Dod 7000.14-R Financial Management Regulation Volume 5, Chapter 28

DoD 7000.
14-R
2B Financial Management Regulation Volume 5, Chapter 28
*November 2012
VOLUME 5, CHAPTER 28: “MANAGEMENT AND COLLECTION OF INDIVIDUAL

DEBT”
SUMMARY OF MAJOR CHANGES
All changes are denoted by blue font.
Substantive revisions are denoted by an * symbol preceding the section, paragraph,

table, or figure that includes the revision.
Unless otherwise noted, chapters referenced are contained in this volume.
Hyperlinks are denoted by bold, italic, blue and underlined font.
The previous version dated September 2010 is archived.
PARAGRAPH EXPLANATION OF CHANGE/REVISION PURPOSE

280208 Divided 280207 into two paragraphs, “Duplication of Update
Administrative Proceedings” and “No Private Right
Created” since they are separate subjects. Renumbered
remaining paragraph.
280402.G Deleted paragraph on individual high dollar improper Delete
(Sept 2010 payments since these are not to be reported publicly per
version) Office of the Secretary of Defense (OSD) and Office of
Management and Budget guidance.
280402.F Added language that demand letters to the debtor should Add
comply with the Treasury Financial Management Service
(FMS) due process notification requirements listed in
Appendix 8, “Managing Federal Receivables,” dated
May 2005.
280904.A.5 Added the requirement that debt packages referred to Debt Add
and Claims Management Office must include the date the
debt became delinquent. Added language that demand
letters should comply with the Treasury FMS due process
notification requirements listed in Appendix 8, “Managing
Federal Receivables,” dated |May 2005.
280904.A.7 Clarified language to create a transmittal number by adding Update
a unique identifier for each transmittal letter.
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Table of Contents
VOLUME 5, CHAPTER 28: “MANAGEMENT AND COLLECTION OF INDIVIDUAL

DEBT .............................................................................................................................................. 1
2801 OVERVIEW................................................................................................................... 6
280101. Purpose ................................................................................................................. 6

280102. Scope .................................................................................................................... 6
280103. Internal Controls ................................................................................................... 6
2802 GENERAL GUIDANCE ............................................................................................... 6
280201. General Legislative Authority .............................................................................. 6

280202. Debt Management Program ................................................................................. 7
280203. Prompt Collection of Debt ................................................................................... 7
280204. Prevention of Indebtedness .................................................................................. 7
280205. Method of Payment .............................................................................................. 7
280206. DoD Debtor Information Exchange and Debt Collection Partnership Programs 7
280207. Duplication of Administrative Proceedings ......................................................... 8
*280208. No Private Right Created ..................................................................................... 8
280209. Accounting Entries ............................................................................................... 8
2803 DEBT COLLECTION AND RECOVERY TOOLS FOR DELINQUENT DEBTS .... 8
280301. General ................................................................................................................. 8

280302. Offset by DoD and/or the Department of the Treasury........................................ 8
280303. Authorities Other Than Offset.............................................................................. 8
280304. Alternative Administrative Remedies .................................................................. 9
280305. Lump-Sum Collection .......................................................................................... 9
280306. Collection Before Due Process ............................................................................ 9
2804 NOTIFICATION TO DEBTOR .................................................................................... 9
280401. General Requirements for Debt Notification and Demand for Payment ........... 10
*280402. Demand Letters .................................................................................................. 10
2805 RESPONDING TO DEBTOR INQUIRIES ................................................................ 11
2806 INTEREST, PENALTY, AND ADMINISTRATIVE CHARGES ............................. 11
2807 INSTALLMENT COLLECTION ................................................................................ 11
280701. Installment Criteria ............................................................................................. 11

280702. Installment Timing and Amount ........................................................................ 12
280703. Installment Payment Agreement ........................................................................ 12
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Table of Contents (Continued)
280704. Installment Payment Delinquency ..................................................................... 12
280705. Installment Payment Application to Multiple Debts .......................................... 12

280706. Installment Payment Application to Late Payment Charges and Debt
Principal ............................................................................................................................ 13
280707. Installment Payment Review.............................................................................. 13
2808 ADMINISTRATIVE AND SALARY OFFSET FOR COLLECTION OF

INDIVIDUAL DEBT ................................................................................................................ 13
280801. General ............................................................................................................... 13

280802. Administrative Offset for Advancements and Deductions ................................ 13
280803. Administrative Offset for Damage to Military Housing .................................... 14
280804. Administrative Offset for Administratively Determined Debts ......................... 14
280805. Administrative Offset to Recover Public Funds ................................................ 14
280806. Salary Offset for Monthly Installments .............................................................. 14
280807. Offset Under Statutes Not Specifically Covered................................................ 15
280808. Collection by Administrative Offset .................................................................. 15
280809. Noncentralized Administrative Offset ............................................................... 18
280810. Department of the Treasury Centralized Administrative Offset Program ......... 19
280811. Administrative Offset From the Civil Service Retirement and Disability Fund
(CSRD) and the Federal Employee Retirement System (FERS) ........................................... 19
2809 COLLECTION AND PROCESSING OF INDIVIDUAL OUT–OF–SERVICE

DEBT ...................................................................................................................................... 19
280901. General ............................................................................................................... 19

280902. Incidence of Individual Out-of-Service Debts ................................................... 19
280903. Obtaining Service from DCMO ......................................................................... 19
*280904. Individual Out-of-Service Debt Collection Procedures ..................................... 19
280905. Collection Assistance for Military Pay System-Generated Individual Out-of-
Service Debts.......................................................................................................................... 23
2810 RECONSIDERATION AND HEARINGS FOR ADMINISTRATIVE OFFSETS .... 23
281001. General ............................................................................................................... 23

281002. Debtor Responsibilities ...................................................................................... 24
281003. DCO and DCMO Responsibilities ..................................................................... 24
281004. Administrative Offset Reconsideration or Hearing Officials ............................. 25
281005. Hearing Official Responsibilities ....................................................................... 26
2811 BANKRUPTCY DEBTS ............................................................................................. 26
281101. Bankruptcy Petition Filed................................................................................... 26
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281102. Proof of Claim .................................................................................................... 26

281103. Relief from Automatic Stay ............................................................................... 27
281104. Offset and Recoupment ...................................................................................... 27
2812 DEBT REFERRALS OUTSIDE THE DEPARTMENT OF DEFENSE .................... 27
281201. Referrals to DOJ ................................................................................................. 27

281202. Debt Referrals to Private Collection Agencies .................................................. 29
281203. Debt Reporting to Credit Bureaus ...................................................................... 30
281204. Referral to Department of the Treasury ............................................................. 31
2813 DEBT COMPROMISE, SUSPENSION, AND TERMINATION .............................. 33
281301. General ............................................................................................................... 33

281302. Determining Debt Amount for Compromise, Suspension, and Termination ..... 33
281303. Compromise ....................................................................................................... 33
281304. Suspension of Collection Action ........................................................................ 36
281305. Termination of Collection Actions ..................................................................... 39
281306. Suspension or Termination of Indebtedness From Deceased Debtors ............... 41
2814 STANDARDS FOR DETERMINING FINANCIAL POSITION OF DEBTOR ....... 41
281401. General ............................................................................................................... 41

281402. Information to be Considered ............................................................................. 41
2815 DEBT WRITE-OFF AND CLOSE-OUT .................................................................... 41
2816 REMISSION AND WAIVER OF INDEBTEDNESS ................................................. 41
281601. Remission of Indebtedness Due From Military Members ................................. 41

281602. Waiver of Indebtedness Arising From Erroneous Payments ............................. 42
2817 REFUNDING PREVIOUSLY COLLECTED DEBTS AND LATE PAYMENT

CHARGES................................................................................................................................. 42
281701. General ............................................................................................................... 42

281702. Determination of Refund Amount...................................................................... 42
281703. Funding the Payment of Collected Debt Refunds .............................................. 43
Table 28-1. DoD Financial Management Regulation Volumes and Chapters on Debt
Collection................................................................................................................................... 44
Table 28-2. Selection of Hearing/Reconsideration Officials for DoD Component Debts ....... 45
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Figure 28-1. Debt Certification Statement ............................................................................... 46
Figure 28-2. Defense Debt Management System (DDMS) Debt Processing Steps ................. 47
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CHAPTER 28
MANAGEMENT AND COLLECTION OF INDIVIDUAL DEBT
2801 OVERVIEW
280101. Purpose
This chapter provides an overview of the requirements for debt management and
collection of individual debts within the Department of Defense (DoD).
280102. Scope
Policies and procedures in this chapter apply to administrative actions associated with the
collection and disposition of individual debts owed to the United States and collected by DoD.
This chapter does not apply to collection of debts owed by contractors, vendors, assignees, state
and local governments, or foreign governments. Nor does this chapter apply to the collection of
child support, alimony, or commercial debts from the pay or salaries of DoD civilian employees
or military members through garnishment or involuntary allotment. This chapter also does not
apply to antitrust, fraud, tax, and interagency claims. Refer to Table 28-1 to determine the
applicable volume and chapter for guidance on collection of debts not covered by this chapter.
280103. Internal Controls
All organizations involved in the collection and management of individual debts will
establish and maintain internal controls to ensure debts owed to DoD are aggressively managed
and collected in accordance with this chapter and other applicable regulatory and statutory
requirements.
2802 GENERAL GUIDANCE
280201. General Legislative Authority
A. Where a specific statutory authority applies to the collection of a particular

category of debt, the provisions of the applicable statute and implementing regulation(s) must
determine the appropriate debt recovery and collection procedures that must be used in each
case.
B. The “Federal Claims Collection Act of 1966” gave agencies certain

authorities to collect delinquent debts. The “Debt Collection Act of 1982” expanded agencies’
authority to use such tools as credit bureau reporting and private debt collection agencies. In
1984, the Congress added tax refund offset as a collection tool available to agencies with the
passage of the Deficit Reduction Act. The “Federal Claims Collection Standards” (FCCS),
Title 31, Code of Federal Regulations, Parts 900-904 (31 C.F.R. 900-904) prescribes standards
for Federal agencies’ use in the administrative collection, offset, compromise, and suspension or
termination of collection activity for civil claims for money, funds, or property, except as
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otherwise provided for by specific Federal Agency statutes or regulations, or by Title 11 of the
United States Code (U.S.C.), when the debt involves bankruptcy. The FCCS also prescribes
standards for referring debts to the Department of Justice (DOJ) for litigation. Rules governing
the use of certain debt collection tools under the “Debt Collection Improvement Act of 1996,”
such as administrative wage garnishment, are also issued in 31 C.F.R. 285.
280202. Debt Management Program
The DoD Components must establish and maintain a debt management program to
identify, recover, and collect debts owed by individuals to the United States, as appropriate. The
recovery of debts must be undertaken promptly, using a strategy that is determined to result in
maximum recovery of debt within acceptable costs. Debtors must be afforded appropriate due
process in accordance with this and applicable regulations and 31 C.F.R. 901.3(b)(4). The DoD
Components must clearly designate the official(s) responsible for the recovery and collection of
individual debts within the DoD Component. Guidance must be established that clearly assigns
responsibilities for processing, monitoring, reporting, and closing out individual delinquent debts
throughout the entire debt collection process.
280203. Prompt Collection of Debt
Debt Collection Offices (DCOs) must take prompt and aggressive action to recover and
collect debts owed to DoD and to the United States and must pursue continuing follow-up
actions, as necessary, to ensure that debts owed to DoD and to the United States are collected.
280204. Prevention of Indebtedness
The DoD Components must institute procedures and assign responsibility to designated
personnel as necessary to ensure that all appropriate personnel and organizations (e.g., personnel,
entitlement, payroll, finance and accounting, disbursing, and legal offices) are promptly notified
and kept apprised of any activities that potentially could give rise to indebtedness by any
member, employee, or other personnel based on employment or other financial or contractual
relationship between DoD and the indebted individual(s). The DoD Components must maintain
continuous communication and follow-up to prevent inadvertent indebtedness to remain
unresolved for an extended period.
280205. Method of Payment
Debts may be paid in the form of money, or, when a contractual basis exists, demand
may be made for the return of specific property or the performance of specific services. Debts
otherwise may be resolved by law, regulation, contract, or agreement.
280206. DoD Debtor Information Exchange and Debt Collection Partnership

Programs
DCOs must participate in sharing information concerning delinquent debtors. DCOs

must cooperate with each other and with other Federal agencies, including private debt collection
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agencies and credit bureaus, to facilitate the collection of delinquent debts owed by current and
former DoD civilian employees and military members.
280207. Duplication of Administrative Proceedings
Nothing in this chapter or FCCS requires the omission or duplication of administrative

proceedings associated with debt collection that may be required by other laws or regulations.
Refer to 31 C.F.R 900.7.
*280208. No Private Right Created
DoD's failure to comply with FCCS does not create any right or benefit, substantive or
procedural, enforceable by law or in equity by a party against the United States, its agencies, its
officers, or any other person. Refer to 31 C.F.R 900.8.
280209. Accounting Entries
Guidance for recording associated accounts receivable transactions for individual debt is
in Volume 4, Chapter 3.
2803 DEBT COLLECTION AND RECOVERY TOOLS FOR DELINQUENT DEBTS
280301. General
This section contains information on debt collection remedies and procedures, including
those specified in the “Debt Collection Improvement Act” and FCCS. Nothing contained in this
chapter, however, precludes the use of any other administrative remedies that may be available
under other statutes, regulations, or DoD’s common-law rights for the collection or disposition of
delinquent debts. These remedies generally do not apply to debts arising under, or payments
made under, the “Internal Revenue Code of 1986,” the “Social Security Act” (except to the
extent provided under 42 U.S.C. 404, and 31 U.S.C. 3716), or tariff laws of the United States.
280302. Offset by DoD and/or the Department of the Treasury
A. Administrative and Salary Offset by DoD. Refer to section 2808 for

guidance on administrative and salary offset from DoD civilian employees and military
members.
B. Administrative Offset of Federal Payments. Refer to paragraph 281204

for guidance on the Department of the Treasury’s administrative offset programs.
280303. Authorities Other Than Offset
A. Suspension or revocation of eligibility for loans and loan guarantees,

licenses, permits, or privileges (except for disaster loans and where exempted by the Under
Secretary of Defense (Comptroller) or his designee, the Deputy Chief Financial Officer, DoD);
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B. Liquidation of collateral;
C. Collection in installments;
D. Administrative wage garnishment;
E. Credit bureau reporting;
F. Contracting with collection agencies; or
G. Litigation. (Refer to paragraph 281201 for a detailed explanation of

referral to DOJ.)
280304. Alternative Administrative Remedies
A. Security or collateral may be liquidated by the DoD Component through a

power of sale or nonjudicial foreclosure if debtors fail to pay debts within a reasonable time after
issuance of a demand letter, if such action is in the best interests of the government. Give
consideration to security or collateral disposition costs as compared to amounts that might be
received from such a sale. After the DoD Component liquidates the security or collateral to
satisfy a debt, the DoD Component must give the debtor a written notice of sale and an
accounting of surplus proceeds in accordance with applicable law or regulation. The servicing
general counsel should be contacted if there is a bankruptcy filed, which is possible if there is a
liquidation of security or collateral.
B. Collection from other sources, including liquidation of collateral or

security, is not a prerequisite to requiring payment by a surety or insurance concern unless
expressly required by law.
280305. Lump-Sum Collection
DCOs must request payment of debts, along with penalties, administrative charges, and
interest in one lump-sum amount, whenever possible. Lump-sum collection is the preferred
collection method. Lump-sum collections by offset from current pay or salary, unless voluntary,
cannot exceed the percentages specified in Volume 7A, Chapter 50, Volume 7B, Chapter 28, and
Volume 8, Chapter 8, and other applicable regulations.
280306. Collection Before Due Process
DCOs may, when necessary, collect the money before giving due process. For example,
appropriate collection action(s) may precede written demands for payment when necessary to
protect the DoD Component’s interests and to prevent the applicable statute of limitations from
expiring. Due process should be completed as expeditiously as possible after collection.
2804 NOTIFICATION TO DEBTOR
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280401. General Requirements for Debt Notification and Demand for Payment
FCCS requires the issuance of a minimum of one demand letter. That requirement may
be a single, all-inclusive demand letter or several successive and progressively stronger demand
letters depending on the type and amount of the debt and the debtor’s response to collection
efforts. Use demand letters to expedite the resolution and collection of debts or arrive at the
earliest practicable decision on the final disposition or referral of debts to DOJ for litigation. In
determining the timing of the demand for payment, give consideration to the need to refer
delinquent debts promptly to DOJ for litigation.
*280402. Demand Letters
DCOs must issue the initial demand letter within five working days following
confirmation of the debt, the basis of indebtedness, and the amount of the debt. DCOs must
exercise care to ensure that demand letters are mailed or hand-delivered on the same day that
they are dated. Demand letters will inform the debtor of the following information and
requirements:
A. The reason for the indebtedness (e.g., overpayment of living quarters

allowance), the authority of establishing the debt (e.g., 31 U.S.C. 3716), and the rights, if any,
that the debtor may have to seek review of the indebtedness.
B. The applicable standards (e.g., 31 C.F.R. 901.9) upon which any interest,
penalties, or administrative charges are based.
C. The date by which payment must be made in order for the debtor to avoid
late charges and enforced collection (that date generally will not be more than 30 days from the
date the demand letter is mailed or hand-delivered).
D. The name, address, and telephone number of a point of contact or office

the debtor may speak with or write to regarding the demand for payment of the debt.
E. Remedies that DCO will use to enforce payment of debts may include:
1. Federal salary offset, including routine pay adjustments and

recoupments, or salary offsets according to the policies and procedures specified in Volume 7A,
Chapter 50; Volume 7B, Chapter 28; and Volume 8, Chapter 8 or other provisions of this
Regulation, as appropriate;
2. Assessment of interest, administrative charges, and penalties;
3. Allotments;
4. Collection of collateral and collection from other sources;
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5. Tax refund and administrative offset (through the Department of
the Treasury Offset Program);
6. Credit bureau reporting;
7. Collection agencies;
8. Administrative wage garnishment; or
9. Litigation.
F. Other appropriate information, if applicable, including DCO’s willingness

to discuss alternative methods of payment, any rights to a hearing, and any opportunity to seek a
waiver or remission of the debt. Demand letters should comply with the Treasury Financial
Management Service (FMS) due process notification requirements listed in “Managing Federal
Receivables,” Appendix 8, dated May 2005.
2805 RESPONDING TO DEBTOR INQUIRIES
DCOs must respond promptly to communications from debtors, normally not later than
30 days from the date of receipt of the debtor’s correspondence. DCOs must advise debtors who
dispute debts to furnish available evidence to support their position. Refer to section 2810 for
information on reconsiderations and hearings. When it becomes necessary to extend the 30 day
notice/written demand period, DCO must act promptly to facilitate a possible referral/request for
debt litigation from DOJ within 1 year of the most recent debt delinquency event.
2806 INTEREST, PENALTY, AND ADMINISTRATIVE CHARGES
Title 31, U.S.C., section 3717 and FCCS authorize the assessment of interest, penalty,
and administrative charges on delinquent debts. All interest, penalty, and administrative charges
on delinquent debts must be calculated and recorded in the DoD Component accounting system.
Refer to Volume 4, Chapter 3, Annex 1 for guidance on assessing these charges and possible
waiver of these charges.
2807 INSTALLMENT COLLECTION
280701. Installment Criteria
If a debtor informs DCO that financial constraints prevent payment of a debt in one
lump-sum, then payments may be accepted in regularly scheduled installments. If the debtor
submits financial statements, then make those documents a part of the debtor’s permanent debt
file. DCO will base a decision to accept installment repayment of a debt on a review of the
debtor’s financial statement(s) or independent verification of the debtor’s reported financial
position and the following factors:
A. Age and health of the debtor;
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B. Present and potential income;
C. Inheritance prospects;
D. Possibility of hidden assets or fraudulent transfers;
E. Assets/income available through enforced collection; and
F. Reasonable and necessary living expenses for the debtor and the debtor’s
dependents.
280702. Installment Timing and Amount
Debtors generally must make installment payments on a monthly basis. Installment

payments must bear a reasonable relationship to the size of the debt and the debtor’s ability to
pay. Except when a debtor can prove financial hardship or another reasonable cause exists,
installment payments must be at least $50 each month and must be sufficient to liquidate a debt
within three years or less. Installment payments from current pay or salary, unless voluntary,
must not exceed the offset percentages established in Volume 7A, Chapter 50; Volume 7B,
Chapter 28; and Volume 8, Chapter 8.
280703. Installment Payment Agreement
DCOs that agree to accept installment payments must obtain signed, legally enforceable
repayment agreements from the debtor. Such agreements must specify the terms agreed upon by
the parties, including a provision accelerating the debt, and requiring that the remaining debt
balance must be due and payable immediately upon the debtor’s default on the agreement. As
part of the agreement, require the debtor to submit financial statements annually, as necessary,
whenever the repayment period exceeds three years. DCOs must accept installment payments,
notwithstanding a debtor’s refusal to execute a written agreement or to provide security.
280704. Installment Payment Delinquency
Debts in an active repayment status (according to an installment payment agreement) are

not considered delinquent. If an installment payment is not made by the due date, then the entire
balance of the debt becomes delinquent from the due date of the missed payment.
280705. Installment Payment Application to Multiple Debts
DCOs accepting installment payments for multiple debts of a debtor must apply the
payments to the various debts owed to DoD according to the best interests of DoD and in
accordance with FCCS. Unless otherwise prescribed by statute or regulation, DCOs will collect
debts owed to more than one DoD Component or Federal Agency in the following priority
sequence (within each component, collect the oldest debt first):
A. Debts owed to the creditor DoD Component;
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B. Debts owed to other DoD Components; and
C. Debts owed to other Federal Agencies.
280706. Installment Payment Application to Late Payment Charges and Debt

Principal
Installment payments must be applied in the following order:
A. Penalty charges;
B. Administrative charges;
C. Accrued interest; and
D. Debt principal balance.
280707. Installment Payment Review
DCOs that collect debts by installment must review the debtor’s annual financial
statements and determine whether to collect the balance due in a lump-sum or continue the
installment payment agreement at the same or increased amounts. Smaller installment payments
may be accepted at the request of a debtor, on an exception basis, when a request is supported by
financial data confirming the debtor’s inability to pay the full amount of the agreed upon
installment payment. DCOs normally must not reduce installment payments if a determination is
made that the debtor could have controlled the financial condition that reduced the debtor’s
ability to meet existing installment payment requirements.
2808 ADMINISTRATIVE AND SALARY OFFSET FOR COLLECTION OF INDIVIDUAL

DEBT
280801. General
This chapter implements the administrative offset authority in 31 U.S.C. 3716 and FCCS
for collecting delinquent debts owed to the United States. Debts owed to DoD or other Federal
agencies by current or retired members of the military or current or retired DoD civilian
employees that can be collected through salary offset must be collected as provided in Volume
7A, Chapter 50; Volume 7B, Chapter 28; and Volume 8, Chapter 8. Debts determined to be
owed to the United States that must be collected administratively other than through salary offset
must be collected under the authority of 31 U.S.C. 3716 and FCCS applying the procedures in
this section.
280802. Administrative Offset for Advancements and Deductions
Under 5 U.S.C. 5705, when making collections of unearned advance per diem or mileage
allowances, DCOs must give DoD civilian employees the opportunity to immediately pay the
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amount due. If immediate payment is not made, then full offset, if it does not cause undue
financial hardship, must be made immediately against accrued pay, retired pay, or any other
amount due the civilian employee from the United States. If the civilian employee does not pay,
or if there is no amount available for offset, then DCO must follow all other appropriate debt
collection provisions of this Regulation. DCOs should inform employees of the requirement for
immediate repayment of unearned advances of per diem and mileage allowances at the time that
advances are made. Hearings are not required, but DCOs must reconsider debts upon request of
the debtor.
280803. Administrative Offset for Damage to Military Housing
Under 10 U.S.C. 2775, administrative offset is authorized to pay for the cost of repair,
replacement, or cleaning of military housing caused by the abuse or neglect of military members.
Hearings are not required for debts being collected by administrative offset under this statute.
All other provisions for administrative offset apply to collection of these debts. DCOs must
reconsider these debts upon request of the debtor.
280804. Administrative Offset for Administratively Determined Debts
Under 37 U.S.C. 1007, administrative offsets are authorized to collect debts that
administratively are determined to be owed to a DoD Component by a military member. Except
where there are questions of debt validity or truthfulness, hearings are not required before
collection of debts by administrative offset under this statute. Policies and procedures for
collecting routine pay adjustments under this statutory authority are in Volume 7A, Chapter 50
and Volume 7B, Chapter 28.
280805. Administrative Offset to Recover Public Funds
Under 5 U.S.C 5512, administrative offset is authorized to offset the pay of an

accountable officer in arrears to the United States for all sums for which he or she is liable. This
authority only pertains to collection of debt when the debt is the result of an individual being
held liable for a loss of funds. Withhold the pay of individuals in arrears to the United States
until they have accounted for and paid into the U.S. Treasury all sums for which they are liable.
Refer to Chapter 6 of this volume for additional guidance on loss of funds.
280806. Salary Offset for Monthly Installments
Under 5 U.S.C. 5514, DCOs may initiate salary offset to collect indebtedness by
installment deductions. Refer to Volume 7A, Chapter 50; Volume 7B, Chapter 28; Volume 8,
Chapter 8; and Volume 13, Chapter 8 for salary offset procedures under this statute. This
statutory authority must be used to collect indebtedness of military members, DoD civilian
employees, and nonappropriated fund instrumentality (NAFI) employees from their current pay
or salary accounts when offset is not authorized or required by other more specific statutes.
Unless otherwise provided by this or other Regulation, the paying office must ensure that the
debtor has received due process before the current pay or salary can be involuntarily offset to
satisfy a debt to the United States. The right to a hearing conducted by an independent hearing
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official is one of the due process protections afforded an individual under this statute. Refer to
section 2810 of this chapter for guidance on hearings. Debts owed by individuals to agencies
other than DoD Components are sent by those agencies to the Department of the Treasury’s
Federal Offset Program for processing. Additional guidance pertaining to the Department of the
Treasury’s offset program can be found at: http://www.fms.treas.gov/debt/top.html.
280807. Offset Under Statutes Not Specifically Covered
Nothing contained in this chapter must prevent the collection of indebtedness under the
common law within the statutory period allowed, utilizing any available statutory authority not
covered herein.
280808. Collection by Administrative Offset
A. General. Administrative offset under 31 U.S.C. 3716 is the withholding of

funds from amounts payable by the United States to a person, including a state or local
government but excluding an agency of the United States, to satisfy a debt. The provisions for
administrative offset in FCCS hereby are implemented by FCCS and this chapter. In the event of
any inconsistency between this chapter and FCCS when 31 U.S.C. 3716 is the authority for the
action, the provisions of FCCS will prevail. Where feasible, DCOs must collect debts by
administrative offset whenever a debtor refuses to pay a debt in lump-sum or by an installment
repayment agreement. Debts not subject to administrative offset under 31 U.S.C. 3716 still can
be collected by offset under the common law or other applicable statute. This paragraph applies
to administrative offsets undertaken pursuant to 31 U.S.C. 3716 and FCCS against funds or
money payable to or held for a debtor. This paragraph does not apply to:
1. Offset against Federal salaries, to the extent that FCCS are

inconsistent with regulations implementing salary offsets under 37 U.S.C. 1007 or 5 U.S.C. 5514
(also refer to Volumes 7A, 7B, 8, and 13);
2. Offset under 31 U.S.C. 3728 against a judgment obtained by a

debtor against the United States;
3. Offset or recoupment under common law, state law, or Federal

statutes specifically prohibiting offset or recoupment of particular types of debts; or
4. Offset in the course of judicial proceedings, including bankruptcy.
B. Provisions for Administrative Offset. FCCS provides for administrative

offset utilizing both agency managed noncentralized administrative offset programs and
centralized Department of the Treasury administrative offset programs. The following
provisions apply to either a noncentralized or centralized administrative offset program.
1. Statute of Limitation. Section 14219 of Public Law 110-246

amended 31 USC 3716(e) to eliminate the 10 year statute of limitations on collection by
administrative offset. As a result, all debts, including those previously ineligible for collection
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prior to the removal of the time limit, may now be collected by administrative offset, without any
time limitation. Debts more than 10 years delinquent as of December 31, 2009, that were
previously ineligible for collection may now be collected by administrative offset provided
additional notice and due process requirements are met. Refer to subparagraph 280808.B.3 of
this chapter.
2. Notice Requirements. Before administrative offset is initiated,

DCO will advise the debtor of the proposed action. This notification may be part of the initial
demand letter described in paragraph 280402 of this chapter. Whether included in the initial
demand letter or issued as a separate notification, the DCO will include in the notice of intent to
offset, at a minimum, the following:
a. Written notice of the basis and the amount of the debt and
the intent to use administrative offset to collect the debt after 30 calendar days from date of the
notice, unless a written response is received from the debtor requesting a hearing or debt
determination reconsideration or the debtor provides supporting or mitigating
statements/documents or repayment. Debts referred to the Treasury Offset Program (TOP)
require 60 day notice prior to referral.
b. Information regarding the debtor’s right to inspect and copy

government records related to the debt at the debtor’s expense.
c. Information regarding the debtor’s right to a hearing,

including a statement of the type of hearing (oral or administrative) appropriate for the debt in
question, and an offer to reconsider the debt basis and amount. Refer to section 2810 for
additional guidance on hearings.
d. A request for the debtor to submit any documentation or

statement regarding the debt basis or amount for inclusion in a reconsideration or hearing.
e. An opportunity to make a written agreement to repay the

debt.
f. A date for the debtor to respond in writing to the notice of

offset and submission of additional documentation or statement, normally not less than 30 days
from receipt of the initial notice or 45 days if recipient is overseas.
g. The fact that the debtor’s failure to respond will result in

processing the administrative offset.
h. The fact that if the debtor knowingly provides false or

frivolous statements, representations, or evidence, then the debtor may be subject to penalties
under the False Claims Act (31 U.S.C. 3729, 3730, and 3731), 18 U.S.C. 286, 287, 1001, or
1002, or other applicable statutes.
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i. Statement that any amounts paid or administratively offset
from a payment for the debt that are later waived or found not owing will be promptly refunded
unless prohibited by law or contract.
j. Mailing address and telephone number of point of contact

for the debtor to write or call with any questions or discussions regarding the debt.
3. Additional Notice and Due Process Requirements. Additional

notice and due process requirements apply to the collection of debts that are 10 years delinquent
as of December 31, 2009, and which are referred to TOP. For debts outstanding more than
10 years on or before December 31, 2009, a second written notice of the agency’s intent to offset
must be issued to the debtor even if such a notice was previously issued prior to the debt
becoming 10 years delinquent. The second notice must describe the agency’s intent to collect
the debt through offset and provide the debtor with additional inspection, copying, review, and
repayment opportunities. The second notice must meet the requirements of subparagraphs
280808.B.2.a through B.2.j. Refer to 31 C.F.R. 285.5 for additional guidance.
4. When Requirements may be Omitted. The requirements that must

precede administrative offset may be omitted under any of the following circumstances:
a. The administrative offset is in the nature of a recoupment.
b. The first indication of the existence of a debt provides an

insufficient time before the payment subject to administrative offset would be made to the debtor
to allow for prior notice and opportunity for review.
NOTE: When the preceding conditions are present, afford the debtor an opportunity for review
as soon as practicable and promptly refund any money offset to collect an indebtedness
ultimately found not to have been owed.
5. FCCS requires disbursing officers and certifying officials to

cooperate with all government agencies to collect debts referred for administrative offset except
under either of the following conditions:
a. The offset would not be in the best interest of the United

States with respect to the program against which offset is requested as determined by the head of
the agency holding funds or monies for offset; or
b. The offset would be contrary to another applicable law.
6. When collecting multiple claims by administrative offset, amounts

recovered must be applied to those claims in accordance with the best interests of the United
States, as determined by the facts and circumstances in each case, particularly the applicable
statutes of limitation.
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7. When a debtor previously has been given any of the required
notice and review opportunities with respect to a debt, there is no need to duplicate these before
initiating administrative offset with regard to that debt, except as provided in subparagraph
280808.B.3. Accomplish administrative offset as funds or monies become due and payable to a
debtor after consideration is given to administrative offset requirements.
280809. Noncentralized Administrative Offset
A. Requests for Offset From Non-DoD Federal Agencies. Administrative

offsets under 31 U.S.C. 3716 and FCCS can be made by DoD or other Federal Agency
disbursing officers or officials certifying or authorizing payments to a debtor. All requests from
non-DoD Federal agencies for administrative offset by the DoD Components must be forwarded
to the Department of the Treasury. Additional information regarding the Department of the
Treasury administrative offset process is available at http://www.fms.treas.gov/debt/top.html.
B. Determining Merit of Offset. Organizations processing requests for

administrative offset are not authorized to determine the merits of debts for which offset is
requested. DCO requesting the offset is responsible for determining the validity and merits of
the debt.
C. Requests for Offset Within DoD
1. Requests by a DCO from one DoD Component for administrative

offset against a military member or civilian employee of another DoD Component are initiated
by sending a DD Form 139 (Pay Adjustment Authorization), DD Form 2481 (Request for
Recovery of Debt Due the United States by Salary Offset), other prescribed or authorized form,
or an automated transaction to the debtor’s payroll processing activity. Refer to Volume 7A,
Chapter 50 and Volume 8, Chapter 8 for specific guidance regarding processing these requests.
2. The request must include certification that the debtor owes the debt
and that requesting DCO has fully complied with regulatory requirements concerning
administrative or salary offset.
3. The request must include a point of contact at DCO who must

respond to questions or disputes from the debtor.
4. When a debtor consents to administrative offset in writing or signs

a statement acknowledging receipt of due process procedures, requesting DCO will include the
consent or statement with the request for offset along with the certification and all supporting
documentation. Administrative offset cannot be accomplished until the organization requested to
make the offset has been provided the supporting documentation. The organization processing
the offset will advise the debtor of the offset request and when the offset will be accomplished.
If the debtor terminates employment or transfers to another agency while an offset is ongoing,
then the organization processing the offset must inform requesting DCO that the individual is no
longer employed by the organization and will provide a recap of amounts offset to date.
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280810. Department of the Treasury Centralized Administrative Offset Program
The FMS, Department of the Treasury, has broad administrative offset collection
responsibilities for delinquent debts based on the “Debt Collection Improvement Act of 1996,”
as codified at 31 U. S. C. 3711(g). The DoD Components are required to refer legally
enforceable debts over 180 days delinquent to the Department of the Treasury for continued
collection action. Refer to paragraph 281204 for additional information.
280811. Administrative Offset From the Civil Service Retirement and Disability
Fund (CSRD) and the Federal Employee Retirement System (FERS)
Procedures for requesting offset from CSRD or FERS for debts owed by retired DoD
civilian employees are contained in Volume 8. Requests for offset forwarded to the Office of
Personnel Management in accordance with Volume 8 must not be referred to the Department of
the Treasury under paragraph 280809 or 281204 of this chapter since this action would result in
duplicative offset requests. These debts, however, are eligible for all other collection processes.
2809 COLLECTION AND PROCESSING OF INDIVIDUAL OUT–OF–SERVICE DEBT
280901. General
This section pertains to the processing of individual out-of-service debts referred by

DCOs to the Defense Finance and Accounting Service (DFAS), Debt and Claims Management
Office (DCMO). DCMO operates and maintains the Defense Debt Management System
(DDMS) to provide centralized, cost-effective, automated debt management and collection
assistance for delinquent debts owed to DoD by individuals who currently are not paid by DoD.
DCMO must comply with the “Federal Claims Collection Act of 1966,” as amended, 31 U.S.C.
3701-3720E and all applicable laws and regulations, including the FCCS.
280902. Incidence of Individual Out-of-Service Debts
Individual out-of-service indebtedness occurs when the debtor is not receiving salary or
other payments from DoD that can be offset to collect existing debt owed to DoD. Individual
out-of-service debts may arise from overpayments, erroneous payments, indebtedness by the
public for use of DoD’s facilities or services, or indebtedness by individuals previously serving
in or employed by a DoD Component.
280903. Obtaining Service from DCMO
The DoD Components not supported by DFAS may obtain debt collection services from
DCMO. The DoD Component and DCMO must document the services to be provided using a
Support Agreement (DD Form 1144).
*280904. Individual Out-of-Service Debt Collection Procedures
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A. DCO Responsibilities. DCO is the office responsible for initial debt
collection and due process actions. DCO may be part of the DoD Component’s supporting
accounting office or a separate organizational element within the DoD Component. DCO will:
1. Issue the initial bill, invoice, notice, or demand letter to the debtor
and take appropriate follow-up action. Only one demand letter is required; however, DCOs may
issue additional follow-up notices to the debtor as deemed appropriate. Refer to section 2804.
2. Complete any previously initiated actions such as reclamation,
appeal, litigation, or foreclosure before referring delinquent individual out-of-service debts to
DCMO.
3. Research and verify the military or civilian status of debtors to

ensure that only eligible individual out-of-service debts are referred to DCMO.
4. Refer delinquent individual out-of-service debts that are $225 or

greater to DCMO no later than 60 days after the payment due date when DCO has not been able
to collect the debt or establish a repayment schedule. If an individual has multiple debts all
under $225, then consolidate the debts and refer them to DCMO as one debt package. Refer to
Volume 4, Chapter 3 for guidance on guidance for clearing individual out-of-service debts that
are under $225.
5. Use a transmittal letter to control referral of eligible debts to

DCMO and to ensure that the debts are received by DCMO. Prepare the transmittal letter in
duplicate and send it to DCMO, DFAS-IN, Department 3300 (ATTN: Special Actions), 8899 E.
56th Street, Indianapolis, IN 46249-3300, as required, but no less frequently than weekly.
Identify on the transmittal letter all attached debt case files by name, Social Security number, and
amount. Include the name, email address, and telephone number for DCO point of contact and
the name and location of the office accountable for the debt. Attach a copy of all documentation
and background material in the debt case files. Documentation includes:
a. A copy of the original bill or other demand for payment.
b. The demand letter should comply with the Treasury FMS

due process notification requirements listed in “Managing Federal Receivables,” Appendix 8,
dated May 2005, in order for the DCMO to accept the debt.
c. The original debt principal amount with complete

accounting classification and fiscal year to be credited with any collections. Include a copy of
the original disbursement voucher when the debt is the result of a previous payment.
d. The date the debt became known.
e. The date the debt was due.
f. The date the debt became delinquent.
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g. The amount of accrued interest, administrative charges, and
penalty fees.
h. Copies of any follow-up correspondence.
i. Amounts and dates of any prior collections (and the

accounting classification credited). Include a copy of the collection voucher when the collection
was not processed through salary offset.
j. The debtor’s branch of service or agency where formerly

employed.
k. The debtor’s, sponsor’s, or beneficiary’s Social Security

number.
l. Military status and date of separation for members or

employees whose period of service or employment ended with indebtedness.
m. Copy of DD Form 139, if available.
n. Copy of DD Form 2481, if available.
o. Any other relevant documentation or information regarding

the debt.
6. Include in each transmittal package a statement certifying that the

amounts of the debts being referred are correct and that the debts are delinquent, valid, and
legally enforceable. DCOs referring debts electronically will also submit a certification
statement. Refer to Figure 28-1 of this chapter for a sample certification statement.
7. Assign a unique 9-digit transmittal number to each transmittal

letter. Create transmittal numbers using the date of the transmittal letter and a unique number for
each transmittal letter on that date (i.e. the time stamp as a component of the transmittal number).
8. Correct any errors in debt packages returned by DCMO for

correction/additional action and send the debt package back to DCMO using a new transmittal
number.
9. Coordinate with their supporting accounting office to ensure that

accountability for the referred debts is removed from its records in accordance with procedures
in Volume 4, Chapter 3 upon receipt of the duplicate copy of the transmittal letter.
10. Maintain names, official addresses, and contact information for all
witnesses to the events leading to the debt and copies of and location of physical evidence
(documentation and other evidence) relating to the debt for payroll debts involving fraud,
misrepresentation, or credibility, and for all non-payroll debts. This information is necessary in
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the event that the debt must be referred to DOJ for litigation.
11. Follow up with DCMO to obtain the status of the referred debt
when 60 days have elapsed from receipt of the duplicate copy of the transmittal letter and no
additional information has been received.
12. Mail payments received from a debtor after the debt was referred
to DCMO to DCMO, DFAS-IN, Department 3300 (ATTN: Case Management), 8899 E. 56th
Street, Indianapolis, IN 46249-3300. Include the debtor’s name and Social Security number so
the proper account can be credited.
B. DCMO Responsibilities. DCMO will:
1. Assist DCOs in the centralized management of debts, including

automated, centralized processing, referral, reporting, and accounting of debts.
2. Return uncollectible debts, debts requiring additional DCO

collection action, and debts with incomplete documentation to DCO with an explanation of the
reason for the return.
3. Determine the effective date for entering the debts into DDMS,
annotate the effective date on the duplicate copy of the transmittal letter, and return the duplicate
copy of the transmittal letter to DCO.
4. Pursue collection action once debts are entered in DDMS. Actions

include servicing, collecting, compromising, suspending, or terminating collection. A general
overview of the individual out-of-service delinquent debt collection steps is illustrated in
Figure 28-2 of this chapter. The procedures include referring delinquent debts to private
collection agencies for collection, reporting to credit bureaus, and referring uncollectible
delinquent debts to the Department of the Treasury Offset Program and to DOJ for possible
litigation. Timelines indicated in Figure 28-2 of this chapter are based on the date that the debt is
first referred to DCMO and do not reflect the actual age of the debt. In the case of deceased
debtors, DCMO uses DD Form 2840 (Request for Information Regarding Deceased Debtor) to
seek information from state probate courts concerning the establishment of an estate and pursues
collection of the indebtedness in this manner.
5. Provide the data recorded in DDMS monthly to DFAS

departmental accounting offices.
6. Upon request, provide feedback regarding status of debt collection

to the applicable DoD Component.
C. DFAS Departmental Accounting Offices. DFAS departmental accounting

offices must use DDMS to establish and maintain accountability at the departmental level for all
debts referred to DCMO. DFAS departmental accounting offices will report the transfer-out and
transfer-in of these debts on Part I, Section A, Line 5.A, “Reclassified/Adjusted Amounts” on the
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Treasury Report on Receivables (TROR), and provide the required footnote. Refer to Volume 4,
Chapter 3 for specific reporting requirements.
280905. Collection Assistance for Military Pay System-Generated

Individual Out-of-Service Debts
Uncollectible debts on the Master Military Pay Account (MMPA) for Active Component
(AC) and Reserve Component (RC) service members due upon separation or retirement, as well
as debts for offset from retired pay, or annuitant pay periodically are systemically referred to
DCMO. Once these system-generated debts are entered in DDMS, they are treated the same as
collection action(s) taken on installation-generated debts. Defense Retiree and Annuitant Pay
System (DRAS) debts are created when payments are made after the entitlement has ended.
Those debts are transferred each month by an interface between DRAS and DDMS.
2810 RECONSIDERATION AND HEARINGS FOR ADMINISTRATIVE OFFSETS
281001. General
A. Upon written request, a debtor is entitled to reconsideration or a hearing

(when authorized by statute) regarding determination of a debt. Both, reconsideration and
hearing, involve review of debt documentation. A debtor is entitled to only one hearing, either
administrative or oral, per debt owed to DoD.
B. Reconsideration is an informal examination of internal debt records by

DCO to validate the debt without appointment of a hearing official. Reconsideration does not
include a determination of the credibility or veracity of the debt.
C. An administrative hearing is accomplished by a hearing official and must

involve consideration of debtor-submitted statements and documentation as well as DCO internal
debt files.
D. An oral hearing consists of an appearance by the debtor before a hearing

official to present arguments regarding the debt. An oral hearing normally will be conducted
when the question of the indebtedness cannot be resolved by review of the documentary
evidence, for example, when the validity of the debt involves an issue of credibility or veracity.
E. DCO will refer all requests for hearings received from DoD military
members, DoD civilian employees, and NAFI employees to DFAS, DFAS/JFEA-IN, 8899 East
56th Street, Department 3300 (ATTN: Hearings), Indianapolis, IN 46249-3300.
F. When a debtor has requested and is entitled to a hearing in conjunction

with administrative offset, DCMO must determine whether an administrative or oral hearing is
appropriate. An oral hearing is not required with respect to determinations of indebtedness that
do not involve issues of credibility or veracity and when DCMO has determined that review of
the written record is an adequate means to discover and correct any prior mistakes. When a
debtor has requested a hearing and DCMO determines that an oral hearing is not required, then
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DCMO must provide an administrative hearing.
G. There are no provisions for review or appeal of debt determination

decisions rendered with regard to administrative offset; however, DCOs, DCMO, and debtors
may exercise any other collection, appeal, waiver, remission, or review right that may be
provided by other statute or regulation with regard to the debt.
281002. Debtor Responsibilities
A. Debtors must indicate, in their initial written response to a notice of

administrative offset, their desire for a reconsideration of the debt or a hearing. The debtor must
furnish, by the date specified in the notice of administrative offset, any facts and reasons why
they believe that the debt is erroneous.
B. Debtors afforded an oral hearing on the existence or amount of the debt

may petition for an administrative hearing in lieu of an oral hearing. Debtors who elect an
administrative hearing in lieu of an oral hearing waive any right to an oral hearing and must
agree to accept the administrative hearing decision as final as part of their written petition. Once
approved by DCMO, the debtor cannot revoke his or her petition for an administrative hearing.
C. At least 3 working days before an oral hearing, the debtor must give the
hearing official and DCMO the name of his or her representative, if one is selected, copies of any
records that he or she plans to introduce if the records are different from those in the possession
of DCMO, and a list of any witnesses, along with a summary of their anticipated statements.
D. Debtors, their representatives, and witnesses are responsible for their

expenses incident to inspecting and copying government records and attending oral hearings.
E. If the debtor fails to submit a request in writing to DCO for a

reconsideration or hearing by the date specified in the administrative offset notification letter,
fails to appear on time at a scheduled oral hearing, or fails to file required documentation with
DCO or hearing official by the specified due date, then DCO may grant the request if the debtor
can show that the delay was because of circumstances beyond his or her control or because of
failure to receive notice of the time limit (unless otherwise aware of it).
F. During oral hearings, debtors may not raise any issues not previously
raised with the hearing official and DCMO nor may they introduce any facts or records not
previously submitted.
281003. DCO and DCMO Responsibilities
A. DCO Responsibilities
1. When the debtor requests reconsideration and DCO determines

that the request is appropriate, DCO will issue a response to the debtor within 60 days after
receiving the request. The response must advise the debtor that the basis for the debt and amount
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were reconsidered, indicate whether the debtor’s contentions were accepted in whole or in part,
specify the debt amount now owed, and, if applicable, reaffirm DCO’s intent to collect the debt
by administrative offset.
2. When the debtor requests a hearing, DCO will forward the request
to DCMO. Refer to paragraph 281001.E.
B. DCMO Responsibilities
1. When an administrative hearing is requested and deemed

appropriate, DCMO will issue a response to the debtor within 60 days after receiving the request.
The response must advise the debtor that the basis for the debt and amount were reviewed,
indicate whether the debtor’s contentions were accepted in whole or in part, specify the debt
amount now owed, and, if applicable, reaffirm DCMO’s intent to collect the debt by
administrative offset.
2. When an oral hearing is requested and deemed appropriate (refer to

subparagraphs 281001.D and F), DCMO will, within 20 working days after receiving the
debtor’s request, notify the debtor of the time, date, and location of the oral hearing and provide
a list of any additional submissions required of the debtor and the mailing address for the
submissions. Whenever feasible, DCMO will schedule an oral hearing site, time, and date
convenient for the debtor. Also, at least 3 working days before an oral hearing, DCMO will
forward to the debtor and hearing official a package containing copies of debt records in the
possession of DCMO, a statement supporting the basis for the debt, the amount of the debt, and
names of DCMO witnesses and their anticipated statements. DCMO will document all
significant matters discussed at the oral hearing.
3. Upon the written request of a debtor, DCMO will change oral

hearings to administrative hearings if the request is received at least 3 working days before
established oral hearing dates and if all submissions will be available to hold the administrative
hearing at the already established time and site.
281004. Administrative Offset Reconsideration or Hearing Officials
A. General. Personnel eligible to reconsider debt determination issues or

officiate over hearings include, but are not limited to, supervisors, management personnel, and
other employees who are assigned to offices performing functions associated with matters
pertaining to debt management, debt collection, debt servicing, claims examination, military pay,
vendor or contract pay, or contracting. Other eligible personnel include grievance and appeals
examiners, attorney advisors, judge advocates, and similar personnel who have been trained in or
are qualified to perform hearing officer duties.
B. Reconsideration or Hearing Officials Under 31 U.S.C. 3716. Title 31,

U.S.C., section 3716 specifies that reconsiderations or hearings will be performed within the
agency. In most instances personnel assigned to DCO must be available to accomplish any
debtor requested reconsiderations regarding debt existence or amount. In accordance with
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subparagraph 281001.E of this chapter, all requests for hearings will be forwarded to DCMO.
C. Hearing Officials Under 5 U.S.C. 5514. Hearing officials will be

appointed according to guidance in Table 28-2.
281005. Hearing Official Responsibilities
Hearings must be held according to the following requirements:
A. An administrative hearing must consist of a thorough examination of the

regulations, records, documents, and facts underlying the debt.
B. An oral hearing must consist of an informal conference between the debtor

and the hearing official for the presentation of documents, witnesses, and arguments.
C. Except for oral testimony, the only evidence permitted at oral hearings
must be that already furnished as prehearing submissions.
D. Debtors must not raise any issues at oral hearings not previously raised
with DCMO.
E. The hearing official must issue a written decision to the debtor within
30 days after the date of the hearing. The hearing official may extend this deadline. A hearing
official’s decision must be final for the purposes of 31 U.S.C. 3716 and must discuss the basic
facts documenting the debt and will include conclusions concerning the basis and amount of the
debt.
F. Hearing officials will review debtors’ submissions received not later than
three working days after the due date to determine if debtors forfeited their hearing right. If
debtors show good cause, then this right will not be forfeited due to minor submission delays.
2811 BANKRUPTCY DEBTS
281101. Bankruptcy Petition Filed
Upon learning that a bankruptcy petition has been filed with respect to a debtor, before
taking any further collection action, DCO must obtain legal advice concerning the impact of the
Bankruptcy Code (Title 11) on any pending or planned collection action. In most cases,
collection action should stop immediately unless it is determined that the automatic stay imposed
at the time of filing pursuant to 11 U.S.C. 362 has been lifted or is no longer in effect.
281102. Proof of Claim
After obtaining legal advice, a proof of claim in most cases should be filed with the
bankruptcy court or the trustee. Attorneys should be aware of and provide advice, as necessary,
relating to the consequences on sovereign immunity of filing a proof of claim under the
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provisions of 11 U.S.C. 106.
281103. Relief from Automatic Stay
A secured creditor may seek relief from the automatic stay regarding its security, subject
to the provisions and requirements of 11 U.S.C. 362.
281104. Offset and Recoupment
Offset is stayed in most cases by the automatic stay. DCOs must seek legal advice
regarding initiation of action to freeze payments to the debtor and payments to other agencies
available for offset pending relief from the automatic stay from the bankruptcy court. DCOs also
must seek legal counsel regarding the possibility of recoupment.
2812 DEBT REFERRALS OUTSIDE THE DEPARTMENT OF DEFENSE
281201. Referrals to DOJ
A. General. After taking aggressive collection action, DCOs must promptly

refer to DOJ for litigation all uncollectible delinquent debts greater than $2,500, exclusive of
interest, penalties, and administrative charges, that cannot be compromised, suspended, or
terminated. In addition, DCOs must promptly refer any debt based in whole or in part on
conduct in violation of the antitrust laws or any debt involving fraud, the presentation of a false
debt, or misrepresentation on the part of the debtor or any party having an interest in the debt to
DOJ. DCOs must refer debts with a principal amount over $1,000,000, exclusive of interest,
penalties, and administrative charges, to the responsible DOJ litigation division in Washington,
D.C. Debts with a principal amount of $1,000,000 or less, exclusive of interest, penalties, and
administrative charges, must be referred to DOJ’s Nationwide Central Intake Facility as required
by the Claims Collection Litigation Report (CCLR) instructions. DCOs must promptly refer
debts within the statute of limitations period for initiating lawsuits against debtors, and generally
within one year of the date that the debt last became delinquent.
B. Documentation
1. DCOs will use a CCLR and include a signed Certificate of

Indebtedness to refer all uncollectible debts to DOJ for litigation or approval for compromise,
suspension, or termination. Refer to section 2813 of this chapter for additional information on
compromise, suspension, and termination.
2. A blank CCLR and instructions for completion of CCLR are

located at the FMS website, Managing Federal Receivables, Appendix 10-B. Forward CCLR to
Director, Commercial Litigation Branch, P.O. Box 875, Ben Franklin Station, Washington, D.C.
20044.
3. DCO must complete all sections of CCLR appropriate for the debt
being referred and furnish such other information as required by DOJ. Include as attachments to
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CCLR a completed checklist or brief summary of actions taken to collect or resolve the debt and
an explanation for the omission of any administrative collection action required by FCCS, or this
chapter. If a debtor’s address is unknown, then include a list of the debtor’s prior known
addresses and an explanation of actions taken to locate the debtor. Include with the debt referral
the debtor’s latest credit history data, such as a commercial credit report, balance sheet, or
financial statement submitted by the debtor. Also indicate whether there is reasonable prospect
of enforcing debt collection.
4. Credit data may be omitted from CCLR if a debtor is bankrupt, in

receivership, or if the debtor’s liabilities are fully covered by insurance. If applicable, then
include the identity and address of the insurer, and the type and amount of insurance. Credit data
also may be omitted if credit history is not available, such as may be the case for a state or local
government unit.
5. Indicate clearly on CCLR the DOJ litigation action being sought

(e.g., enforced collection or judgment lien) with respect to the underlying debt.
C. Notification to Debtor. Before a delinquent debt can be referred to DOJ,

DCOs must notify the debtor that litigation may be initiated if the debt cannot be collected using
administrative procedures. This notification can be issued either as part of the demand letter
described in paragraph 280402 of this chapter or in a separate notice. When referring a debt for
litigation, give evidence to DOJ that this notification has been provided to the debtor.
D. Minimum Amount for Referral. Generally, only non-fraud debts with a

principal balance greater than $2,500 are eligible for referral to DOJ. After consultation with the
Financial Litigation staff attorneys of DOJ, DCOs may refer debts under $2,500, exclusive of
interest, penalties, and administrative charges, to DOJ for acceptance under the following
circumstances:
1. Litigation to collect such smaller debts is important to ensure

compliance with policies or programs.
2. Referral is for the purpose of securing a judgment against the

debtor that will be filed as a lien against the debtor’s property pursuant to 28 U.S.C. 3201, and
returned to the referring office for enforcement.
3. The debtor has the ability to pay the debt and the Government
effectively can enforce payment with due regard for the exemptions available to the debtor under
federal and state law and the judicial remedies available to the Government.
E. Preservation of Evidence. Preserve all debt files and records that may be
needed by DOJ to prove its case in court. Include certified copies of the documents that form the
basis for the debt in the debt referral package. Provide originals of the documents if requested by
DOJ.
F. Contact With Debtor After Referral. Once a debt has been referred to
DOJ, DCO personnel must refrain from contact with the debtor regarding the debt. DCOs must
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refer debtors raising questions to the appropriate DOJ office and must notify DOJ immediately of
any payments received by DCO on referred debts in accordance with DOJ guidance.
G. Suspension or Termination of Collection Action. DOJ has exclusive

jurisdiction over the debts referred to DOJ. DCOs will terminate the use of any administrative
collection actions on debts referred to DOJ for litigation. Refer to 31 C.F.R. 904.1.
281202. Debt Referrals to Private Collection Agencies
A. Authority to Use Private Collection Agencies. Designated DCOs may

utilize private collection agencies to supplement their debt collection programs.
B. Contracts for Private Collection Agency Services. Federal agencies

generally are required to use government-wide contracts to obtain services provided by private
collection agencies. Contracts with private collection agencies to locate delinquent debtors and
recover delinquent debts will define the services available that generally will conform to the
following terms agreed to between the Federal Government and the collection agency.
1. The referring DCO must retain the authority to resolve disputes,

compromise debts, suspend or terminate collection activity, refer debts to credit bureaus, and
refer debts to DOJ for litigation.
2. The collection agency is not allowed to offer the debtor, as an

incentive for payment, the opportunity to pay the debt less the collection agency’s fee unless the
collection agency is granted authorization by DCO in advance of granting such an offer.
3. The collection agency is subject to the “Privacy Act of 1974” to

the extent specified in 5 U.S.C. 552a and to applicable Federal and state laws and regulations
pertaining to debt collection practices, including but not limited to, the Fair Debt Collection
Practices Act (15 U.S.C. 1692).
4. The collection agency is required to account for all amounts

collected.
5. The collection agency must comply with other requirements, as

appropriate, with regard to locating and contacting debtors, accepting installment payments,
processing late payment charges, and returning uncollectible debts to the referring DCO.
6. The debts cannot be subject to the requirement to transfer debts to

the Department of the Treasury. Refer to 31 U.S.C. 3711(g) and 31 C.F.R 285.12(e).
C. Funding Private Collection Agency Contracts. Contracts with private

collection agencies may be funded in accordance with either of the following:
1. Fixed Fee. Payment to the collection agency is a set fee
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determined without regard to the amount actually collected under the contract, but only to the
extent that funds are made available in advance in appropriations.
2. Contingent Fee. Payment to the collection agency is based on a

provision in the contract permitting the collection agency to deduct a fee, consistent with
prevailing commercial practice, based on a percentage of the amount collected under the
contract.
281203. Debt Reporting to Credit Bureaus
A. Authority to Report Debts. DCOs must develop and implement

procedures for reporting delinquent debts to credit bureaus and other automated databases.
DCOs also must develop procedures to report nondelinquent debts to credit bureaus. Procedures
must comply with the “Bankruptcy Code” and the “Privacy Act of 1974” (5 U.S.C. 552a), as
amended. Provisions of the “Privacy Act” do not apply to credit bureaus. Consumer debt
reporting must be consistent with due process and other requirements in 31 U.S.C. 3711(e).
Effective March 1, 2007, in accordance with 10 U.S.C. 2780(b), debts incurred by military
members will not be reported to credit bureaus during the time that a decision regarding waiver
or remission/cancellation of the debt is pending.
B. Due Process. Before reporting debts to credit bureaus, DCOs must ensure
that the due process requirements have been met. Duplication of previously provided due
process notice(s) or opportunity for review with respect to a particular debt is not required prior
to reporting the debt to the credit bureau as long as the following requirements have been met:
1. Information comes from a system of records for which the Privacy

Act notice indicates that information in the system may be disclosed to a credit bureau.
2. DCO has decided that the debt is valid and overdue.
3. DCO has notified the debtor in writing:
a. That payment of the debt is overdue;
b. That, within not less than 60 days after sending the notice,
DCO intends to disclose to a credit bureau that the debtor is responsible for the debt;
c. Of the specific information to be disclosed to the credit

bureau; and
d. Of the rights the debtor has to a complete explanation of
the debt, to dispute information in the records of the DoD Component or DCO regarding the debt
and to administrative repeal or review of the debt.
4. Debtor has not:
a. Repaid or agreed to repay the debt under a written
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repayment plan that the debtor has signed and the DoD Component or DCO has agreed to; or
b. Filed for review of the debt under section 2810.
5. DCO has established procedures to:
a. Disclose promptly, to each credit bureau to which the

original disclosure was made, a substantial change in the condition or amount of the debt;
b. Verify or correct promptly information about the debt on

request of a credit bureau for verification of information disclosed; and
c. Get satisfactory assurances from each credit bureau that the

credit bureau is complying with all laws of the United States related to providing consumer
credit information.
6. Information disclosed to credit bureaus is limited to:
a. Information necessary to establish the identity of the

debtor, including name, address, and taxpayer identification number;
b. The amount, status, and history of the debt; and
c. The DoD Component or program under which the debt

arose.
C. Maintaining Reported Debts Current. Once a debt is reported to a credit

bureau, DCO must make prompt disclosure to that credit bureau of any substantial change in the
condition or amount of the debt. DCO also must verify or promptly correct information about a
debt when required and when requested by a credit bureau.
D. Maintenance of Debt Records. The credit bureau must remove accurate,

negative information from a credit report only if it is over 3 years old. Bankruptcy information
can be reported for 10 years. DCOs must retain records for debts reported to credit bureaus in
accordance with guidelines of the National Archives and Records Administration General
Records Schedule.
281204. Referral to Department of the Treasury
A. Treasury Offset Program
1. FMS, Department of the Treasury, has broad administrative offset

collection responsibilities for delinquent debts based on the “Debt Collection Improvement Act
of 1996,” as expressed in 31 C.F.R. 285.7. FMS established TOP to accomplish centralized
administrative offsets of federal tax and nontax payments to collect federal delinquent debts
government-wide. Under TOP, a database of certified delinquent debts submitted by
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government creditor organizations is maintained and updated. Before FMS disburses a payment,
it makes a comparison to determine whether the payment should be offset to satisfy a payee’s
delinquent debt. As necessary, the Department of the Treasury determines, in the best interest of
the United States, how funds collected must be applied to multiple debts. Additional information
on TOP can be found at https://www.fms.treas.gov/debt/top.html.
2. Some payments are prohibited by law from being offset and are
exempt from centralized administrative offset. For example, certain payments under the “Social
Security Act,” “Black Lung Benefits Act,” and “Railroad Retirement Board Act” are generally
exempt, unless the Department of Treasury issues regulations permitting offset. In addition, the
Department of the Treasury can exempt offset of means-tested benefit payments (programs
wherein eligibility for beneficiary payment is based on the need to maintain a certain standard of
living) and other classes of payments based on a determination that offset would not be in the
best interest of the United States. An example would be administrative offset to collect a debt
where the offset would tend to interfere with or defeat the purpose of a government payment
program.
B. Cross-Servicing. Cross-Servicing is the collection of debt by one agency

on behalf of another agency in accordance with 31 U.S.C. 3711(g). Additional information on
Treasury Cross-Servicing can be found at http://fms.treas.gov/debt/crosserv.html.
C. Delinquent Individual Debt. In accordance with 31 U.S.C. 3711, DoD is

required to refer individual debt that has been delinquent for 180 days to FMS, Department of
the Treasury for continued collection action. Prior to referral to FMS, DCOs must consider the
out-of-service debt program and procedures in section 2809 of this chapter to determine whether
the out-of-service program offers more cost-effective services and debt management controls and
reporting. DCO must send any required offset correspondence to debtors at the most current
address as maintained in the DoD Component’s files, regardless of source. FMS is authorized to
charge fees to cover the costs of debt collection and administrative offset programs are
authorized and FMS deducts such fees from the amount offset before the residual amount is
transmitted to referring DCO. These offsets are not subject to any type of verification by the
paying activity, so any action by a debtor to recover an offset will be referred to DCO. Although
FMS will not identify the source of the offset to DCO, any tax information that may be known
by any means is confidential and its use is restricted and governed by 26 U.S.C. 6103.
D. Offsets for State Debts. Under 31 U.S.C. 3716(h), the Department of the
Treasury may enter into reciprocal agreements with states for federal disbursing officers to
collect state debts through offset of federal payments and for state disbursing officers to collect
federal debts through offset of state payments. Thus, as a result of Department of the Treasury
and state government agreements and implementing regulations, offsets of state debts certified to
Department of the Treasury may be paid to states and DoD may receive requests from
Department of the Treasury to offset payments to satisfy debts due to states.
E. Computer Matching. In accordance with 31 U.S.C. 3716(f), the

Department of the Treasury may waive the provisions in the “Computer Matching and Privacy
Protection Act of 1988” concerning matching agreements and post-match notification and
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verification (5 U.S.C. 552) for administrative offset under this paragraph upon receipt from a
DCO that the due process requirements in subparagraph 280808.B have been met. The
certification of a debt in accordance with subparagraph 280904.A.6 will satisfy this requirement.
If the Department of the Treasury grants such a waiver, then only the Department of the Treasury
Data Integrity Board is required to oversee any matching activities in accordance with
31 U.S.C 3716(f).
2813 DEBT COMPROMISE, SUSPENSION, AND TERMINATION
281301. General
FCCS provides agencies authority to compromise, suspend, or terminate collection

action. Requests for compromise, suspension, or termination of collection action may be
prepared and submitted by DCO, DCMO, Accounts Receivable Office (ARO), fund holder, or
other entity involved in individual debt management.
281302. Determining Debt Amount for Compromise, Suspension, and Termination
Debts must not be subdivided to avoid monetary ceilings for debt compromise,
suspension, or termination of collection actions. A debtor’s liability arising from a particular
transaction must be considered a single debt in determining if a debt is greater than $100,000,
between $100,000 and $500,000, or over $500,000 for purposes of compromise, suspension, or
termination. The amounts are exclusive of interest, penalties, and administrative costs.
281303. Compromise
A. General. Compromise is the acceptance of less than the full amount of the
debt in satisfaction of the entire amount of the debt. Any debt based in whole or in part on
conduct in violation of the antitrust laws, or any claim involving fraud, the presentation of a false
claim, or misrepresentation on the part of the debtor or any party having an interest in the debt,
will not be compromised. Refer these debts promptly to DOJ. DCOs will take no further action
on debts referred to DOJ. If such debt is otherwise below the threshold for DOJ referral, then
DOJ may retain the debt or may return the debt with instructions for further handling. Refer to
31 C.F.R. 902 for additional guidance on when a compromise may be approved.
B. Approval Authorities
1. DFAS has authority to approve compromises for debts referred to

DFAS when the principal amount does not exceed $100,000. DFAS will coordinate with the
fund holder as part of carrying out these responsibilities.
2. DoD Components have authority to approve compromises for

debts not referred to DFAS when the principal amount does not exceed $100,000.
3. DOJ has delegated to the Department of the Treasury authority to

approve compromises for debts less than or equal to $500,000 when the debt is being serviced by
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the Department of the Treasury in its cross-servicing program.
4. DOJ has authority to compromise debts exceeding $100,000 when

the debt is not serviced by the Department of the Treasury in its cross-servicing program and also
has authority to compromise all debts greater than $500,000. Only DOJ can consider noncash
compromise offers for debts exceeding $100,000.
5. DFAS and the DoD Components cannot approve a compromise on

a debt referred to DOJ for litigation unless the debt is returned to DoD for disposition.
C. Referring Compromise Offers to DOJ. Acceptable offers of compromise

exceeding $100,000 that are not being serviced by the Department of the Treasury in its cross-
servicing program and all offers exceeding $500,000 must be referred to DOJ using a CCLR.
See paragraph 281201 of this chapter for guidance on preparation and submission of the CCLR.
The referral must include appropriate financial information and a recommendation for the
acceptance of the compromise offer by DOJ. DOJ approval is not required if a decision is made
to reject a compromise offer.
D. Review of Compromise Offers by DOJ. If DFAS or the DoD Component

is uncertain whether or not to accept a firm, written substantive compromise offer on a debt
within the delegated compromise authority of $100,000 or less, then DFAS or the DoD
Component may refer the compromise to DOJ. Use CCLR to refer the offer along with
supporting data and particulars concerning the debt. DOJ may act upon the offer or return it with
instructions or advice for further action.
E. Reasons for Compromise. Debts may be compromised for any one or a

combination of several valid reasons. When assessing the merits of a compromise proposal, it
may be beneficial to obtain a current financial statement from the debtor and a credit report or
other financial information to aid in evaluating the debtor’s assets, liabilities, income, and
expenses. Possible grounds for compromise include the following:
1. Compromise Because of Litigation Risks. If there is significant

doubt concerning the government’s ability to prove its case in court for the full amount of the
debt, then a compromise may be appropriate. The amount accepted in a compromise agreement
should reflect such factors as the complexity of the legal issues, the probability of a bona fide
dispute as to the facts, the availability of witnesses and supporting evidence, and the probability
of successful prosecution. In determining the litigation risks involved, DFAS or the DoD
Component must consult with agency counsel and DOJ to consider the probable amount of court
costs and attorney fees that may be imposed against the government if litigation is unsuccessful.
2. Compromise Because of Debtor Inability to Pay Full Amount.

DFAS or the DoD Components may compromise debts if the debtor is unable to pay the full
amount due in a reasonable time or if the full amount due could not be collected in a reasonable
time using enforced collection. Consider, as a minimum, the following factors, in determining a
debtor’s ability to pay the full amount of the debt:
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a. Current financial statement from the debtor;
b Credit reports and other financial information;
c. Debtor’s age and health;
d. Debtor’s present and potential income;
e. Debtor’s inheritance prospects;
f. The possibility that assets have been concealed or

improperly transferred by the debtor; and
g. The availability of assets or income that may be realized by

enforced collection proceedings.
3. Compromise Because Collection Costs Exceed Amounts

Recoverable or Collection is not Anticipated. DFAS or a DoD Component may compromise a
debt if the cost of collection does not justify the enforced collection of the full amount.
Collection costs may be a substantial factor in the compromise of smaller debts. An amount
accepted in compromise may reflect a discount for the administrative and litigation costs of
collection along with consideration for the time involved to effect collection. In determining
whether the cost of collection justifies enforced collection of the full amount, DFAS or the DoD
Component must consider whether continued collection of the debt, regardless of cost, is
necessary to further an enforcing principle, such as the willingness to aggressively pursue
defaulting or uncooperative debtors.
F. Compromise With Joint and Several Liability. When two or more debtors
are jointly and severely liable, collection must be pursued against all debtors, as appropriate. Do
not attempt to allocate payment of the debt between debtors, but proceed to liquidate the debt as
quickly as possible. A compromise agreement with one debtor will not release the indebtedness
with the remaining debtors. The amount of a compromise with one debtor should not be
considered a precedent or binding in determining the amount that would be required from other
jointly or severally liable debtors.
G. Compromises Payable in Installments. Installment payment of

compromised debts generally should not be accepted since this is not an advantageous form of
compromise in terms of time and administrative expense. If installment payment of a
compromise is necessary, however, then DFAS or the DoD Component must obtain a legally
enforceable written agreement that stipulates immediate payment of the original debt, less sums
already paid, in the event of default. Whenever possible, obtain security for installment
repayment agreements.
H. Enforcement Policy. Accidental or minor violations of regulations that

result in indebtedness may be treated less severely than willful and substantial violations. Statu-
tory penalties, forfeitures, or debts established as an aid to enforcement and to compel
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compliance may be compromised so long as no present or future harm is done to standards for
enforcement, deterrence, or compliance.
I. Tax Consequences to the U.S. Government. In negotiating a compromise,

consider the tax consequences to the government. In this situation, consider requiring a waiver
of tax loss carry-forward and tax loss carry-back rights of the debtor in the compromise
agreement and furnish a copy to the Internal Revenue Service.
J. Mutual Releases of the Debtor and the U.S. Government. In appropriate

circumstances, implement an accepted compromise by means of a mutual release, whereby the
debtor is released from further nontax liability on the compromised debt in consideration of
payment in full of the compromise amount, and the government and its officials, past and
present, are released and discharged from any and all claims that the debtor may have against
them arising from the same transaction.
281304. Suspension of Collection Action
A. General. Suspension of collection action is a determination to temporarily

cease collection action. Any debt, based in whole or in part on the violation of antitrust laws
must be referred promptly to DOJ for a decision on the disposition of the debt. Likewise, any
claim involving fraud, the presentation of a false claim, or misrepresentation on the part of the
debtor or any party having an interest in the debt, will not be suspended, but will be promptly
referred to DOJ for a decision on the appropriate disposition of the debt. DCOs will take no
further action on debts referred to DOJ. DOJ may retain the debt for processing or may return
the debt with instructions for further handling. Refer to 31 C.F.R. 903 for additional guidance
on when suspension of collection action is appropriate.
B. Approval Authority
1. DFAS has authority to suspend collection action on debts referred

to DFAS when the principal amount does not exceed $100,000. DFAS will coordinate with the
2. DoD Components have authority to suspend collection action on


approve suspension of collection action on debts with a principal amount of $500,000 or less
when the debt is being serviced by the Department of the Treasury in its cross-servicing
program.
4. DOJ has authority to approve suspension of collection action on

debts with a principal balance exceeding $100,000 when the debt is not serviced by the
Department of the Treasury in its cross-servicing program and approval to suspend collection
action on all debts greater than $500,000.
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C. Suspension of Collection Action. Suspend collection action on a debt
when any of these conditions arise:
1. The debtor cannot be located;
2. The debtor’s financial condition is expected to improve;
3. The debtor has requested a waiver or review of the debt and

suspension of the debt is appropriate under subparagraph 281304.D; or
4. The debtor’s current financial condition or future financial

prospects justify retention of the debt for periodic review and collection activity based on any of
the following factors:
a. The applicable statute of limitations has not expired; or
b. The debtor agrees to pay interest on the suspended debt

amount and the suspension is likely to enhance the debtor’s ability to pay the full debt principal
amount at a later date with interest.
D. Suspension During Waiver, Remission, or Review. Do not suspend

collection activity if it is determined that a request for waiver, remission, or review is frivolous
or made primarily to delay collection. Suspend collection activity during the time required for
consideration of a debtor’s good faith request for waiver, remission, or review of the debt if any
of the following factors apply:
1. The statute under which the request is sought prohibits collection

activity during that time;
2. The amount collected during that time cannot be refunded under

the applicable statute;
3. There is reasonable possibility that the debtor will prevail; or
4. There is reasonable assurance that the debt could be collected if the

debtor does not prevail.
E. Suspension for Bankruptcy. When a bankruptcy petition has been filed

with respect to a debtor, collection activity on a debt must be suspended pursuant to
11 U.S.C. 362, 1201, or 1301, unless it can be clearly established that the automatic stay has
been lifted or no longer is in effect. With the coordination and assistance of the supporting legal
office, seek action to prevent disbursement of funds to the debtor until relief from the automatic
stay is obtained.
F. Consideration of Delay of Collection Action. As amended by section 661

of the Fiscal Year 2010 National Defense Authorization Act (NDAA), 37 U.S.C. 1007(c)
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provides that military members subject to deductions from pay under that section may request a
delay in the start of the repayment requirement to recover the indebtedness. Before beginning
deductions from pay, DCO will consider the reasons provided by the military member for the
requested delay, including the financial ability of the service member to repay the indebtedness,
and the hardship that immediate collection would impose on the military member and the
military member’s dependents.
G. Suspension of Collection of Overpayments to Wounded or Injured

Military Members
1. The policy contained in this paragraph is applicable to

overpayment of pay or allowances made to military members after October 28, 2009.
2. In accordance with section 661 of the Fiscal Year 2010 NDAA, if

a military member, through no fault of his/her own, incurs a wound, injury, or illness while in the
line of duty in a combat operation or combat zone designated by the President or the Secretary of
Defense and is overpaid pay or allowances while recovering from the wound, injury, or illness,
then collection of that overpayment may not be deducted from the military member’s pay until:
a. the military member is notified of the overpayment; and
b. the later of the following occurs:
(1) the end of the 180 day period beginning on the date
of the completion of the military member’s tour of duty in the combat operation or combat zone;
or
(2) the end of the 90 day period beginning on the date

of the military member is reassigned from a military treatment facility or other medical unit
outside of the theater of operations.
3. The provisions of subparagraph 281304.G.2.b do not apply if the

military member after receiving notification of the overpayment, requests or consents to
collection of the overpayment at an earlier date.
H. Referral to DOJ for Approval to Suspend Collection Action. DOJ may

suspend collection activity on a debt with a principal balance exceeding $100,000 that is not
being serviced by the Department of the Treasury in its cross-servicing program and all offers
exceeding $500,000. If suspension is appropriate, then DFAS or the DoD Component must refer
such debts to DOJ using a CCLR and specifying the reasons for referral. Refer to paragraph
281201 for guidance on preparation and submission of the CCLR.
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281305. Termination of Collection Actions
A. General. Termination of collection action is a determination to cease

collection action with no intention to resume collection action at a later date. Any debt, based in
whole or in part on the violation of antitrust laws must be referred promptly to DOJ for a
decision on the disposition of the debt. Likewise, any claim involving fraud, the presentation of
a false claim, or misrepresentation on the part of the debtor or any party having an interest in the
debt, will not be terminated, but will be promptly referred to DOJ for a decision on the
appropriate disposition of the debt. DCOs will take no further action on debts referred to DOJ.
DOJ may retain the debt for processing or may return the debt with instructions for further
handling. Refer to 31 C.F.R. 903.3 and 903.4 for additional guidance on the termination of
collection action.
B. Approval Authorities
1. DFAS has authority to terminate collection action on debts referred

to DFAS when the principal amount does not exceed $100,000. DFAS will coordinate with the
2. DoD Components have authority to terminate collection action on


approve termination of collection action on debts with a principal amount of $500,000 or less
when the debt is being serviced by the Department of the Treasury in its cross-servicing
program.
4. DOJ has authority to approve termination of collection action on

debts with a principal balance exceeding $100,000 when the debt is not serviced by the
Department of the Treasury in its cross-servicing program and approval to terminate collection
action on all debts greater than $500,000.
C. Reasons to Terminate Collection Action. Active collection of a debt may

be terminated after all appropriate means of collection have been pursued and a determination is
made, based upon the results of collection activity, that the debt cannot be collected.
Termination results in removal of the debt from the active collection files and write-off from the
accounting records generally follows. Terminate collection activity when a determination is
made that any of the following conditions apply:
1. No substantial amount can be collected using all tools available;
2. The debtor cannot be located;
3. Costs of collection are anticipated to exceed amounts recoverable;
4. The debt is legally without merit;
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5. Enforced collection is barred by any applicable statute of
limitations;
6. Documentation indicates that further collection action would be

futile;
7. The debt cannot be substantiated; or
8. The debt has been discharged in bankruptcy.
D. Record of Terminated Accounts. Although a debt may be terminated for

collection activity, DFAS or the DoD Component must retain a record of the debt for the
purposes of:
1. Selling the debt, if the Department of the Treasury determines the

sale is in the best interest of the United States;
2. Pursuing collection activity at a later date in case there is a change

in the debtor’s status or a new collection tool becomes available;
3. Offsetting against future income or assets not available at the time of termination
of collection activity; and
4. Screening future applicants for prior indebtedness.
E. Termination for Bankruptcy. Generally, DFAS or the DoD Components

must terminate collection activity on a debt that has been discharged in bankruptcy, regardless of
amount. Subject to the provisions of the Bankruptcy Code, however, collection activity can
continue for any debt payments specified under a plan of reorganization. Offset and recoupment
rights may survive the discharge of the debtor in bankruptcy, and under some circumstances,
debts also may survive the discharge. For example, the debt of a known creditor of a debtor may
survive a discharge if the known creditor did not receive formal notice of the proceedings. As
with other bankruptcy issues, the DoD Component must seek the counsel of the supporting legal
office regarding debts or offsets that may survive the discharge of a debtor in bankruptcy.
F. Exception to Termination. When a significant enforcement policy is

involved or recovery of a judgment is a prerequisite to the imposition of administrative
sanctions, debts may be referred to DOJ for litigation even though termination of collection
action otherwise might be appropriate.
G. Referral to DOJ for Approval to Terminate Collection Action. DOJ may

terminate collection activity on debts with a principal balance exceeding $100,000 that are not
being serviced by the Department of the Treasury in its cross-servicing program and may
terminate collection activity on all debts exceeding $500,000. If termination is appropriate for
these debts, then DFAS or the DoD Component must refer such debts to DOJ using the CCLR
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and specifying the reasons for referral. Refer to paragraph 281201 of this chapter for guidance
on preparation and submission of CCLR.
281306. Suspension or Termination of Indebtedness From Deceased Debtors
Under 31 U.S.C. 3711 (f)(1), when deemed appropriate, the Secretary of Defense has
the authority to suspend or terminate an action by the Secretary or by the Secretary of a military
department to collect a claim against the estate of a service member who died while on active
duty with the Army, Navy, Air Force, Marine Corps, or Coast Guard during a period when the
Coast Guard is operating as a service in the Navy.
2814 STANDARDS FOR DETERMINING FINANCIAL POSITION OF DEBTOR
281401. General
Various actions within the debt collection process may require DCO to make decisions
based on the financial position of the debtor.
281402. Information to be Considered
The following information may be considered when determining the financial position of
the debtor:
A. Income from all sources and expenses for the debtor, spouse, and
dependents;
B. The extent that assets of the debtor, spouse, and their dependents are
available to meet the offset and essential subsistence expenses;
C. Whether subsistence expenses have been reduced to minimum essential

amounts;
D. The extent to which a debtor or spouse can borrow money to meet the
offset and minimum subsistence expenses; and
E. The extent to which the debtor, spouse, and dependents have other
exceptional expenses that should be taken into account and whether these types of expenses have
been minimized.
2815 DEBT WRITE-OFF AND CLOSE-OUT
Refer to Volume 4, Chapter 3 of this for guidance on debt write-off and close-out.
2816 REMISSION AND WAIVER OF INDEBTEDNESS
281601. Remission of Indebtedness Due From Military Members
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Title 10, U.S.C., sections 4837, 6161, and 9837 provide authority for the remission of
indebtedness due from a military member. This process is not available to DoD civilian
employees. Requests from Army and Air Force military members will be forwarded to their
respective services for processing. Requests from Navy and Marine Corps military members
will be submitted on a DD Form 2789 (Waiver/Remission of Indebtedness Application) and will
be forwarded to DFAS-IN, Department 3300 (Waiver/Remission), 8899 East 56th Street,
Indianapolis, IN 46249-3300 for processing.
281602. Waiver of Indebtedness Arising From Erroneous Payments
Title 5, U.S.C., section 5584, 10 U.S.C. 2774, and 32 U.S.C. 716 provide authority to
waive an indebtedness which is the result of an erroneous payment of pay or allowances or an
erroneous payment of travel, transportation or relocation expenses and allowances. All requests
for waiver of indebtedness for DoD civilians (current and retired) and military members (active,
reserve, retired and National Guard) will be submitted on a DD Form 2789 and will be
forwarded to DFAS-IN, Department 3300 (Waiver/Remission), 8899 East 56th Street,
Indianapolis, IN 46249-3300 for processing. Refer to DoD Instruction 1340.23, “Waiver
Procedures for Debts Resulting from Erroneous Pay and Allowances,” for additional guidance.
2817 REFUNDING PREVIOUSLY COLLECTED DEBTS AND LATE PAYMENT

CHARGES
281701. General
Occasionally, because of post-collection clarification regarding a debt, monies collected

for penalties, administrative costs, interest, and collection fees must be authorized for refund to
the debtor by the DoD Component or DCO. Such refunds occur for a variety of reasons, but
generally are based on a determination that the debt is invalid or should have been forgiven
under applicable law or regulation. When making a refund payment, the DoD Component or
DCO must prepare a Standard Form SF 1034 (Public Voucher for Purchases or Services Other
Than Personal), or other approved voucher and submit it for payment, along with documentation
from the debtor or other source(s) that establishes the former debtor’s claim against the
Government. The DoD Component or DCO must retain a copy of the voucher and supporting
documentation in the debtor’s case file.
281702. Determination of Refund Amount
The amount collected from the debtor that is subject to refund usually includes penalties,
administrative charges, and interest computed on the principal amount of the debt. Additional
fees will have to be considered for inclusion in the refund if the debt was collected by the
Department of the Treasury and/or a commercial collection agency. A debt refund might be
applied against a part, or to the entire amount, of the debt. When a debt is collected, the
principal debt amount is credited to the appropriation or other account owed the debt if the
appropriation/account is still open. If the appropriation/account is closed, then the collection
must be credited to receipt account 3200, “Collections of Receivables from Canceled Accounts.”
28-42
DoD 7000.14-R
*November 2012
A. Once DCO effects collection, the amounts received for penalty,
administrative charges, and interest are credited to a miscellaneous receipt account that is
prefixed by the appropriate departmental symbol (17, 21, 57, 96, or 97 for the Navy, Army, Air
Force, Corps of Engineers, and Defense, respectively).
B. When collection is effected through TOP, the fee added to the debt is
retained by the Department of the Treasury. The amount collected by offset (minus the amount
retained by the Department of the Treasury) is deposited to the appropriate appropriations and
accounts. If a refund is required, then the amount refunded to the debtor must be the total
amount collected by offset even, though a portion representing the Department of the Treasury’s
administrative fees was not returned to referring DCO.
C. When collection is made by a commercial collection agency, the amount

collected from the debtor includes an additional fee assessed on the total debt referred for
collection. The collection agency retains its fees and remits the remainder of the amount
collected from the debtor to DCO. The remaining amount represents debt principal, penalty,
administrative costs, and interest referred to the collection agency. These amounts are credited
to the appropriate appropriation(s) and account(s). If the debtor is entitled to a refund, then the
amount refunded must be the total amount collected, including the collection agency fee.
281703. Funding the Payment of Collected Debt Refunds
A. The refund of the amounts collected for principal debt, interest, penalty,
and administrative charges should be charged to the appropriation or account that was credited
with the collection. Any amount to be refunded that was credited to an appropriation or account
that subsequently has been closed, must be charged to the current fiscal year for the same
appropriation or account as allowed by law. For example, if the original principal debt were
collected into a military pay appropriation, the associated interest and administrative fees were
collected into 3210 (General Fund Proprietary Receipts, Defense Military, Not Otherwise
Classified), and the penalty was collected in 1099 (Fines, Penalties, and Forfeitures, Not
Otherwise Classified), then the refund will be charged to these same accounts for the amounts
originally collected.
B. The refund to the debtor for fees assessed and retained by the Department
of the Treasury or private collection agencies, must be charged to the applicable DoD
Component’s current year operating funds.
28-43
DoD 7000.14-R
*November 2012
Table 28-1. DoD Financial Management Regulation Volumes and Chapters on Debt Collection
DOD FINANCIAL MANAGEMENT REGULATION

VOLUMES AND CHAPTERS ON
DEBT COLLECTION
Category of Debtor Volume and Chapter
General Guidance on Receivables Volume 4, Chapter 3
Military Member (Active or Volume 7A, Chapter 50

Reserve) to include Retired and
Out-of-Service Volume 7B, Chapter 28
Volume 9, Chapter 8
Civilian Employee Volume 8, Chapter 8

(paid from appropriated funds)
Volume 9, Chapter 8
Civilian Employee Volume 13, Chapter 8

(paid from nonappropriated funds)
Contractor or vendor Volume 10, Chapter 18
Foreign Indebtedness Volume 6A, Chapter 12

Volume 15, Chapter 5
28-44
DoD 7000.14-R
*November 2012
Table 28-2. Selection of Hearing/Reconsideration Officials for DoD Component Debts
SELECTION OF HEARING/RECONSIDERATION OFFICIALS

FOR DOD COMPONENT DEBTS UNDER 5 U.S.C. 5514 (Note 1)
COLUMN A COLUMN B COLUMN C

R
U If the Creditor Component And the Debtor is Then obtain a hearing
L is the: employed by the: official from:
E
1 DFAS DFAS Any DoD Component
2 DFAS/DoD Component DoD Component Other DoD Component

(Note 2) (Note 3)
3 DFAS/DoD Component DFAS Other DoD Component

(Note 2) (Note 3)
4 DoD Component DFAS Other DoD Component
(Note 3)
5 DoD Component DoD Component DFAS/Other DoD
Component (Note 3)
6. Other DoD Component Other DoD Component DFAS/Any DoD
Component
7. NAFI NAFI, DFAS, DoD DFAS, Any DoD
Component Component, or Other
NAFI (Note 4)
Note 1. Contact DFAS-Indianapolis (DFAS-JFEA-IN) for guidance in cases with
circumstances other than those included in this table.
Note 2. DFAS and a DoD Component both are considered creditor Components in situations
when one makes payment for the other using the other’s appropriation. In this case, neither
the paying nor employing Component can provide the hearing official.
Note 3. Other DoD Component is one other than the creditor DoD Component identified in
Column A as the Creditor Component.
Note 4. Other NAFI is one other than the creditor NAFI identified in Column A.
28-45
DoD 7000.14-R
*November 2012
Figure 28-1. Debt Certification Statement
DEBT CERTIFICATION STATEMENT
Pursuant to Title 28, United States Code, Section 1746, I certify under the penalty of perjury that
to the best of my knowledge and belief that the debts submitted herewith are delinquent, valid
and legally enforceable in the amounts stated. The debts are not subject to any circumstances
that legally preclude or bar collection, including collection by offset. Records available do not
show that any debtor owing a debt has filed for bankruptcy protection.
________________ _______________________________________
Date Signature of Debt Certifying Official
Print Name:___________________________________________
Title:_________________________________
Office Symbol:_________________________
PREPARATION AND SUBMISSION INSTRUCTIONS
REQUIRED SIGNATORY: The submitting office’s director, deputy director, or

designee.
MANUAL DEBT SUBMISSION: Prepare and send a copy of the Certification

Statement along with each manual submission of debts.
ELECTRONIC DEBT SUBMISSION: Prepare and mail a copy of the Certification

Statement to cover the electronic submission of debts to: DCMO, DFAS-IN, Department
3300 (ATTN: Debt Establishment), 8899 E. 56th Street, Indianapolis, IN 46249-3300.
Prepare and mail a new Certification Statement whenever the signatory changes. For
those periodic electronic debt submissions when it is not necessary to reissue and mail a
paper copy Certification Statement (i.e., no change in signatory), e-mail the Certification
Statement to cover the electronically transmitted debts. Contact DCMO to obtain the
current e-mail address for submission of e-mailed certifications.
28-46
DoD 7000.14-R
*November 2012
Figure 28-2. Defense Debt Management System (DDMS) Debt Processing Steps
DEFENSE DEBT MANAGEMENT SYSTEM (DDMS) DEBT PROCESSING STEPS

DAY 1 ESTABLISH DEBT
SEE NOTE 1. IN DDMS
DAY 2 NOTIFY DEBTOR

BY LETTER
YES
DAY 31 COLLEC PROCESS
ASSESS INTEREST T? COLLECTION
RETROACTIVE TO DATE
OF DELINQUENCY.
SEE NOTE 2. NO
DAY 32 SEND 2nd LETTER

TO DEBTOR
YES
COLLEC PROCESS
T? COLLECTION
NO
NOTIFY CREDIT
DAY 62 BUREAU.
SEE NOTE 3
YES
COLLEC PROCESS
T? COLLECTION
ADD PENALTY FEE ON

DEBTS > 90 DAYS DAY 92
DELINQUENT
NO
REFER TO
TREASURY
ADD ADMINISTRATIVE FEE
OFFSET PROGRAM
(as appropriate) AND 1st PRIVATE
COLLECTION
AGENCY (PCA)
28-47
DoD 7000.14-R
*November 2012
(Continued)
YES
COLLECT? PROCESS
COLLECTION
NO
DAY 314
ADD ADMINISTRATIVE FEE
(as appropriate) REFER TO 2nd PCA
YES
COLLECT?
COLLEC PROCESS
T? COLLECTION
NO
NLT 1 YEAR REFER TO

ADD ADMINISTRATIVE FEE DEPARTMENT OF
(as appropriate) JUSTICE
YES
COLLECT?
COLLEC PROCESS
T? COLLECTION
NO
WRITE-OFF DEBT AND

CLASSIFY AS CURRENTLY
NOT COLLECTIBLE (CNC).
MAINTAIN DEBT AT
TREASURY FOR
ADMINISTRATIVE OFFSET
SEE NOTE 4.
YES
COLLECT? PROCESS
COLLECTION
NO
CLOSE-OUT DEBT
SEE NOTE 5.
28-48
DoD 7000.14-R
*November 2012
NOTES:
1. The number of days depicted in this chart reflects the approximate number of days that a debt
has been recorded in DDMS.
2. Interest is accrued and assessed monthly throughout the life of a delinquent debt.
3. Debts are reported to credit bureaus no earlier than 60 days from date debtor is notified of the
intention to report the debt to a credit bureau. DCMO includes this notice in the initial letter to
the debtor (Day 2).
4. Refer to Volume 4, Chapter 3 for guidance on write-off and classification of debt as CNC.
5. Refer to Volume 4, Chapter 3 for guidance on close-out of debts.
28-49

Dod 7000.14-R Financial Management Regulation Volume 5, Chapter 28

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VOLUME 5, CHAPTER 28: “MANAGEMENT AND COLLECTION OF INDIVIDUAL

SUMMARY OF MAJOR CHANGES

All changes are denoted by blue font.

Substantive revisions are denoted by an * symbol preceding the section, paragraph,

Unless otherwise noted, chapters referenced are contained in this volume.

Hyperlinks are denoted by bold, italic, blue and underlined font.

The previous version dated September 2010 is archived.

PARAGRAPH EXPLANATION OF CHANGE/REVISION PURPOSE

VOLUME 5, CHAPTER 28: “MANAGEMENT AND COLLECTION OF INDIVIDUAL

280101. Purpose ................................................................................................................. 6

2802 GENERAL GUIDANCE ............................................................................................... 6

280201. General Legislative Authority .............................................................................. 6

280301. General ................................................................................................................. 8

2804 NOTIFICATION TO DEBTOR .................................................................................... 9

2805 RESPONDING TO DEBTOR INQUIRIES ................................................................ 11

2806 INTEREST, PENALTY, AND ADMINISTRATIVE CHARGES ............................. 11

2807 INSTALLMENT COLLECTION ................................................................................ 11

280701. Installment Criteria ............................................................................................. 11

280704. Installment Payment Delinquency ..................................................................... 12

280705. Installment Payment Application to Multiple Debts .......................................... 12

2808 ADMINISTRATIVE AND SALARY OFFSET FOR COLLECTION OF

280801. General ............................................................................................................... 13

2809 COLLECTION AND PROCESSING OF INDIVIDUAL OUT–OF–SERVICE

280901. General ............................................................................................................... 19

2810 RECONSIDERATION AND HEARINGS FOR ADMINISTRATIVE OFFSETS .... 23

281001. General ............................................................................................................... 23

2811 BANKRUPTCY DEBTS ............................................................................................. 26

281101. Bankruptcy Petition Filed................................................................................... 26

281102. Proof of Claim .................................................................................................... 26

281104. Offset and Recoupment ...................................................................................... 27

2812 DEBT REFERRALS OUTSIDE THE DEPARTMENT OF DEFENSE .................... 27

281201. Referrals to DOJ ................................................................................................. 27

2813 DEBT COMPROMISE, SUSPENSION, AND TERMINATION .............................. 33

281301. General ............................................................................................................... 33

2814 STANDARDS FOR DETERMINING FINANCIAL POSITION OF DEBTOR ....... 41

281401. General ............................................................................................................... 41

2815 DEBT WRITE-OFF AND CLOSE-OUT .................................................................... 41

2816 REMISSION AND WAIVER OF INDEBTEDNESS ................................................. 41

281601. Remission of Indebtedness Due From Military Members ................................. 41

2817 REFUNDING PREVIOUSLY COLLECTED DEBTS AND LATE PAYMENT

281701. General ............................................................................................................... 42

Figure 28-1. Debt Certification Statement ............................................................................... 46

MANAGEMENT AND COLLECTION OF INDIVIDUAL DEBT

280103. Internal Controls

2802 GENERAL GUIDANCE

280201. General Legislative Authority

A. Where a specific statutory authority applies to the collection of a particular

B. The “Federal Claims Collection Act of 1966” gave agencies certain

280202. Debt Management Program

280203. Prompt Collection of Debt

280204. Prevention of Indebtedness

280205. Method of Payment

280206. DoD Debtor Information Exchange and Debt Collection Partnership

DCOs must participate in sharing information concerning delinquent debtors. DCOs

280207. Duplication of Administrative Proceedings

Nothing in this chapter or FCCS requires the omission or duplication of administrative

*280208. No Private Right Created

280209. Accounting Entries

2803 DEBT COLLECTION AND RECOVERY TOOLS FOR DELINQUENT DEBTS

280302. Offset by DoD and/or the Department of the Treasury

A. Administrative and Salary Offset by DoD. Refer to section 2808 for