[Code of Federal Regulations]

[Title 31, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 31CFR902.2]



[Page 968-969]

 

                  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 969]]



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.