[Code of Federal Regulations]
[Title 45, Volume 1]
[Revised as of October 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 45CFR30.22]

[Page 96-97]
 
                        TITLE 45--PUBLIC WELFARE
 
                           AND HUMAN SERVICES
 
PART 30_CLAIMS COLLECTION--Table of Contents
 
                        Subpart C_Debt Compromise
 
Sec. 30.22  Bases for compromise.

    (a) Compromise. The Secretary may compromise a debt if the full 
amount cannot be collected based upon inability to pay, inability to 
collect the full debt, cost of collection, or doubt debt can be proven 
in court.
    (1) Inability to pay. The debtor is unable to pay the full amount in 
a reasonable time, as verified through credit reports or other financial 
information. In determining a debtor's inability to pay the full amount 
of the debt within a reasonable time, the Secretary will obtain and 
verify the debtor's claim of inability to pay by using credit reports or 
a current financial Statement from the debtor, executed under penalty of 
perjury, showing the debtor's assets, liabilities, income, and expenses. 
The Secretary may use a Departmental financial information form or may 
request suitable forms from Justice or the local United States 
Attorney's Office. The Secretary also may consider other relevant 
factors such as:
    (i) Age and health of the debtor;
    (ii) Present and potential income;
    (iii) Inheritance prospects;
    (iv) The possibility that assets have been concealed or improperly 
transferred by the debtor; and
    (v) The availability of assets or income that may be realized by 
enforced collection proceedings.
    (2) Inability to collect full debt. The Government is unable to 
collect the debt in full within a reasonable time by enforced collection 
proceedings.
    (i) In determining the Government's ability to enforce collection, 
the Secretary will consider the applicable exemptions available to the 
debtor under State and Federal law, and may also consider uncertainty as 
to the price the collateral or other property will bring at a forced 
sale.
    (ii) 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.
    (3) Cost of collection. The cost of collecting the debt does not 
justify the enforced collection of the full amount.
    (i) The Secretary 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 of such cases may reflect an 
appropriate discount for the administrative and litigation costs of 
collection, with consideration given to

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the time it will take to effect collection. Collection costs may be a 
substantial factor in the settlement of small debts.
    (ii) In determining whether the costs of collection justify enforced 
collection of the full amount, the Secretary will consider whether 
continued collection of the debt, regardless of cost, is necessary to 
further an enforcement principal, such as the Government's willingness 
to pursue aggressively defaulting and uncooperative debtors.
    (4) Doubt debt can be proven in court. There is significant doubt 
concerning the Government's ability to prove its case in court.
    (i) 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 to the availability of witnesses and other 
evidentiary support for the Government's claim.
    (ii) In determining the litigation risks involved, the Secretary 
will 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.
    (b) Installments. The Secretary generally will 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, the Secretary 
shall, except in the case of compromises based on paragraph (a)(4) of 
this section, 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. The 
Office of the General Counsel should be consulted concerning the 
appropriateness of including such a requirement in the case of 
compromises based on paragraph (a)(4) of this section. Whenever 
possible, the Secretary will obtain security for repayment in the manner 
set forth in subpart B of this part.