[Code of Federal Regulations]

[Title 42, Volume 1]

[Revised as of October 1, 2006]

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

[CITE: 42CFR60.40]



[Page 338-340]

 

                         TITLE 42--PUBLIC HEALTH

 

    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 

                                SERVICES

 

PART 60_HEALTH EDUCATION ASSISTANCE LOAN PROGRAM--Table of Contents

 

                     Subpart D_The Lender and Holder

 

Sec.  60.40  Procedures for filing claims.



    (a) A lender or holder must file an insurance claim on a form 

approved by the Secretary. The lender or holder must attach to the claim 

all documentation necessary to litigate a default, including any 

documents required to be submitted by the Federal Claims Collection 

Standards, and which the Secretary may require. Failure to submit the 

required documentation and to comply with the HEAL statute and 

regulations or the lender's or holder's insurance contract will result 

in a claim not being honored. The Secretary may deny a claim that is not 

filed within the period specified in this section. The Secretary 

requires for all claims at least the following documentation:

    (1) The original promissory note;

    (2) An assignment to the United States of America of all right, 

title, and interest of the lender or holder in the note;

    (3) The loan application;

    (4) The history of the loan activities from the date of loan 

disbursement through the date of claim, including any payments made; and

    (5) A Borrower Status Form (HRSA-508), documenting each deferment 

granted under Sec.  60.12 or a written statement from an appropriate 

official stating that the borrower was engaged in an activity for which 

he or she was entitled to receive a deferment at the time the deferment 

was granted.

    (b) The Secretary's payment of a claim is contingent upon receipt of 

all required documentation and an assignment to the United States of 

America of all right, title, and interest of the lender or holder in the 

note underlying the claim. The lender or holder must warrant that the 

loan is eligible for HEAL insurance.

    (c) In addition, the lender or holder must comply with the following 

requirements for the filing of default, death, disability, and 

bankruptcy claims:

    (1) Default claims. Default means the persistent failure of the 

borrower to make a payment when due or to comply with other terms of the 

note or other written agreement evidencing a loan under circumstances 

where the Secretary finds it reasonable to conclude that the borrower no 

longer intends to honor the obligation to repay the loan. In the case of 

a loan repayable (or on which interest is payable) in monthly 

installments, this failure must have persisted for 120 days. In the case 

of a loan repayable (or on which interest is payable) in less frequent 

installments, this failure must have persisted for 180 days. If, for a 

particular loan, an automatic stay is imposed on collection activities 

by a Bankruptcy Court, and the lender or holder receives written 

notification of the automatic stay prior to initiating legal proceedings 

against the borrower, the 120-



[[Page 339]]



or 180-day period does not include any period prior to the end of the 

automatic stay.

    (i) If a lender or holder determines that it is not appropriate to 

commence and prosecute an action against a default borrower pursuant to 

Sec.  60.35(c)(3), it must file a default claim with the Secretary 

within 30 days after a loan has been determined to be in default.

    (ii) If a lender files suit against a defaulted borrower and does 

not pursue collection of the judgment obtained as a result of the suit, 

it must file a default claim with the Secretary within 60 days of the 

date of issuance of the judgment. If a lender or holder files suit 

against a defaulted borrower, and pursues collection of the judgment 

obtained as a result of the suit, these collection activities must begin 

within 60 days of the date of issuance of the judgment. If the lender or 

holder is unable to collect the full amount of principal and interest 

owed, a claim must be filed within 30 days of completion of the post-

judgment collection activities. In either case, the lender or holder 

must assign the judgment to the Secretary as part of the default claim.

    (iii) In addition to the documentation required for all claims, the 

lender or holder must submit with its default claim at least the 

following:

    (A) Repayment schedule(s);

    (B) A collection history, if any;

    (C) A final demand letter;

    (D) The original or a copy of all correspondence relevant to the 

HEAL loan to or from the borrower (whether received by the original 

lender, a subsequent holder, or an independent servicing agent);

    (E) A claims collection litigation report; and

    (F) If the defaulted borrower filed for bankruptcy under chapter 7 

of the Bankruptcy Act and did not file a complaint to determine the 

dischargeability of the loan, all documents sent to or received from the 

bankruptcy court, including evidence which shows the period of the 

bankruptcy proceedings.

    (iv) If a lender or holder files a default claim on a loan and 

subsequently receives written notice from the court or the borrower's 

attorney that the borrower has filed for bankruptcy under chapter 11 or 

13 of the Bankruptcy Act, or under chapter 7 with a complaint to 

determine the dischargeability of the loan, the lender or holder must 

file that notice with the Secretary within 10 days of the lender or 

holder's initial date of receipt, as documented by a date stamp. If the 

borrower is declaring bankruptcy under chapter 7 of the Bankruptcy Act, 

and has not filed a complaint to determine the dischargeability of the 

loan, the lender or holder must file the written notice with the 

Secretary within 30 days of the lender's or holder's initial date of 

receipt, as documented by a date stamp. If the Secretary has not paid 

the claim at the time the lender or holder receives that notice, upon 

receipt of the notice, the lender or holder must file with the 

bankruptcy court a proof of claim, if applicable, and an objection to 

the discharge or compromise of the HEAL loan. If the Secretary has paid 

the claim, the lender or holder must file a statement with the court 

notifying it that the loan is owned by the Secretary.

    (2) Death claims. A lender or holder must file a death claim with 

the Secretary within 30 days after the lender or holder obtains 

documentation that a borrower is dead. In addition to the documentation 

required for all claims, the lender or holder must submit with its death 

claim those documents which verify the death, including an official copy 

of the Death Certificate.

    (3) Disability claims. A lender or holder must file a disability 

claim with the Secretary within 30 days after it has been notified that 

the Secretary has determined a borrower to be totally and permanently 

disabled. In addition to the documentation required for all claims, the 

lender or holder must submit with its claim evidence of the Secretary's 

determination that the borrower is totally and permanently disabled.

    (4) Bankruptcy claims. For a bankruptcy under chapter 11 or 13 of 

the Bankruptcy Act, or a bankruptcy under chapter 7 of the Bankruptcy 

Act when the borrower files a complaint to determine the 

dischargeability of the HEAL loan, the current holder must file a claim 

with the Secretary within 10 days of the initial date of receipt of



[[Page 340]]



court notice or written notice from the borrower's attorney that the 

borrower has filed for bankruptcy under chapter 11 or chapter 13, or has 

filed a complaint to determine the dischargeability of the HEAL loan 

under chapter 7. The initial date of receipt of the written notice must 

be documented by a date stamp. The lender or holder must file with the 

bankruptcy court a proof of claim, if applicable, and an objection to 

the discharge or compromise of the HEAL loan. In addition to the 

documentation required for all claims, with its claim the lender or 

holder must submit to the Secretary at least the following:

    (i) Repayment schedule(s);

    (ii) A collection history, if any;

    (iii) A proof of claim, where applicable;

    (iv) An assignment to the United States of America of its proof of 

claim, where applicable;

    (v) All pertinent documents sent to or received from the bankruptcy 

court; and

    (vi) A statement of any facts of which the lender is aware that may 

form the basis for an objection to the bankrupt's discharge or an 

exception to the discharge.

    (vii) The notice of the first meeting or creditors, or an 

explanation as to why this is not included;

    (viii) In cases where there is defective service, a declaration or 

affidavit attesting to the fact that the lender or holder was not 

directly served with the notice of meeting of creditors. This 

declaration or affidavit must also indicate when and how the lender or 

holder learned of the bankruptcy; and

    (ix) In cases where there is defective service due to the borrower's 

failure to list the proper creditor, a copy of the letter sent to the 

borrower at the time of purchase of the HEAL loan by the current holder, 

or a sample letter with documentation indicating when the letter was 

sent to the borrower.



(Approved by the Office of Management and Budget under control numbers 

0915-0036 and 0915-0108)



[48 FR 38988, Aug. 26, 1983, as amended at 52 FR 750, Jan. 8, 1987; 56 

FR 42701, Aug. 29, 1991; 57 FR 28798, June 29, 1992]