3-10.000
CIVIL FINANCIAL
LITIGATION
ACTIVITY
3-10.120 Nationwide Central
Intake
Facility
3-10.130 Claims Collection
Litigation
Report
3-10.141 Returning Deficient
Referrals
3-10.142 Acknowledgment of
Referral
3-10.150 Precomplaint Demand
3-10.160 Filing Complaint
3-10.170 Prejudgment Agreements
to Pay
3-10.180 Civil Compromise Policy
3-10.200 Civil Postjudgment
Financial
Litigation Activity Perfecting the Judgment
3-10.220 Bill of Cost
3-10.230 Notice of Entry of
Judgment
to Client Agency
3-10.240 Postjudgment Demand
3-10.300 Installment Payment
Plans
3-10.310 Default on Installment
Payment Plan
3-10.400 Receipt of Payments by
United
States Attorneys' Offices
3-10.420 Return of Certain
Bankruptcy
Cases to Agencies for Collection
3-10.500 Enforced Collections
3-10.510 Discovery to determine
ability to pay
3-10.520 Federal Debt Collection
Procedures Act Tools
3-10.530 Offset
3-10.540 Depriving Debtors of
Their
Residence
3-10.600 Transfers
3-10.620 Assists
3-10.700 Terminating Civil
Postjudgment Collection Action -- Suspension of Collection Action
3-10.720 Returning Case to Agency
for
Surveillance
3-10.730 Returning Case to Agency
as
Uncollectible
Commencing on October 1, 1990, all federal agencies are
required to
refer claims when the principle amount is $1,000,000 or less for
litigation or debt enforcement to the Department of Justice through
the
Nationwide Central Intake Facility. The Nationwide Central Intake
Facility acknowledges receipt of the claim, provides a limited
review of
the Claims Collection Litigation Report (CCLR) for compliance with
the
Federal Claims Collection Standards, and forwards the information
to the
appropriate United States Attorney's office for litigation. Federal
agencies are not required to send the following types of cases to
the
Nationwide Central Intake Facility: anti-trust cases; environment
and
natural resources cases; tax cases; fraud cases; interagency
claims;
renewal of judgment lien only cases; and if the agency is seeking
Department of Justice concurrence on an agency's proposal to
suspend or
terminate action to collect a claim.
In cases where time is of the essence in securing the
government's
position, the agency may send a referral directly to the United
States
Attorney's office with a copy of the CCLR to the Nationwide Central
Intake Facility. If the Financial Litigation Unit receives a
referral
package directly from an agency, or they are requested to enforce
a
civil judgment from another division within the United States
Attorney's
office that has not been previously docketed by the Nationwide
Central
Intake Facility, Financial Litigation Unit personnel shall provide
data
on the referral by completing and mailing the "Nationwide Case
Initiation Sheet" to the Nationwide Central Intake Facility.
The Federal Claims Collection Standards (4 C.F.R. Parts 101 to
105)
prescribe regulations which agencies must follow to collect,
compromise
and suspend or terminate collection action on their claims.
Agencies are
required to provide certain information to the Department of
Justice
when referring claims for litigation and enforced collection. See
4
C.F.R. § 105.1 et seq. The Financial Litigation Staff, with the
support and cooperation of the General Accounting Office, developed
the
Claims Collection Litigation Report (CCLR) as the standard report
to
convey this information.
Unless an exception has been granted by the Financial
Litigation
Staff, agencies are required to provide a completed CCLR with each
claim
they refer. See 4 C.F.R. § 105.2. United States Attorneys'
offices
are responsible for ensuring that CCLRs comply with the
requirements set
forth in Federal Claims Collection Standards. These requirements
should
be addressed with local agency representatives when claims are
referred
without the CCLR, or when the CCLRs provided are inadequate. The
Deputy
Director, Legal Programs, should be advised of any problems which
cannot
be resolved or continue to persist at the local level.
Some information requested on the CCLR may be superfluous to a
particular agency's claim or impossible for the agency to obtain.
The
agency's inability to obtain all information required on the CCLR
should
not be viewed as a bar to the referral of a claim for litigation.
However, information requested on the CCLR should be provided to
the
extent feasible and any omissions by the agency should be noted
throughout the CCLR.
The Federal Claims Collection Standards also provide that once
a
claim has been referred to the Department of Justice, the referring
agency shall refrain from having any contact with the debtor and
shall
direct the debtor to the United States Attorney on any matters
concerning the claim. The Standards further provide that the United
States Attorney shall be immediately notified by the referring
agency of
any payments which are received from the debtor subsequent to
referral
of a claim. See 4 C.F.R. § 105.1(d).
For further information on the review of claim referral
packages,
see the EOUSA Resource Manual at
108.
If the CCLR or accompanying claim referral package is deficient
and
the deficiency cannot be expeditiously resolved with a minimum of
effort, a deficiency or declination letter shall be immediately
prepared
and used to return the claim to the agency. This letter will inform
the
client agency of the specific reason(s) why the claim is considered
deficient and that the United States Attorney presently declines to
litigate and enforce collection of the claim. See the EOUSA Resource Manual at 109.
Suit shall not be filed on any claim which is referred after
the
applicable statute of limitations period has expired. Such claims
shall
be immediately declined and returned to the agency. Agencies are
required to refer claims to the Department of Justice as early as
possible, consistent with aggressive agency collection action and
should
be well within the period for bringing a timely suit against the
debtor.
4 C.F.R. § 105.1(a).
As soon as it is determined that the CCLR and accompanying
referral
package is complete, the claim shall be opened in the United States
Attorney's office collection tracking system. The Acknowledgement
of
Referral portion of the Nationwide Central Intake Facility Claim
Acknowledgement/Closing Notification form must be returned to the
Nationwide Central Intake Facility. Additionally, an acknowledgment
letter shall be promptly sent to the referring agency to notify the
agency that the claim has been received, the name of the contact at
the
United States Attorney's office handling the case, and the United
States
Attorney's office case number.
Agencies which document their compliance with the Federal Claims
Collection Standards in the CCLR will have fulfilled the pre-filing notice
requirements of Executive Order No. 12988 on Civil Justice Reform dated
February 1996, and the United States Attorney's office should not send
another prejudgment demand letter. Further delay in filing a complaint
post-referral will usually not be warranted and may be counterproductive.
Pursuant to an Office of the Inspector General finding made
during a
Fiscal Year 1990 United States Attorney's offices inspection,
routine
fully-documented referrals for debt collection action should be
filed
within 30 days of receipt. More complex referrals which may require
additional preparation time should be filed within 45 days.
Incomplete
referrals should be immediately declined. See USAM 3-10.141.
Financial Litigation Unit personnel are not required to
"perform
collection actions which should have been undertaken by any other
agency." 4 C.F.R. § 102.1. Claims are referred to United States
Attorneys' offices for litigation and enforced collection, and the
referring agency is under an affirmative obligation to provide the
current address of the debtor. See 4 C.F.R. § 105.2. Although
a
limited amount of skiptracing incident to litigation may be
undertaken,
if substantial effort is needed to locate the debtor prior to
filing
suit, then the case should be returned to the agency for
skiptracing.
In cases where federal law authorizes the United States to
enforce a
state court judgment (i.e., Public Health Service cases), the
United
States Attorney's office may register the judgment with the clerk
of the
court and enforce it accordingly.
If, after the government files the complaint, the debtor
contacts
the United States Attorneys' office, acknowledges the debt, and
requests
to enter into an installment payment plan, then the debtor shall be
required to complete and sign a Form OBD-500, Financial Statement,
or
similar statement of financial disclosure. If the financial
disclosure
information reveals the debtor's ability to pay the debt in full,
then
the United States Attorney's office should require the debt to be
paid
in full. If an installment payment plan is justified based upon a
review
of the Financial Statement and other credit information, the debtor
shall then be required to execute a consent judgment and that
judgment
shall be immediately entered with the court. The consent judgment
shall
be for an amount equal to the principal amount of the debt plus all
prejudgment interest, administrative costs and penalties payable to
the
date of judgment, and court costs. The client agency shall be
promptly
notified of the entry of the judgment.
Once a determination has been made by the United States
Attorney to
pursue a claim, the government's interests should be promptly
secured.
Given that the debtor has been provided ample opportunity to
arrange for
payment of the debt prior to referral, it is counterproductive for
the
United States Attorney to provide further opportunity for payment
without first securing the government's interests. Accordingly, the
use
of confess-judgment notes (sometimes referred to as "Cognovit
notes") or
promissory notes containing an agreement for judgment are not
acceptable.
A claim shall remain in prejudgment status only in those
instances
where the debtor agrees to pay the debt in full within 30 days and
executes a consent judgment with the understanding that the
judgment
will be entered with the court if full payment is not received
within 30
days. If full payment is not received within the 30 day period, the
executed consent judgment shall be immediately entered with the
court
and enforced collection efforts initiated.
The United States Attorney shall personally approve and set
forth in
writing for the Financial Litigation Unit any exceptions to this
policy
which are required for the handling of unusual types of situations
or
claims. Any approved exceptions shall be incorporated into the
district's Financial Litigation Plan.
In addition to obtaining a consent judgment, Financial
Litigation
Unit personnel should ensure that installment payment terms are set
forth within the body of a separate written payment plan or letter
of
agreement signed by the debtor. If the terms for repayment are
included
in the consent judgment, such consent judgment shall also provide
for
future modification of the terms upon a change in the debtor's
economic
circumstances. This will allow for increases in the debtor's
monthly
payment amount when justified by updated financial information.
Financial Litigation Unit personnel should always endeavor to
increase the amount of a debtor's monthly payment so that the debt
is
satisfied in the shortest period of time possible. Updated
financial
information should be obtained from the debtor and reviewed at
least
every year.
A compromise is an agreement to accept less than the total
amount
owing in principal interest, and administrative costs in civil
cases.
Criminal cases (with the exception of bail bond forfeitures) cannot
be
compromised. Compromises are accepted only when it is not in the
best
interest of the government to pursue the full amount of the debt.
Pursuant to Title 4, Code of Federal Regulations (C.F.R.), Section
103.2, the factors to consider include: (1) the debtor's inability
to
pay the full amount within a reasonable time; or (2) the refusal of
the
debtor to pay the claim in full and the government's inability to
enforce collection in full within a reasonable time by enforced
collection proceedings.
Pursuant to 28 C.F.R., Part O, Subpart Y, Civil Division
Directive
14-95, compromises must be approved by a supervisory Assistant
United
States Attorneys.
A claim or judgment should only be compromised with agency
approval.
Whenever a claim is compromised, the full compromised debt should
be
collected in a lump sum. Any agreement to accept several payments
must
provide for payment of the full compromise amount within 90 days.
If
several payments are agreed to with full payment within 90 days,
the
government's claim must be secured by the entry of a judgment.
Following payment of a compromised amount, the Financial
Litigation
Unit shall promptly send the client agency a notice of compromise
and a
closing letter. The letter will document for the agency the
reason(s)
why the claim was compromised and inform it of the total amount
recovered.
Immediately following expiration of the 10-day automatic stay
after
entry of the judgment (whether by default, stipulation, court
determination, or by the referral of a judgment from another
district),
see Fed. R. Civ. P. 62(a), immediate action shall be taken to
perfect
the judgment as a lien in accordance with the Federal Debt
Collection
Procedures Act. See 28 U.S.C. § 3201.
Special care should be taken to ensure that the judgment is
perfected as a lien by filing a certified copy of the abstract of
the
judgment in the manner in which a notice of tax lien would be filed
under paragraphs (1) and (2) of § 6323(f) of the Internal
Revenue
Code of 1986. A lien should be filed in accordance with state law
filing
requirements and should be filed in any state where the debtor owns
real
property.
Upon entry of a judgment, the Financial Litigation Unit should
present a Bill of Cost to the Clerk of the United States District
Court.
See 28 U.S.C. § 1920.
The amount of any costs taxed by the clerk shall be included in
the
letter notifying the agency of entry of judgment. A Bill of Cost
should
also be presented for the recovery of any subsequent costs and the
agency promptly informed of the amount of such costs once taxed by
the
clerk.
The client agency shall be promptly notified of the entry of
the
judgment. Upon request, the Financial Litigation Unit shall provide
a
copy of the judgment to the agency. The letter of notification
should
contain the necessary information to enable the agency to update
properly their records and maintain accurate account balances. The
letter will also serve as a request for any supplemental ability to
pay
information which the agency may have obtained subsequent to
referring
the claim.
Immediately following expiration of the 10-day automatic stay
after
entry of the judgment, see Fed. R. Civ. P. 62(a), a letter shall be
mailed to the debtor providing notice of entry of the judgment and
demanding payment in full within a time certain. The period of time
established for full payment from the debtor shall not exceed 30
days
from the date of the letter.
The date by which full payment should be received from the
debtor
shall be entered into the automated tickler system to ensure timely
follow-up. If full payment or an appropriate offer to repay is not
received by this date, enforced collection proceedings shall be
immediately initiated.
An installment payment plan shall be established only when the
debtor is unable to make payment in full, or to obtain suitable
financing from a private institution in order to make payment in
full.
Establishment of an installment payment plan shall not be
considered
unless and until a financial statement has been fully completed and
signed by the debtor. Under no circumstances shall an installment
payment plan be agreed to, or the terms and conditions of any plan
be
discussed, with the debtor prior to receiving a financial
statement. All
financial information provided must first be reviewed by Financial
Litigation Unit personnel to determine whether a payment plan would
be
appropriate and, if so, to ensure that the maximum monthly payment
amount is obtained and the judgment is liquidated at the earliest
possible date.
See also the EOUSA Resource Manual
at 110.
"Default" is defined as the debtor's failure to make a payment
within five days of the payment due date agreed to and established
in
the written installment payment plan. In the event of a default, a
past
due notice shall be mailed to the debtor not later than 20 days
from the
date of default. The past due notice should clearly advise the
debtor
that if he or she fails to make payment and cure the default within
10
days of the date of the notice, or fails to make any future
payments as
scheduled in the plan, the United States Attorney's office will
proceed
to execute on the judgment without further notice.
All payments made by a debtor in a civil case, including
prejudgment
settlements, are to be made payable to the United States Department
of
Justice and deposited through the Direct Deposit (Lockbox) System
or the
Direct Deposit Program (Debtor Statement Program).
All judgments in payment status, other than bankruptcy cases,
see USAM 3-10.420, shall be retained by
the
United States Attorney's office until fully satisfied. This policy
does
not affect in any way the return of uncollectible judgments to the
agencies for surveillance or the return of marginal cases if
payments
will never meet the requirements of USAM
3-10.300.
A policy different from that set forth above, at USAM 3-10.400, has been established
for
certain bankruptcy cases under chapters 11, 12 and 13 of title 11,
in
which there is a confirmed plan which provides for payment to the
government. After confirmation of a plan takes place, the case
shall be
returned to the agency for monitoring and collection.
If special circumstances exist in a particular case which
indicate
that there is a likelihood of the debtor, or debtor in possession,
defaulting on its terms of payment to the government under the
plan, or
other problems exist relating to timely payment or timely
notification
of default, the United States Attorney's office may continue to
handle
the case while monitoring its plan for compliance. At such time as
these
special circumstances no longer exist, the United States Attorney's
office shall return the case to the agency for continued
collection.
An exception to the policy of returning cases to the referring
agency arises when the United States Attorney's office has reason
to
believe that there has been fraud or conversion of government
property
in a bankruptcy case. The case should then be referred to the civil
division of the United States Attorney's office for screening, in
order
to determine whether measures may be taken that would provide for
additional civil collections, or if it should be forwarded to the
criminal division of the United States Attorney's office for
possible
prosecution.
The United States Attorney's office and referring agency
representatives should coordinate locally to ensure that any
bankruptcy
case returned to the agency can and will be handled properly. A
brief
letter must accompany each returned case. This letter shall advise
the
agency of their responsibility for collection and processing
payments
under the debtor's plan, and for returning the case to the United
States
Attorney's office within 30 days of a default by the debtor on the
terms
of payment under the plan for purposes of litigation and
enforcement.
The letter should include the debtor's full name, the agency's file
number, the scheduled payment amount pursuant to the confirmed
plan, and
the scheduled payment date.
The United States Attorney's office must also advise the
debtor,
debtor in possession, or, where distribution is made by a trustee,
advise the trustee as well, in writing that the referring agency
will be
monitoring the debtor's account, that all future payments should be
directly sent to the referring agency, and warn the debtor of the
consequences of his or her failure to maintain the payment
schedule.
When a debtor fails to respond to the postjudgment demand
letter or
to cure a default on the terms of an established payment plan,
immediate
steps shall be taken to initiate enforced collection proceedings.
The
rights and remedies available to the United States, and exemptions
available to the debtor, under the Federal Debt Collection
Procedures
Act, 28 U.S.C. §§ 3001-3308, should be considered in
determining
the most efficient and effective means to satisfy the judgment.
Full use shall be made of those discovery methods provided for
in
the Federal Rules of Civil Procedure whenever financial information
is
not voluntarily provided by the debtor. If the debtor fails to
respond
to such discovery requests, those sanctions provided for under the
Federal Rules of Civil Procedure shall be pursued promptly and
vigorously. All financial information which is obtained through
discovery shall be thoroughly reviewed and a determination made on
how
to proceed to enforce the judgment.
The Federal Debt Collection Procedures Act provides the
exclusive
civil procedures the United States must utilize for prejudgment and
postjudgment debt recovery. Enforcement of unpaid debts shall be
aggressively pursued in accordance with the Federal Debt Collection
Procedures Act, 28 U.S.C. §§ 3001-3308.
Offset of a debtor's federal tax return, federal salary, or
federal
administrative benefit should be undertaken whenever permitted by
law.
Approval of the United States Attorney should be obtained prior
to
executing upon a debtor's residence. Normally, execution on a
debtor's
residence should not be made if the debtor is cooperative and
making
reasonable efforts to satisfy the judgment. Similarly, execution
upon
the debtor's personal or real property should not result in the
debtor's
family becoming a public charge.
Civil postjudgment debts should not be transferred to another
district simply because the debtor resides in another district. The
nationwide enforcement provision of the Federal Debt Collection
Procedures Act, 28 U.S.C. § 3004(b), can be used to enforce
collection in another district. A debt should be transferred to
another
district if it is in the best interests of the United States to do
so
(e.g., state law preclude the United States from using the Federal
Debt
Collection Procedures Act enforcement provisions).
Instances will arise when a Financial Litigation Unit requires
the
assistance of another United States Attorneys' office to help
collect on
a judgment. For example, an "assist" might be needed when: (1) a
debtor
has assets or is employed in another district and the assistance of
that
district is needed to attach the debtor's assets or garnish the
debtor's
wages; (2) there are multiple debtors on one debt and they reside
in
other districts; or (3) to obtain essential information necessary
to
utilize Federal Debt Collection Procedures Act provisions.
The Financial Litigation Unit requesting an "assist" shall
provide
the following: (1) specific instructions on the assistance needed;
(2)
all documents necessary to accomplish the goal of the assist
requested;
and (3) informing the assisting district when the balance of the
debt
changes. Primary record keeping and reporting responsibility will
remain
with the office requesting the assist.
In some instances the prospect of obtaining a substantial sum
through enforced collection proceedings will be so poor that
continuation of such efforts would be futile. At the same time,
however,
future prospects for enforcing collection may be such that the
judgment
cannot be considered permanently uncollectible. With the approval
of the
Assistant United States Attorney responsible for financial
litigation,
collection action on such judgments may be suspended.
Updated financial information on suspended civil debts should
be
obtained and a re-evaluation of the debtor's ability to pay should
be
made at least once every six months. Judgments should not be
retained in
a suspense status for more than two years. If a determination is
made
that a judgment remains uncollectible after making timely, periodic
reviews of the debtor's financial situation over a two-year period,
the
judgment should be returned to the agency for surveillance or
closed as
uncollectible.
Many judgments which are deemed presently uncollectible may
have
future collection potential. For example, the debtor may be young
or
well educated, or may inherit wealth. When this situation exists,
a
decision must be made on whether to suspend collection action or to
return the judgment to the agency for surveillance. By necessity,
this
decision must be made on a case-by-case basis, giving due regard to
the
judgment amount, the posture of the debtor, the likelihood for
improvement in the debtor's financial situation over time, and the
effectiveness of those judgment enforcement remedies available
under the
Federal Debt Collection Procedures Act.
When the judgment is presently uncollectible but has future
collection potential, and the United States Attorney is not in a
better
position than the agency to keep the matter under surveillance, the
judgment should be returned to the agency for surveillance. The
transmittal letter returning the judgment to the agency for
surveillance
shall advise the agency that if the debtor's financial situation
improves or an enforcement action becomes practical, the agency
should
re-refer the case to the United States Attorney for legal action.
The
letter should also inform the agency of the date on which the
judgment
lien will expire and request that the United States Attorney be
notified
in writing six months prior to that date if the agency wishes to
have
the judgment lien renewed.
A judgment case should be closed by the United States
Attorney's
office whenever current financial information reveals that the
present
and future prospects of collecting a substantial amount are so poor
that
the reasonable probability is against realizing a net gain over the
expenditure of money and resources required to keep the case in an
open
status. The transmittal letter to the agency closing the case as
uncollectible should include the same information as required in USAM 3-10.720. Additionally, the
Financial Litigation Unit shall inform the agency that if the
agency
writes off the debt and a 1099 is issued to the debtor, then the
agency
must notify the United States Attorney's office to ensure the lien
is
released.
| March 2000
| USAM Chapter 3-10
|