[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR902.2]

[Page 1344-1345]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
   CHAPTER IX--FEDERAL CLAIMS COLLECTION STANDARDS (DEPARTMENT OF THE 
                    TREASURY--DEPARTMENT OF JUSTICE)
 
PART 902_STANDARDS FOR THE COMPROMISE OF CLAIMS--Table of Contents
 
Sec. 902.2  Bases for compromise.

    (a) Agencies may compromise a debt if the Government cannot collect 
the full amount because:
    (1) The debtor is unable to pay the full amount in a reasonable 
time, as verified through credit reports or other financial information;
    (2) The Government is unable to collect the debt in full within a 
reasonable time by enforced collection proceedings;
    (3) The cost of collecting the debt does not justify the enforced 
collection of the full amount; or
    (4) There is significant doubt concerning the Government's ability 
to prove its case in court.
    (b) In determining the debtor's inability to pay, agencies should 
consider relevant factors such as the following:
    (1) Age and health of the debtor;
    (2) Present and potential income;
    (3) Inheritance prospects;
    (4) The possibility that assets have been concealed or improperly 
transferred by the debtor; and
    (5) The availability of assets or income that may be realized by 
enforced collection proceedings.
    (c) Agencies should verify the debtor's claim of inability to pay by 
using

[[Page 1345]]

a credit report and other financial information as provided in paragraph 
(g) of this section. Agencies should consider the applicable exemptions 
available to the debtor under state and Federal law in determining the 
Government's ability to enforce collection. Agencies also may consider 
uncertainty as to the price that collateral or other property will bring 
at a forced sale in determining the Government's ability to enforce 
collection. A compromise effected under this section should be for an 
amount that bears a reasonable relation to the amount that can be 
recovered by enforced collection procedures, with regard to the 
exemptions available to the debtor and the time that collection will 
take.
    (d) If there is significant doubt concerning the Government's 
ability to prove its case in court for the full amount claimed, either 
because of the legal issues involved or because of a bona fide dispute 
as to the facts, then the amount accepted in compromise of such cases 
should fairly reflect the probabilities of successful prosecution to 
judgment, with due regard given to the availability of witnesses and 
other evidentiary support for the Government's claim. In determining the 
litigative risks involved, agencies should consider the probable amount 
of court costs and attorney fees pursuant to the Equal Access to Justice 
Act, 28 U.S.C. 2412, that may be imposed against the Government if it is 
unsuccessful in litigation.
    (e) Agencies may compromise a debt if the cost of collecting the 
debt does not justify the enforced collection of the full amount. The 
amount accepted in compromise in such cases may reflect an appropriate 
discount for the administrative and litigative costs of collection, with 
consideration given to the time it will take to effect collection. 
Collection costs may be a substantial factor in the settlement of small 
debts. In determining whether the cost of collecting justifies enforced 
collection of the full amount, agencies should consider whether 
continued collection of the debt, regardless of cost, is necessary to 
further an enforcement principle, such as the Government's willingness 
to pursue aggressively defaulting and uncooperative debtors.
    (f) Agencies generally should not accept compromises payable in 
installments. This is not an advantageous form of compromise in terms of 
time and administrative expense. If, however, payment of a compromise in 
installments is necessary, agencies should obtain a legally enforceable 
written agreement providing that, in the event of default, the full 
original principal balance of the debt prior to compromise, less sums 
paid thereon, is reinstated. Whenever possible, agencies also should 
obtain security for repayment in the manner set forth in part 901 of 
this chapter.
    (g) To assess the merits of a compromise offer based in whole or in 
part on the debtor's inability to pay the full amount of a debt within a 
reasonable time, agencies should obtain a current financial statement 
from the debtor, executed under penalty of perjury, showing the debtor's 
assets, liabilities, income and expenses. Agencies also may obtain 
credit reports or other financial information to assess compromise 
offers. Agencies may use their own financial information form or may 
request suitable forms from the Department of Justice or the local 
United States Attorney's Office.