Frequently Asked Questions about the Cross-Servicing Program for Federal Agencies

The requirement to “transfer” or "refer" a debt means the agency must send the debt to Fiscal Service's Cross-Servicing program (or, in some cases, another Treasury-designated debt collection center) for debt collection services. After referral, Fiscal Service (or the debt collection center) becomes responsible for collecting the debt.

In general, federal agencies must refer any debt that is between 60 and 121 days delinquent.

Yes, the following types of debt are excluded from mandatory transfer Fiscal Service:

• Debts that are in litigation or foreclosure
• Debts that will be disposed of within 1 year of becoming eligible for sale under an asset sales program.
• Debts that will be disposed of later than 1 year under an asset sales program, and that is consistent with an asset sales program.
• Debts that will be disposed of later than 1 year under an asset sales program, and that is on a schedule established by the agency and approved by the Director of the Office of Management and Budget (OMB).
• Debts that have been referred to one of Fiscal Service’s private collection contractors for collection for a period time determined by Fiscal Service.
• Debts that have been referred to a Treasury-designated debt collection center with the consent of Fiscal Service and for a period of time determined by Fiscal Service.
• Debts that will be collected by an agency through internal offset if that offset is enough to collect the debt within 3 years of time the debt first became delinquent.
• Debts exempted by the Secretary of Treasury

A debt is “in litigation” if:

• The agency has referred the debt to the Department of Justice for litigation.
• The debt is the subject of pending court proceedings (including bankruptcy proceedings), regardless of whether the debtor, the agency or another party started the proceedings. The agency has the authority to litigate and a complaint has been filed.

A debt is “in foreclosure” if (1)  collateral securing the debt is subject to foreclosure proceedings in court or the agency has issued a foreclosure notice for the collateral; AND (2) the agency expects the proceeds from sale of the collateral will pay off the debt.

If the debt is still valid and delinquent, the agency must transfer the debt to Fiscal Service within 30 days of the final decision or the debt’s return to the agency.

If a debt is in an administrative appeal process, the agency waits for the process to be finished and the amount due to be fixed.

If the debt is still valid and delinquent at the end of the appeal process, the agency must transfer the debt to Fiscal Service within 30 days of the debt’s return to the agency.

The date of delinquency for the debt is still the date that the original payment was due.

If the debtor is still in bankruptcy, debts owed by the debtor should not be referred to Cross-Servicing even if the debt is not included in the bankruptcy, unless the agency has obtained relief from the automatic stay.

For questions about 1099-C reporting requirements, please visit the IRS website, including Instructions for Forms 1099-A and 1099-C.

If the debt is still valid and legally enforceable, DDM may try to collect the debt. In general, there is no time limitation on the collection of federal debts. However, if the debtor has not received notification about the debt for an extended period of time, the creditor agency should consider sending an additional notice.

• “Write-off” is an accounting concept governed by OMB Circular A-129 that requires agencies to accurately reflect the value of their receivables on their books. The write-off of a debt is simply the removal of the debt from the agency’s accounting and records.
  
  Generally, write-off is mandatory for debts delinquent more than two years. Agencies should continue collection efforts after the agency writes off a debt, unless it determines that suspension or termination of debt collection action is appropriate. When writing off a debt, agencies classify the debts as either “currently not collectible” or “closed-out.”
  
  
  • “Currently not collectible” is a classification of write-off that indicates that the agency will continue its collection efforts after write-off.
  • “Closed-out” is a classification of write off that indicates that the agency has terminated both active and passive debt collection activity.

• “Termination of collection action” means that the agency has determined that it has authority under the Federal Claims Collection Standards to cease active collection efforts for the foreseeable future.  Termination of active collection does not preclude passive collection efforts, such as offset or credit bureau reporting.  It also does not prevent an agency from pursuing active collection if there is a change in the debtor’s status or if a new collection tool becomes available.
• “Discharge” is a term which can have different meanings, depending on the context. 
  
  
  • A discharge in bankruptcy generally means that the agency no longer has a right to pursue the collection of the debt from the debtor who received the discharge, and that collection action should be terminated.
  • In the context of the requirement to report a discharge of indebtedness to the Internal Revenue Service on a Form 1099-C, “discharge” generally means that an “identifiable event” has occurred.  The reporting of a discharge of indebtedness on a Form 1099-C generally does not affect the rights of a creditor to collect a debt.

For additional information about these terms, see Chapter 7 of Managing Federal Receivables or Part IV: Chapter F of the Treatise on Federal Nontax Debt Collection Law.

For the standards under which Fiscal Service will evaluate an agency’s request to be designated as a debt collection center, please consult our Treasury Financial Manual. See I TFM 3-5400.