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Statute of Limitations on Debt Collection

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Statute of Limitations on Debt Collection Powered By Docstoc
					     Terminating & Suspending
     Collection
              WHY DO AGENCIES TERMINATE OR
              SUSPEND COLLECTION ACTION?
               Federal law (31 U.S.C. 3711 and 31 CFR Parts 900-904):
              1.   requires that agencies try to collect debts owed to the Federal
                   government (this is known as an agency’s affirmative duty to
                   collect their debts);
2.    authorizes agencies to suspend or terminate collection action; and
3.    states that agencies act under their own regulations and standards promulgated
      in accordance with regulations issued by the Departments of Justice and the
      Treasury (also known as the Federal Claims Collection Standards (FCCS)).

 In summary, agencies have an affirmative duty to collect their delinquent debts.
 They may be relieved of this duty by terminating or suspending collection action
 under standards provided for in the FCCS and their own agency regulations.

 The decision to terminate or suspend collection action must be clearly
 made, and must be justifiable under established standards.

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Terminating and Suspending
Collection - Definitions
  WHAT DO TERMINATION AND SUSPENSION MEAN?

      Termination of collection action means ceasing “active collection”
       on a debt. When an agency terminates collection on a debt, it does
       not intend to pursue “active collection” at a later time.
      Suspension of collection action means temporarily ceasing “active
       collection” on a debt.
      “Active collection” means the debt is being collected using all
       appropriate debt collection remedies (such as demand letters, credit
       bureau reporting, garnishment, litigation, foreclosure, and cross-
       servicing with the Financial Management Service.

  Note: When an agency terminates or suspends collection action, it may
  continue “passive collection” action if such action is not prohibited by law
  and is appropriate. Passive collection action includes maintaining a lien on
  collateral securing the debt without taking action to liquidate the collateral;
  or referring the debt to the Treasury Offset Program (TOP); or scheduling
  the debt for sale through an asset sales program.


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  Terminating & Suspending
  Collection
             WHEN SHOULD AN AGENCY TERMINATE
             OR SUSPEND COLLECTION ACTION?

             The general rule is that the agency should terminate or
             suspend collection action on a debt when it is either not
             economically worthwhile to continue collection action on the
             debt, or collection action is otherwise inappropriate.

There is an exception to the general rule: when a significant
enforcement policy is involved or recovery of a judgment is a
prerequisite to imposition of administrative sanctions, it is
inappropriate to terminate or suspend collection action.

There are specific criteria in the Federal Claims Collection
Standards to help agencies evaluate when to terminate or
suspend collection action.

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Terminating Collection
     Under the FCCS, agencies may terminate
     collection action when:
          The agency is unable to collect any substantial amount through its own efforts
           or the efforts of others, including the consideration of the present and future
           financial condition of the debtor.

          The agency is unable to locate the debtor.

    The cost of collection is anticipated to exceed amount collected.

    The debt is legally without merit. This means the debt was never owed in the first
     place and should not have been classified as a debt.

    Enforcement of all appropriate debt collection tools (such as offset, administrative
     wage garnishment and litigation) is barred by statute(s) of limitations.

    The debt cannot be substantiated, that is, there is insufficient witnesses, evidence or
     documentation to validate the debt and the debtor will not sign a repayment
     agreement.

    The debt owed by the debtor has been discharged in bankruptcy.
                                                                                        4
Terminating Collection – DOJ
Concurrence
      WHEN DOES AN AGENCY NEED THE CONCURRENCE
      OF THE DEPARTMENT OF JUSTICE (DOJ) TO
      TERMINATE COLLECTION ACTION?

   Generally, DOJ concurrence is required to terminate active
    collection on debts with principal amounts greater than
    $100,000 unless there is an exemption to this requirement.
   When an agency has a debt arising from fraud, false
    statements, or misrepresentation by the debtor, the agency
    must ask DOJ for authority to terminate or suspend
    collection action regardless of the amount.
   Note: Treasury has been authorized by DOJ to approve
    termination of collection on debts of $500,000 or less that
    have been referred to FMS for cross-servicing.
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Terminating & Suspending
Collection
      WHAT ARE THE EXECEPTIONS TO
      THE REQUIREMENT TO OBTAIN DOJ
      CONCURRENCE?
     The agency has independent litigating authority.
     The debt has been referred to DOJ for litigation.
     The debt has been discharged in bankruptcy.
     The statute of limitations for litigation has run.
     The agency has determined that the debt is legally
      without merit or cannot be substantiated.

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  Terminating & Suspending
  Collection
       DOJ Concurrence not required for
       write-off.


DOJ concurrence not required to write-off
debts, because write-off is a concept
different from termination of collection
action and is done under different rules.


                                            7
Terminating Collection – DOJ
Concurrence
   HOW DOES AN AGENCY REQUEST
   CONCURRENCE FROM DOJ?
     To request DOJ concurrence submit a completed Claims
      Collection Litigation Report (CCLR) to:
                Department of Justice
                Civil Division, Commercial Litigation Branch
                1100 L Street NW, Room 10057
                Washington, DC 20530

     The CCLR can be found at Appendix 7 of Chapter 7 of
      Managing Federal Receivables and on FMS’ website at
      www.fms.treas.gov/debt.

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    Suspension of Collection -
    Criteria
        WHEN IS SUSPENSION OF COLLECTION
        ACTION APPROPRIATE?

        An agency may suspend collection action on a debt if any of
        the following apply:
   The agency cannot locate the debtor at the present time.
   Though the debtor currently may not be able to pay anything or
    have any assets from which to collect the debt, the debtor’s
    financial condition is expected to improve.
   The debtor has requested a waiver or administrative review of
    the debt.
   The debtor has filed for bankruptcy. In most cases, the
    automatic stay in bankruptcy applies.

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Suspension of Collection –
DOJ Concurrence
        WHEN IS DOJ CONCURRENCE NEEDED TO
        SUSPEND COLLECTION ACTION ON A DEBT?

     DOJ concurrence is required to suspend collection on debts
      whose principal amounts exceed $100,000.
     When an agency has a debt arising from fraud, false
      statements, or misrepresentation by the debtor, the agency
      must ask DOJ for authority to suspend collection action
      regardless of the amount.
 DOJ concurrence is not required if any of the following apply:
   The agency has independent litigating authority.

   A statute requires suspension of collection action.
   The debtor has filed for bankruptcy.
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Terminating & Suspending
Collection
          Attention Students!
          You have learned the rules for
          terminating and suspending
          collection action.
          CONGRATULATIONS - You are
          now “Terminators”.
 It is now time to learn more about write-off.
 PROCEED TO MY NEXT PART BY
 CLICKING ON THE ARROW!

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