 2015
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 any adjustment to pay arising out of an employee’s election

of coverage or a change in coverage under a Federal benefits

program requiring periodic deductions from pay, if the

amount to be recovered was accumulated over four pay

periods or less;

 a routine intra-agency adjustment of pay that is made to

correct an overpayment of pay attributable to clerical or

administrative errors or delays in processing pay

documents, if the overpayment occurred within the four

pay periods preceding the adjustment and, at the time of

such adjustment, or as soon thereafter as practical, the

individual is provided written notice of the nature and

amount of the adjustment and point of contact for such

adjustment; or

 any adjustment to collect a debt amounting to $50 or less,

if, at the time of such adjustment, or as soon thereafter as

practical, the individual is provided written notice of the

nature and the amount of the adjustment and a point of

contact for contesting such adjustment.

As with administrative offset cases, an agency must honor the 

request of another agency to arrange for a salary offset. As much as 

15% of the debtor's disposable pay can be collected each pay period 

through offset until the full amount of the debt is repaid. If the 

agency has obtained a judgment against the employee, it may 

request the employing agency to offset up to 25% of the debtor’s 

disposable salary and no hearings are required. However, in the 

case of military employees, even if a judgment has been obtained, 

the amount of the offset cannot exceed 15%. At no time can the 

employing agency unilaterally change or adjust the amount being 

withheld, without the consent of the creditor agency. The 

employing agency must remit the amount offset within each pay 

period; it cannot accumulate offset amounts until the entire debt is 

collected. 

Reporting Delinquent Debts to Credit Bureaus 

Reporting delinquent debts to credit bureaus is an essential part of 

an agency’s debt collection efforts. The DCIA requires Federal 

agencies to report to credit bureaus information on all delinquent 

Revised March 2015
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Federal consumer debts. Federal agencies have been required, as a 

matter of policy, to report all delinquent commercial debts since 

September 1983. This requirement is incorporated into OMB 

Circular No. A-129 and the FCCS. 

Specific requirements that govern the reporting of consumer and 

commercial debts to credit bureaus are set forth in the “Guide to the 

Federal Credit Bureau Program,” issued by Fiscal Service and 

available on the Fiscal Service website at 

http://fiscal.treasury.gov/files/debt-management/federal-credit-bureauguide.pdf. An agency should review the guide for detailed 

information on reporting current and delinquent debts to credit 

bureaus. The guide provides information on topics such as:

 distinction between the reporting of consumer and

commercial debts;

 legal requirements;

 handling disputed information;

 agreements known as Memoranda of Understanding

(MOUs) with credit bureaus;

 reporting formats for debts, including the use of Metro 2

format and frequency of reporting;

 credit bureau reporting on consumer debts when the debts

change from “current” to “delinquent” status; and

 reporting of debts being collected by Fiscal Service

through cross- servicing.

NOTE: An agency that elects to use expedited referral to crossservicing, i.e., referral of debts within 60 days of the date of 

delinquency, does not need to report its debts to credit bureaus 

because Fiscal Service will report the debts on the agency’s behalf. 

See Appendix 5 for a debt collection strategy that includes 

expedited referral to Fiscal Service. 

Revised March 2015
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The Demand Letter Checklist at Appendix 8 includes the 

information that must be sent to the debtor prior to reporting a 

consumer debt to a credit bureau. 

Private Collection Agencies 

In its efforts to recover a delinquent debt, an agency may use the 

services of private collection agencies (PCAs). As mandated by the 

DCIA, Fiscal Service maintains a list of PCAs eligible for referral of 

debts from Fiscal Service. In order to minimize the government’s

collections costs and avoid duplication of efforts, an agency should, 

whenever possible, refer debts to Fiscal Service for cross-servicing 

in order to obtain the services of a PCA. Fiscal Service monitors the 

performance of its PCAs in accordance with the terms of a task 

order for PCA services under a contract administered through a 

General Services Administration (GSA) Federal Supply Schedule 

(FSS). The terms of the task order reward better performing PCAs 

(based on collections and debt resolutions) with additional referrals 

and bonus monies. 

Debts that are referred to Fiscal Service for cross-servicing will be 

referred to a PCA on Fiscal Service’s list. When using PCAs on

Fiscal Service’s list, funds collected by the PCAs are remitted to the 

creditor agency by Fiscal Service with supporting detailed debt 

information. Under the terms of the Fiscal Service task order, PCAs 

charge fees, which are paid out of amounts collected. The creditor 

agency retains the final authority to resolve disputes, compromise 

debts, suspend or terminate collection action, and refer accounts to

DOJ for litigation. Agencies are strongly encouraged to delegate this 

authority to Fiscal Service, as appropriate. Fiscal Service provides 

guidance and standards for PCAs to follow when negotiating 

acceptable repayment plans and compromise agreements with 

debtors based on creditor agency parameters provided to Fiscal 

Service. 

An agency may refer debt that is less than 180 days delinquent to a 

PCA pursuant to a contract between the creditor agency and the 

contractor, as authorized by law. Further, in some cases, a creditor 

agency may not be able to use the services of PCAs through Fiscal 

Service because such services are materially insufficient to collect 

the agency’s debts. For example, if an agency has unique debt 

Revised March 2015
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collection tools, the agency may justify establishing its own 

contract with PCAs for assistance in utilizing those tools. A 

creditor agency that independently contracts for PCA services 

should use GSA’s FSS contract to obtain collection services. An 

agency should ensure that the following terms are required under 

any PCA contract: 

 The contract should allow the agency to contract with a

number of PCAs who receive referrals based on

performance, unless this is not cost-effective or not in the

best interest of the government.

 The referral period for sending debts to any single PCA

should not exceed 180 days and must not interfere with the

statutory requirement to refer debts to Fiscal Service for

cross- servicing unless the debts are exempt from such

requirement. Unless exempt, an agency should consider

that all debts at a PCA that are not subject to an acceptable

repayment arrangement must be referred to Fiscal Service

for cross- servicing no later than 30 days after the debt is

eligible for referral (generally at 180 days delinquent or

less, unless the agency relies on Fiscal Service to submit

debts for administrative offset, in which case, the debt

must be referred no later than 120 days).

 The contract must include provisions to clearly indicate that

the collection efforts of PCAs are governed by the Privacy

Act and Federal and state laws related to debt collection

practices, including, but not limited to, the Fair Debt

Collection Practices Act and the FCCS (as applicable to the

agency).

 The contract should include controls to ensure that debtors

are treated fairly, such as periodic monitoring of contractor

performance, investigation and resolution of complaints, and

a requirement that the PCA submit to periodic audits of its

work.

 The agency must retain the final authority to resolve

disputes, compromise debts, suspend or terminate

collection action, and refer accounts to DOJ for litigation

(it should be clear that the PCA is not authorized to retain

Revised March 2015
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legal counsel to represent the United States in any 

litigation). 

 The agency should establish procedures to monitor the

performance of the PCAs it uses and develop an

information tracking system to account for cases referred.

Administrative Wage Garnishment 

In the absence of extenuating circumstances, if a debtor is 

employed, the debtor should be repaying his or her debt to the 

government. The DCIA (as codified at 31 U.S.C. § 3720D) 

authorizes an agency to collect a delinquent debt by administrative 

garnishment of the pay of a delinquent debtor who is employed by 

any organization, business, state or local government, or other 

entity other than a Federal agency. See pages 6-38 and 6-42 for 

procedures on how to offset the salary of a Federal employee to 

collect a debt. Fiscal Service has issued regulations governing the 

administrative wage garnishment process (see 31 CFR 285.11). 

Administrative wage garnishment 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 compliance with 

the order and pays those amounts to the Federal creditor agency to 

which the employee owes a debt. 

Requirements for Agency Use of Administrative Wage 

Garnishment. Generally, an agency should use the services of 

Fiscal Service, through its Cross-Servicing Program, to implement 

administrative wage garnishment proceedings. An agency may, 

however, implement administrative wage garnishment directly if 

the agency has the appropriate procedures in place. 

Before using administrative wage garnishment, an agency must do 

the following: 

 adopt hearing procedures as described in, or consistent with,

the procedures described in Fiscal Service’s wage

garnishment regulations; and

Revised March 2015
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 authorize Fiscal Service to implement administrative wage

garnishment for the agency through the Cross-Servicing

Program.

Notice Requirements. For debts referred to Fiscal Service for 

cross- servicing, Fiscal Service or its PCA will send to a debtor, on 

behalf of the creditor agency, proper notice of the government’s

intent to collect a debt through deductions of his or her pay. 

Otherwise, at least 30 days before issuing a wage garnishment 

order, an agency must send written notice to the debtor, at the 

debtor’s most current address known to the agency, informing the 

debtor of: 

 the nature and amount of the debt;

 the intent of the agency to collect the debt through

deductions of pay; and

 an explanation of the debtor’s rights.

The debtor’s rights include an opportunity to: 

 inspect and copy the agency’s records pertaining to the

debt;

 enter into a repayment agreement acceptable to the agency;

and

 receive a hearing concerning the existence or amount of the

debt and the terms of the repayment schedule.

Hearing Requirements. An agency’s procedures for 

administrative wage garnishment hearings must, at a minimum, 

provide for the following: 

 If a request for a hearing is received within 15 business days

following the mailing of the written notice to the debtor, a

hearing must be held prior to the issuance of a wage

garnishment order. If a request for a hearing is received

after 15 business days, a hearing must still be held; however,

Revised March 2015
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the garnishment order may be issued before the hearing is

concluded; 

 The hearing official may be any qualified person, as

determined by the creditor agency, who will maintain an

official summary record of the hearing. There is no

requirement that the hearing official be an administrative

law judge or someone outside the agency;

 Oral hearings are not required unless the matter cannot be

resolved based on written evidence; and

 A final written decision on the hearing must be issued

within 60 days of the date of receipt of the request. If a

wage garnishment order has been issued and a final

decision has not been issued by the 61st day, the agency

must notify the employer to suspend collection on that

order. An agency may begin collecting on that garnishment

order again only after a final written decision in the

agency’s favor is mailed to the debtor.

Administrative Wage Garnishment Form (SF-329). An authorized 

agency official issues an administrative wage garnishment order using 

a standard form known as Administrative Wage Garnishment Form 

SF-329, which may be obtained through Fiscal Service’s web site at 

https://fiscal.treasury.gov/debt-management/resources/guides-formsdownloads.html. The form consists of the following four parts:

 Letter to Employer & Important Notice to Employer (SF329A) which is sent to the employer with the garnishment

order to explain why a garnishment order is being issued;

 Wage Garnishment Order (SF-329B) which describes the

terms of the garnishment and the amount the employer

must garnish;

 Wage Garnishment Worksheet (SF-329C) which assists the

employer in calculating the amount to be garnished; and

Revised March 2015
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 Employer Certification (SF-329D) which is completed and

returned to the agency by the employer with information

related to the garnishment.

After the wage garnishment order is completed and signed by an 

authorized agency official, all four parts of form SF-329 should be 

sent to the debtor’s employer. For debts referred to Fiscal Service 

for cross- servicing, Fiscal Service will sign the wage garnishment 

order on behalf of the creditor agency. Fiscal Service or its private 

collection contractor will then send the order to the employer and

monitor the employer’s compliance with the order. 

Amount of Garnishment. Generally, an agency may garnish up to 

15% of a debtor’s disposable pay. “Disposable pay” is the debtor’s 

net pay after deductions for taxes and health insurance premiums as 

described in the Wage Garnishment Worksheet (SF-329C). For 

example, if the gross amount paid to an employee is $500 per week, 

and taxes and insurance deductions total $150 per week, the 

employee’s disposable pay is $350, and the amount of the 

garnishment should not exceed $52.50 (15% of $350). The 

employer is responsible for calculating the amount of the 

garnishment, and may use the Wage Garnishment Worksheet to 

calculate the amount available for garnishment. Below is an 

example of how the amount of garnishment would be calculated 

using the Wage Garnishment Worksheet (see the following page). 

Revised March 2015
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WAGE GARNISHMENT WORKSHEET

Pay Period Frequency (Select One): 

 Weekly or less Every other week Two times per month Monthly Other (Specify: ) 

DISPOSABLE PAY COMPUTATION 

1. Gross Amount paid to Employee 500.00

2. Amount Withheld:

a. Federal Income tax 75.00

b. F.I.C.A. (Social Security) 20.00

c. Medicare 5.00

d. State tax (including income tax, unemployment, disability) 20.00

e. City/Local tax

f. Health insurance premiums 30.00

g. Involuntary retirement or pension plan payments

3. Total allowable deductions [Add lines a - g] 150.00

4. DISPOSABLE PAY [Subtract line 3 from line 1] 350.00

WAGE GARNISHMENT AMOUNT COMPUTATION 

If the Employee’s wages are not subject to any withholding orders with priority, skip to line 8. 

5. 25% of Disposable Pay [Multiply line 4 by .25]

6. Total Amounts Withheld Under Other Wage Withholding Orders with

Priority. See section 2(b) of the Order.

7. Subtract line 6 from line 5 [If line 6 is more than line 5, enter zero]

8. Multiply the percentage from section 2(b)(1) of the Order by line 4. (The

percentage from section 2(b)(1) of the Order may not exceed 15%). Example: If 

the percentage from section 2(b)(1) of the Order is 15%, multiply .15 by line 4.

52.50

9. Amount equivalent to 30 times the Fed. min. wage ($7.25)

If the employee is paid Line 9 is If the employee is paid Line 9 is

Weekly or less 217.50 2x per month 471.45

Every other week 435.00 Monthly 942.50

217.50

10.

Subtract line 9 from line 4 [if line 9 is more than line 4, enter zero] 132.50

$$$13

2.50 11. WAGE GARNISHMENT AMOUNT

Line 7, 8, or 10, whichever amount is the smallest 52.50

**************************************************************************** 

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9. Amount equivalent to 30 times the Fed. min. wage ($7.25)

If the employee is paid Line 9 is If the employee is paid Line 9 is

Weekly or less 217.50 2x per month 471.45

Every other week 435.00 Monthly 942.50

217.50

10. Subtract line 9 from line 4 [if line 9 is more than line 4, enter zero] 2.50

11. WAGE GARNISHMENT AMOUNT

Line 7, 8, or 10, whichever amount is the smallest 2.50

An agency may issue multiple garnishment orders for the same 

debtor, but the total may not exceed 15% of the debtor’s disposable 

pay. 

Limitations on Amount of Garnishment. If a debtor owes multiple 

debts and the debtor’s pay is already subject to other garnishments, 

the total amount garnished, including other garnishment orders, may

not exceed 25% of the debtor’s disposable pay. For example, if the 

pay of the debtor in the example above was subject to a prior 

withholding order of 15%, then the amount available for garnishment 

would be limited to $35 (10% of the debtor’s disposable pay). An

example of how this would be calculated within the Wage 

Garnishment Worksheet is detailed below. 

****************************************************************************** 

WAGE GARNISHMENT AMOUNT COMPUTATION 

If the Employee’s wages are not subject to any withholding orders with priority, skip to line 8. 

5. 25% of Disposable Pay [Multiply line 4 by .25] 87.50

6. Total Amounts Withheld Under Other Wage Withholding Orders with Priority. 

See section 2(b) of the Order.

52.50

7. Subtract line 6 from line 5 [If line 6 is more than line 5, enter zero] 35.00

****************************************************************************** 

The amount to be garnished may be limited further if withholding 

15% of the debtor’s disposable pay would reduce the debtor’s pay to 

an amount less than $217.50 per week (30 times the minimum wage 

of $7.25 per hour). For example, if the disposable pay of a debtor is

$220.00 per week, deduction of 15% ($33) would leave the debtor 

with $187 per week. Since the debtor’s pay cannot be reduced to less 

than $217.50 per week, the garnishment amount would be limited to

the amount by which the debtor’s pay exceed the minimum, or $2.50. 

This would be calculated on the Wage Garnishment Worksheet as

follows: 

4. 220.00

****************************************************************************** 

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Assuming wage garnishment is cost-effective and available, this 

highly effective collection tool should be used whenever an 

employed debtor fails to meet his or her obligations to the 

government. 

Financial Hardship. At any time during the garnishment process, a 

debtor may ask the creditor agency for a review of the amount being 

garnished based on a claim of financial hardship due to materially 

changed circumstances. If an agency finds that a debtor has properly 

documented financial hardship, the agency should downwardly 

adjust the amount of garnishment, or terminate or suspend collection 

through administrative wage garnishment, as appropriate. 

Eligibility for Administrative Wage Garnishment. An agency 

may not garnish a debtor’s wages if: 

 The debtor earns less than 30 times the Federal minimum

wage. Based on a minimum wage of $7.25 per hour, the

wages of a debtor who earns less than $217.50 per week

are not eligible for garnishment. Information about a

debtor’s wages may not be available until after the

garnishment order is served on the employer. The

employer would inform the agency that the debtor earns

less than the minimum required for garnishment;

 The debtor is in a repayment agreement with the agency

and is meeting his or her obligations under the agreement;

or

 The agency knows that the debtor has not been working in

his or her current job for at least 12 months and the debtor

was involuntarily separated from his or her prior job. The

debtor is required to inform the agency that he or she is

ineligible for wage garnishment based on this requirement.

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Termination of the Wage Garnishment Order. The agency 

must terminate the wage garnishment order when: 

 the debt is paid in full, or otherwise resolved through

compromise or other agreement with the agency;

 the debtor files for bankruptcy and the automatic stay is in

effect, or the agency learns that the debt has been

discharged in bankruptcy;

 the agency, a hearing official, judge or other appropriate

adjudicator determines that the debt is not valid; or

 the agency otherwise determines that the wage garnishment

order should be terminated due to the debtor’s financial

hardship or other appropriate reason.

The agency must send a letter or use Form 329E, Notice of 

Termination of Wage Garnishment, to inform the employer that the 

garnishment is terminated and that all withholdings from the 

employee’s pay should stop. 

Liquidating Collateral 

For a secured debt, an agency should take action to liquidate the 

collateral, in accordance, with its specific statutory authority, when 

it becomes apparent that a debtor will not or cannot repay the 

amount owed and collateral liquidation is the best method for 

protecting the government's financial interests. The agency must 

ensure that the account was properly serviced prior to deciding to 

proceed with foreclosure or voluntary conveyance of the property; 

that is, the debtor was provided reasonable opportunity to cure the 

delinquency, including forbearance and rescheduling, in accordance 

with agency-specific statutes and regulations. 

Revised March 2015
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As a general rule, an agency should avoid taking title to the 

collateral property as part of its liquidation strategy; rather, an 

agency’s goal should be to force a sale of the collateral to a third 

party so that the sales proceeds may be applied to the debt. 

However, if taking title to the collateral property would result in a 

better collection result or would further an agency’s program 

purpose(s), the agency may seek to secure title to a collateralized 

property through voluntary conveyance by the debtor or enforced 

foreclosure proceedings, as it determines best in any given situation. 

If an agency obtains title to a property, the agency is responsible for 

maintaining and insuring the property from the time it assumes title 

to the property until final property disposition. Each agency should 

establish procedures for the acquisition, management, and 

disposition of property acquired as a result of direct or guaranteed 

loan defaults. 

If the amount of the debt is not fully satisfied by either the voluntary 

conveyance of the collateral or its liquidation, then the agency may

decide to obtain a deficiency judgment or otherwise continue to

pursue collection on the unrecovered portion of the debt, using the 

appropriate collection techniques, such as cross- servicing. Under 

certain circumstances, the agency may alternatively consider a debt 

“compromised” for the market value of the collateral, and report the 

unrecovered amount to the IRS as potential income to the debtor on 

Form 1099-C if required by IRS (see Chapter 7, Termination of 

Collection Action, Write-off and Close-out/Cancellation of 

Indebtedness). It is an agency's responsibility to liquidate any 

collateral, when appropriate, prior to referral of the debt to Fiscal 

Service for cross-servicing. 

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Bankruptcy 

Generally, when a debtor files for bankruptcy protection, an agency 

is prohibited from pursuing further collection action while the 

bankruptcy is pending because of the automatic stay. An agency or

individual found to have violated the automatic stay could be held 

in contempt by the bankruptcy court. The automatic stay is

effective as of the date of the filing of a bankruptcy. In most cases, 

an agency will not be able to recover funds from a debtor in

bankruptcy. However, there are cases in which funds may be

available in the debtor’s estate to pay some of the debtor’s debts. 

Therefore, it is important for an agency to file a Proof of Claim 

form when allowed to do so by the bankruptcy court in order to

ensure that the agency will receive its share of any proceeds 

available to pay creditors from the bankruptcy estate. The 

appropriate Proof of Claim form may be found at 

www.uscourts.gov/bankform.

An agency should determine whether other steps must be taken in a 

bankruptcy matter to protect the agency’s position and to comply 

with the law. An agency probably will have to return funds 

inadvertently collected while the automatic stay is in effect, but 

agency counsel should be consulted for specific legal advice. In 

some cases, an agency may ask the bankruptcy court for “relief from 

the automatic stay,” that is, permission to pursue collection. An

agency must obtain relief from the automatic stay to pursue 

collection on all types of debts, including “non-dischargeable 

debts,” that is, those debts that survive bankruptcy. An agency must 

also seek relief from the automatic stay in order to retain funds upon 

which the agency places a temporary freeze. See “Litigation” below 

for information on how to refer a matter to DOJ, which is

responsible for legal representation of agencies before U.S. 

Bankruptcy Courts. 

The debtor is released, or discharged, from having to repay most 

types of debts after the bankruptcy process is completed, unless the 

bankruptcy case is dismissed. In certain types of bankruptcy cases, 

however, the debtor is obligated to pay creditors according to the 

provisions of a bankruptcy plan before being discharged. In most 

cases, after a debtor is discharged in bankruptcy, an agency is forever 

precluded from pursuing collecting on most types of debts incurred 

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by the debtor prior to filing for bankruptcy protection. Agency 

personnel should consult with agency counsel to determine whether 

the debtor’s debts are dischargeable in bankruptcy, whether the 

agency should take any action to protect its right to recover funds 

from a debtor in bankruptcy, and for other information concerning 

bankruptcy laws and procedures. 

Litigation 

Unless an agency has specific statutory authority to litigate its own 

debts, it must refer debts to DOJ for litigation, including bankruptcy 

litigation. Debts for which the principal amount is $1,000,000 or 

less must be referred through DOJ's Nationwide Central Intake 

Facility (NCIF): 

DOJ/NCIF 

Attn: Case Processing 

1110 Bonifant Street, Suite 220

Silver Spring, MD 20910-3358.

The NCIF tracks, by agency, the number and dollar value of 

referred debts, their age at referral, and case rejection rates. The 

NCIF will acknowledge receipt of debts referred by the agencies, 

route the debts to the appropriate U.S. Attorney or private counsel 

for litigation, and provide the referring agency with contact 

information for the office receiving the referral. The NCIF will 

return incomplete referrals with a letter specifying the reason for the 

declination. Debts greater than $1,000,000 should be referred 

directly to the Civil Division at DOJ: 

U.S. Department of Justice 

Civil Division 

Attn: Corporate/Financial 

Litigation Branch 

P.O. Box 875 

Ben Franklin Station 

Washington, DC 20044 

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The agency must make every effort to refer a debt within one year of the 

date of delinquency, and only in limited circumstances should the 

agency delay referral to a time when less than one year remains on the 

applicable statute of limitations for litigation. Fiscal Service will refer 

to DOJ for litigation, debts that have been referred to Fiscal Service for 

cross-servicing, when appropriate. When referring a debt to DOJ for 

litigation, an agency must provide a fully completed Claims 

Collection Litigation Report (CCLR). The CCLR instructions can be 

found at: 

http://www.justice.gov/sites/default/files/jmd/pages/attachments/2014/

12/12/cclr_instructions.pdf

and the form at: 

http://www.justice.gov/sites/default/files/jmd/legacy/2014/05/26/cclrform-fillable.pdf. 

The CCLR should include the following: 

 Copies, not originals, of the relevant account

information. Originals may be requested by DOJ at a later

date so the agency must be prepared to produce them

promptly;

 A fully completed Certificate of Indebtedness, submitted

as part of the CCLR package. The Certificate of

Indebtedness must be an original document, not a copy, and

must be signed by an authorized official of the agency;

 A checklist or report of prior collection actions taken. If

the agency has not taken an appropriate collection action, then

the checklist or report must explain why;

 The current address of the debtor. This may be obtained

through various types of research (see page 6-71); and

 Credit data for the debtor. The data must have been

obtained within the past 6 months and can be in any of the

following formats:

- A credit report. The credit report may be obtained 

through GSA’s Federal Supply Schedule for 

Business Information Services (see page 6-71);

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- an investigative report stating the debtor's assets, 

liabilities, income, and expenses; 

- an individual's financial statement indicating assets, 

liabilities, income, and expenses. This statement 

must be signed by the debtor and certified as correct 

under penalty of perjury; and/or 

- an audited balance sheet for a corporate debtor. 

Credit data may be omitted only if 

 the referring agency

- has a surety bond sufficient in amount to satisfy the 

full amount of the debt; 

- seeks liquidation of the collateral by means of

judicial foreclosure, but does not intend to obtain a 

deficiency judgment; 

- can document that the debtor is in receivership or 

bankruptcy; or 

- wants DOJ to obtain a judgment against a debtor 

and return the case to the agency for lien 

enforcement; 

 the value of collateral in a forced sale is sufficient to satisfy

the full amount of the debt. If the agency has any doubt

whether the value of the collateral covers the outstanding

amount of the debt, including all late charges assessed, then it

must provide credit data;

 the outstanding amount of the debt is fully covered by

insurance and the agency can provide all pertinent

information, including name and address, on the insurer;

and/or

 the debt is owed by an entity for which credit data are

unavailable. For example: the debt is owed by a State

Government.

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The agency must provide the equivalent of the above information 

when transmitting accounts through an automated system. The 

failure to provide adequate information, as called for in the 

CCLR, may result in the return of the case from DOJ. You may

contact DOJ to discuss the information available if you are unsure 

whether it meets these standards. 

Further agency collection actions must cease at the point an 

account is referred for litigation. DOJ will submit an agency’s 

eligible debts to TOP on behalf of the creditor agency. The agency 

should not do so once the account is referred for litigation. 

Fraud/False Claims. In case of fraud, the account should be referred 

immediately to the Fraud Section of the Civil Division at DOJ for 

action. It is the responsibility of the party who first learns of the fraud 

to notify DOJ so that such cases can be acted on promptly. If DOJ 

advises the agency that it does not intend to pursue fraud or False 

Claims Act litigation, the agency should pursue collection of the debt 

just as it would any other debt. 

Statute of Limitations. Federal law limits the time period within 

which an agency may file a lawsuit to collect a debt. If the “statute 

of limitations” has expired, the agency is barred from initiating 

litigation to collect its debt; however, other debt collection tools, 

such as administrative offset and referral to a private collection 

agency, may be available. Generally, a lawsuit to collect a debt 

based on a contract must be initiated within six years after the date 

of delinquency (see page 6-4 for the definition of the “date of 

delinquency”). A lawsuit for money damages based on property 

damage or personal injury caused by the debtor must be initiated 

within three years after the date of the damage or injury. Other 

statutes of limitations may apply to a particular type of debt being 

collected. Therefore, referrals to DOJ for collection through 

litigation or for termination of collection action should be made 

timely, that is, at least one year before the applicable statute of 

limitations expires. Also, it is extremely important that agency 

personnel consult with agency counsel to determine the statute of 

limitations applicable to the debts being collected by the agency. 

Further, agency counsel should be consulted to determine whether 

the statute of limitations has been extended in a particular case 

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based on the debtor’s written acknowledgement of the debt, a 

voluntary payment made by the debtor, the debtor having fled the 

country, the fact that the agency did not know and reasonably could 

not have known about its claim when it first accrued, or some other 

reason that allows the time period to be extended. 

Potentially Ineligible Referrals. The agency should not refer a 

debt for litigation if: 

 the debt, exclusive of interest, penalties, and administrative

costs, is less than $2,500. However, debts less than $2,500

may be referred if, after consultation with DOJ, the agency

determines that -

- litigation to collect small claims is important to

ensure compliance with the agency’s policies or 

programs,

- the debt is being referred solely for the purpose of 

securing a judgment against the debtor, or

- the debtor has the clear ability to pay the debt and 

the government effectively can enforce payment; 

 the statute of limitations for initiating litigation has expired.

However, the debt may be referred if there is a possibility that

the time to sue has been extended or legislation has been

enacted abolishing or waiving the statutes of limitations as a

defense to suits to collect its debts;

 the debt has been written-off/closed-out and collection

action terminated;

 it is unlikely that litigation will result in full or partial

recovery of the amount owed;

 all available assets have been liquidated and the debtor is

unemployed, unless the agency believes that the debtor’s

financial situation will substantially improve and the statute

of limitations is about to expire;

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 the current address of debtor cannot be provided, except in

rare circumstances where, after consultation with DOJ, an

agency deems it advisable to commence litigation to

preserve the agency’s claim;

 the documentation necessary to prove that the debtor is

liable for the debt or otherwise support the litigation effort

cannot be provided; or

 the estimated costs of pursuing litigation will probably

exceed the amount recoverable. In this case, the agency

should consider terminating collection action and writing

off the debt. Only when it is critical to an agency's

enforcement efforts and is in the government's best interests

should litigation be pursued regardless of cost. If the

agency wishes to pursue enforced collection action for these

reasons, then the checklist or report must explain why.

Pre-Referral Requirements. The agency may elect to refer a 

delinquent debt to DOJ for litigation before referring the debt to 

Fiscal Service’s Cross-Servicing Program or pursuing other 

administrative debt collection activities. This may be desirable, for 

example, if the debtor refuses to pay in response to the agency’s

demand letter and the debtor owes a large debt, or an important 

enforcement principle is at stake. At a minimum, before referring a 

debt to DOJ for litigation, an agency must send a final demand letter 

to the debtor. See Demand Letter Checklist at Appendix 8 for a list 

of the information that should be sent to the debtor before referring 

the debt to DOJ for litigation. The letter should be tailored to the 

specific case when a debt is being referred to DOJ prior to referral to

Fiscal Service for cross-servicing and/or offset. 

Post-Referral Activities. Upon referral by an agency and 

acceptance by DOJ, the U.S. Attorney's office will try to initiate 

suit within 45 days of receipt of the case. The U.S. Attorney’s 

office will notify the agency when a complaint is filed and when a 

judgment is entered, and provide the post-judgment interest rate for 

the debt as well as any other information necessary for the agency 

to properly update its account and maintain an accurate balance. 

Interest is compounded on post-judgment debts. DOJ must notify 

the agency when it closes its case. If DOJ closes the case and

returns the debt to the agency for surveillance (i.e., monitoring), the 

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agency should write-off the debt and characterize it as “currently

not collectible.”

If DOJ advises that the debt is uncollectible, the agency should 

write-off and “close-out” the debt, and if appropriate, report the 

uncollectible debt to the IRS as potential income to the debtor on 

IRS Form 1099-C. See Chapter 7, Termination of Collection 

Action, Write-off and Close-out/Cancellation of Indebtedness; and 

OMB Circular No. A-129 for an explanation of “currently not 

collectible” and “close-out.” If the U.S. Attorney’s office has filed a 

judicial lien for the debt, the agency must submit a request to that 

office to release the lien at the time the agency closes out the debt. 

In consultation with DOJ, the agency should establish a tracking 

system to account for cases referred to and returned from DOJ since 

the agency remains responsible for monitoring account activity. 

DOJ will assess a 3% administrative fee on amounts collected while 

the case is at DOJ. The agency should pass this cost along to the 

debtor whenever possible. See Appendix 10 for more information 

on assessing and accounting for the DOJ fee. 

In consultation with DOJ and the U.S. Bankruptcy Courts, the 

agency will establish bankruptcy notification procedures to ensure 

the lien position of the Federal Government is protected. DOJ is 

responsible for the legal representation of agencies before U.S. 

Bankruptcy Courts. Notice of a bankruptcy filing should be sent by

the bankruptcy court to both the creditor agency and to the U.S. 

Attorney’s office in the district where the bankruptcy is filed. In 

order to assure that the government’s proof of claim can be filed 

with the bankruptcy court, the agency’s procedures must ensure that 

the notice of bankruptcy is sent to the appropriate contact within the 

agency, and that there is consultation where necessary with the U. S.

Attorney's office. This will allow the review of bankruptcy plans to

ensure secured property is recovered for the Federal Government. 

Barring Delinquent Debtors from Obtaining Federal Loans, Guaranties and 

Loan Insurance 

As required by the DCIA, a delinquent debtor is ineligible for 

Federal financial assistance until the delinquency that triggers the 

bar is resolved. Federal financial assistance includes any Federal 

loan (other than a disaster loan), loan insurance, or loan guaranty. 

This eligibility requirement applies to all Federal loan programs 

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even if creditworthiness or credit history is not otherwise a factor for 

eligibility purposes, and may be waived only by the head of an 

agency, or if properly delegated, the Chief Financial Officer or 

Deputy Chief Financial Officer. 

It is extremely important for creditor agencies to properly report 

delinquent debt to appropriate databases so that lending agencies 

may enforce the DCIA loan bar against persons who owe debts to 

the government. Delinquent debt databases accessed by lending 

agencies as part of loan origination processes include credit bureaus, 

the Department of Housing and Urban Development’s Credit Alert 

Interactive Voice Response System (CAIVRS), and the TOP 

delinquent debtor database (parts of which are made available to

lending agencies and their lenders through a program known as “Do 

Not Pay”). More information about CAIVRS can be found at 

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/93-

17ml.txt. 

More information on the Do Not Pay database can be found at 

http://donotpay.treas.gov/Resources.htm. 

Delinquent Status. A debt is considered to be in “delinquent 

status” for purposes of the DCIA loan eligibility requirement if the 

debt has not been paid by the payment due date or by the end of any 

grace period. A debt is not in delinquent status for purposes of the 

DCIA requirement if: 

 the debtor has been released from any obligation to repay

the debt or there has been an adjudication or determination

that the debtor does not have to pay the debt;

 the debtor is the subject of, or has been discharged in, a

bankruptcy proceeding, including if the debtor is current on

any court authorized repayment plan; or

 the existence of the debt is the subject of an administrative

appeal that has been filed on a timely basis.

A debt may be considered “delinquent” for other purposes, such as 

making a claim in a bankruptcy proceeding, even though the debt is

not in “delinquent status” for purposes of the DCIA loan eligibility 

requirement. 

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Delinquency Resolution. A delinquent debtor may be eligible for 

loan assistance once the delinquent debt is resolved in accordance 

with regulations issued by Fiscal Service at 31 CFR 285.13. A 

creditor agency should respond promptly to debtors who seek to

resolve their debts in order to become eligible for Federal loan 

assistance. For purposes of the DCIA loan eligibility requirement, a 

debt is resolved only if the person: 

 pays or otherwise satisfies the delinquent debt in full;

 pays the amount of a compromise reached with the creditor

agency;

 cures the delinquency (that is, brings the loan or agreement

current) under terms acceptable to the creditor agency; or

 enters into a repayment agreement under terms acceptable

to the creditor agency.

A debt is not resolved if: 

 collection action is suspended or terminated;

 the debt is written off on the agency’s accounting records;

or

 the debt has been reported to the Internal Revenue Service

as a discharge of indebtedness (“closed-out”).

Revoking/Suspending Licenses or Eligibility 

An agency, in accordance with its policies and procedures, should 

consider suspending or revoking Federal licenses (e.g., pilot 

licenses, concession licenses, etc.) or the eligibility of debtors who 

willfully fail to pay forfeitures, penalties, or other debts. This may 

include suspending guaranteed lenders from participation in 

guaranteed loan programs or not allowing a company to bid on a 

contract, if the organization is itself delinquent on a government 

debt. In cases where the creditor agency has no other relationship 

with the debtor, it may be able to implement a suspension or 

revocation through an agreement with another agency which does. 

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An agency may also enter into agreements with state agencies to 

withhold or revoke state-issued licenses, such as for doctors or 

attorneys, to the extent allowed by law. The agency should consider 

taking such actions, particularly for prolonged or repeated failures to

repay a debt. 

In bankruptcy cases, before advising the debtor of an agency’s 

intention to suspend or revoke licenses, permits or privileges, 

agencies should seek legal advice from their agency counsel 

concerning the impact of the Bankruptcy Code. 

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Part III – Miscellaneous Topics 

Purchasing Credit Reports and Locating the Debtor 

An agency may need to obtain additional information about the 

debtor to: 

 locate the debtor;

 determine the debtor's ability to repay the debt in full and

assess the likelihood that the debtor will do so;

 evaluate compromise offers;

 determine a reasonable installment payment plan;

 decide whether to reschedule an account;

 verify information provided by the debtor in support of

requests for compromise, repayment in installments, or

rescheduling;

 determine if an opportunity for administrative offset or

suspending/revoking licenses exists; and

 support litigation.

Credit Reports. There are two types of credit reports available, 

consumer and commercial. A consumer credit report contains credit 

information about an individual person. The DCIA expressly 

authorizes a Federal agency to obtain a consumer report on any 

person who is liable for a debt being collected or compromised by 

the agency, or for which an agency is terminating collection action. 

A Federal agency may also obtain a commercial credit report, which 

contains credit information for a business entity. 

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Consumer Credit Report. A typical consumer credit report 

includes an individual’s name, possible aliases, current and previous 

addresses, social security number, year of birth, current and

previous employer information, and if applicable, spouse’s name. A 

consumer credit report will list credit accounts with banks, retailers, 

credit card issuers and other lenders. For each credit account the 

report will list the type of loan (revolving credit, student loan, 

mortgage, etc.). The report will also include the date the account 

was opened, the credit limit or loan amounts, account balances, any 

co-borrowers responsible for paying the account, and the pattern of 

payment made by the consumer over the previous two years (noting 

the timeliness of payments). The consumer credit report includes 

public record information such as Federal, state and county court 

records related to bankruptcies, tax liens or monetary judgments. In

some states child support payments are reported. 

Commercial Credit Report. A commercial credit report includes 

general information about a business such as the business name, 

current address and telephone number, if available. The report may 

name the principal officers involved in the business, their titles and 

addresses. 

A commercial credit report will provide trade payment history, 

including the business’ credit capacity, credit rating, high credit, 

worth, payment history, and trends for payment. The report also 

will provide financial data on the business, and provide commercial 

and/or banking relationships, if this information is available. The 

commercial credit report, like the consumer credit report, includes 

public record information such as state and county court records 

related to bankruptcies, tax liens or monetary judgments. 

The commercial credit report also contains information pertaining 

to Uniform Commercial Code (UCC) filings. UCC filings are done 

at the state or county level, and indicate when a business has 

pledged personal property assets as collateral (such as inventory 

and machinery & equipment) to secure credit or debts owed by the 

business. 

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Reviewing Credit Report and Other Financial Information. An 

agency should obtain credit reports to verify or determine a debtor’s 

employment, income, assets, and credit history. To the extent 

possible, an agency should also request financial statements, copies 

of tax returns, and other supplementary data sources from the 

debtor. When using a credit report and other supplementary data 

sources to determine the debtor’s ability to pay or whether to pursue 

the enforced collection of the debt, the agency should review and 

evaluate the information on the credit report or other financial data 

in terms of the following questions: 

 Does the debtor have other delinquent accounts? If the

sole delinquency is a Federal debt it may indicate that the

debtor is giving priority to paying other creditors first. The

debtor may be able to restructure payment to other creditors

to secure payment in full of the outstanding Federal debt.

 Does the debtor own any assets that are available to

repay the debt, such as equity in real property, a second

car or a boat? If the debtor has sufficient equity in real

property or other assets, the debtor may be able to secure a

loan against an asset to pay his or her debt in full. Nonessential assets such as a boat could be liquidated to pay the

debt in full or to reduce the balance.

 Is the debtor employed? If so, by whom? If employed by

another Federal agency, then the creditor agency could

pursue collection through salary offset. If privately

employed, collection may be obtained through an

administrative wage garnishment.

 Are there any current accounts that may soon be paid in

full? The money earmarked for payment of these accounts

should be taken into consideration when determining the

debtor’s ability to make payments in installments.

 Does the debtor have too much debt? It may reflect the

debtor's inability to handle the debt incurred and must be

viewed as a potential for the filing of bankruptcy,

jeopardizing the collection of the delinquency. Conversely,

it may indicate the debtor has access to hidden income or

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assets to pay debt in excess of the debtor’s apparent ability 

to pay. 

 Has the debtor declared bankruptcy? The type and

timing of the bankruptcy filing could, in effect, force the

agency to stop or suspend all efforts to collect.

Credit reports, as well as other services (such as locating the debtor) 

are available through GSA’s Federal Supply Schedule for Business 

Information Services (Special Item Number 520-16). Each agency 

needs to identify the types of reports that will best suit its needs in a 

given situation and order the reports accordingly. The costs of 

purchasing a credit report, or obtaining other services, to assist an 

agency in collecting a debt should be passed along to the debtor as 

part of the agency's administrative costs. See Appendix 1 for a key 

to reading credit reports. 

Locating the Debtor. If an agency cannot locate a debtor, the tools 

described below may be used to locate the debtor and/or the debtor’s

assets. When contacting third parties to obtain information about a 

debtor, an agency should ensure that such contacts are in 

compliance with the Privacy Act and other Federal laws. An agency 

should review its procedures with agency counsel to ensure that any 

disclosures of information to a third party, as may be necessary to

identify a debtor about whom an agency seeks information, do not 

violate Privacy Act requirements. 

Depending on the circumstances and the information desired, the 

following tools may assist the agency in locating the debtor. 

GSA’s Federal Supply Schedule for Business Information 

Services (Special Item Number 520-16). Contractors on GSA’s 

schedule are available to supply debtor location services. 

Internet Resources. The Internet is a resource for obtaining 

information at no cost to the requestor. Information sources 

generally available include telephone directories and address 

locator services. 

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Internal Revenue Service. The Internal Revenue Service (IRS) 

will provide mailing addresses of taxpayers to a Federal agency 

collecting debt. Agencies that wish to participate in a computer 

matching program with IRS to obtain mailing addresses of debtors 

in batches of 100 or more should contact: 

IRS Office of Governmental Liaison 

Taxpayer Address Request (TAR) Program Manager 

1111 Constitution Avenue, NW

CL:GLD:GL Room 1611 IR

Washington, DC 20224 

Facsimile Number: (202) 622-3041 

For a detailed description of computer matching and applicable 

agency requirements, refer to the Privacy Act of 1974, as amended, 

which may be found at www.usdoj.gov/foia/privstat.html.

Agencies that wish to obtain mailing addresses from IRS for 

individual debtors should contact the local disclosure officer in the 

IRS office in the State where the agency is located. You can access 

your local IRS office information from www.irs.gov.

Contact with the TAR Manager must include the following: 

 Description of your agency's purpose for requesting the

information and how your agency will use the taxpayers'

addresses;

 The Internal Revenue Code section which permits your

agency to request address information from the IRS

(generally 26 U.S.C. § 6103(m) for debt collection

purposes);

 The approximate number of annual requests for addresses

you anticipate will be made; and

 Name, title, address, phone and fax number of the person

responsible for administering and maintaining this program

if/when your agency begins computer matching.

Note: Participation in computer matching requires the agency to 

provide IRS with the taxpayers' social security numbers and names. 

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The IRS advises that taxpayer information, such as name and social 

security number, should not be sent by fax. 

An agency should review IRS Publication 1075, Tax Information 

Security Guidelines for Federal, State, and Local Agencies, for 

requirements on how the IRS information must be safeguarded. 

For debts being collected through TOP, Fiscal Service will assist 

agencies in requesting taxpayer mailing address information from 

the IRS. For information on how to obtain the addresses for debts in

TOP, an agency should contact Fiscal Service’s Treasury Offset 

Division at (202) 874-6810.

Post Office Trace. A letter on agency letterhead, sent to the United 

States Postmaster located at the debtor’s last known post office, can 

be used to validate an address or obtain an updated address if a 

forwarding address was provided. A letter format is available at 39 

CFR 265.6. 

Department of Motor Vehicles. The Department of Motor 

Vehicles may provide a current home address for the debtor and a 

list of any vehicles registered to the debtor. The identity of the 

vehicle lien holder may be provided if there is an outstanding lien. 

The lien holder may be able to provide information to locate the 

debtor or his/her assets. 

Place of Employment. If the debtor’s employer is known, the 

employer may provide information about a debtor, such as a current 

address and telephone number. 

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Automated Collection Services 

Automated collection services provide an agency with a means to: 

 immediately contact a delinquent debtor by telephone after a

payment due date has passed without payment;

 set collection priorities;

 document contacts with a debtor and/or the results of any

collection actions taken;

 generate management reports; and

 track an individual collector's performance.

Automated collection services that are commercially available can 

be adapted to meet individual agency or program needs. They can 

be designed to provide an automated dialing capability and to 

require a minimum of human intervention. An agency with a large 

volume of debt should evaluate the feasibility of using automated 

collection services to facilitate debt collection. 

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