[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: 31CFR903.5]



[Page 972]

 

                  TITLE 31--MONEY AND FINANCE: TREASURY

 

   CHAPTER IX--FEDERAL CLAIMS COLLECTION STANDARDS (DEPARTMENT OF THE 

                    TREASURY--DEPARTMENT OF JUSTICE)

 

PART 903_STANDARDS FOR SUSPENDING OR TERMINATING COLLECTION ACTIVITY

--Table of Contents

 

Sec. 903.5  Discharge of indebtedness; reporting requirements.



    (a) Before discharging a delinquent debt (also referred to as a 

close out of the debt), agencies shall take all appropriate steps to 

collect the debt in accordance with 31 U.S.C. 3711(g), including, as 

applicable, administrative offset, tax refund offset, Federal salary 

offset, referral to Treasury, Treasury-designated debt collection 

centers or private collection contractors, credit bureau reporting, wage 

garnishment, litigation, and foreclosure. Discharge of indebtedness is 

distinct from termination or suspension of collection activity under 

part 903 of this title and is governed by the Internal Revenue Code. 

When collection action on a debt is suspended or terminated, the debt 

remains delinquent and further collection action may be pursued at a 

later date in accordance with the standards set forth in this chapter. 

When an agency discharges a debt in full or in part, further collection 

action is prohibited. Therefore, agencies should make the determination 

that collection action is no longer warranted before discharging a debt. 

Before discharging a debt, agencies must terminate debt collection 

action.

    (b) Section 3711(i), title 31, United States Code, requires agencies 

to sell a delinquent nontax debt upon termination of collection action 

if the Secretary determines such a sale is in the best interests of the 

United States. Since the discharge of a debt precludes any further 

collection action (including the sale of a delinquent debt), agencies 

may not discharge a debt until the requirements of 31 U.S.C. 3711(i) 

have been met.

    (c) Upon discharge of an indebtedness, agencies must report the 

discharge to the IRS in accordance with the requirements of 26 U.S.C. 

6050P and 26 CFR 1.6050P-1. An agency may request Treasury or Treasury-

designated debt collection centers to file such a discharge report to 

the IRS on the agency's behalf.

    (d) When discharging a debt, agencies must request that litigation 

counsel release any liens of record securing the debt.