BOP Program Statement 2013.04 § 4

The following methods are available for the collection of delinquent debt: Administrative

Offset, Salary Offset and Litigation for Salary Offset, and IRS Offset Program for former

employees.

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When the agency becomes aware that a debtor has filed for bankruptcy protection, Agency legal

counsel should be consulted for legal guidance prior to continuing any collection activities.

a. Administrative Offset For Vendors. Administrative Offset is used to recover debts by

withholding payment to a debtor for other outstanding obligations. If the institution plans to use

Administrative Offset to collect the debt, the debtor must be notified of the intent in any one of

the three demand letters.

The letter(s) must give the debtor the opportunity to:

■ Make voluntary repayment.

■ Inspect and copy records related to the debt.

■ Request a review of the debt.

■ Enter into a repayment agreement.

For example, an institution is owed $150 from a vendor for returned merchandise. The vendor

has not refunded the institution the $150 and 30 days has passed. The institution sends the

vendor the required notice(s) and informs the vendor of the institution’s intent to collect the $150

through Administrative Offset. The institution has since purchased more merchandise from this

vendor and has received a bill for the merchandise. The institution can subtract $150 from the

bill and pay the balance to the vendor. The $150 debt has now been collected.

b. Administrative Offset for Employees. When it becomes known that an employee is leaving

Government service for any reason, it must be determined if the employee is indebted to the

Bureau (i.e.; travel advance, salary advance, repayment of relocation allowances for failure to

fulfill 12-month service agreement, relocation incentives for failure to fulfill 18-month service

agreement). This shall occur during the employee’s exit interview. The last department the

employee is to check with is the Office of Financial Management (OFM). OFM checks its

records and the exit interview sheet (“merry-go-round”) to see if any debts exist.

If the employee is indebted, OFM shall demand immediate repayment in full. If payment is not

made, the Business Administrator shall prepare a memorandum for the CEO’s signature

requesting the Human Resource Management Office (HRM) submit a request to the

Consolidated Processing unit (CPU) via a MAGIC Helpdesk ticket to hold final payment, lump

sum payment, and retirement on the individual.

c. Salary Offset. In accordance with 28 CFR §11.8, Salary Offset shall be used to recover

delinquent debts owed by current Federal employees, including employees who transfer from the

BOP to another Federal agency. Fifteen percent of the employee’s disposable income per pay

period must be collected through Salary Offset until the debt is paid in full. The debt can also be

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referred to DOJ to obtain a judgment. This judgment will allow for the collection of up to 25

percent of the employee’s disposable income per pay period.

(1) Disposable Income Calculation. Disposable income is the part of the pay remaining after

the following deductions:

■ Properly withheld Federal, state, or local income tax as required by law if the amounts

withheld are not greater than that which would be withheld if the individual claimed all

dependents to which the individual is entitled.

■ Health insurance premiums, including Medicare.

■ Normal retirement contributions, including contributions to the Thrift Savings Fund. Any

amounts voluntarily contributed toward additional retirement benefits are considered to be

supplementary and not excluded.

■ Normal life insurance premiums, not including amounts deducted for supplementary

coverage.

Payment plans shall not be accepted for employee debt. Salary Offset must be used.

(2) Employee Salary Offset Procedures. In accordance with 28 CFR §11.8, the Business

Administrator prepares a memorandum to the HRM requesting Salary Offset for the employee.

The memorandum must include the total dollar amount of the debt. The local HRM will submit

a request to the CPU via a MAGIC Helpdesk ticket to initiate Salary Offset Procedures for the

debtor.

Once the offset has been established, NFC will begin collecting the debt, based on the type of

debt. There are two types of debts; minor indebtedness and major indebtedness. A minor

indebtedness is less than 15 percent of disposable income and a “one-time” salary offset. A

major indebtedness is more than 15 percent of disposable pay and is deducted each pay period

until the debt is satisfied.

As the biweekly collections are made, the collections will be applied first to the interest that has

accrued on the debt, then to the principal. Any amount remaining unpaid after NFC has

completed the payroll deduction to collect the principal amount shall be collected directly from

the employee in one lump sum.

If the remaining debt cannot be collected from the employee, refer the debt to NFC for salary

offset. In most cases, the amount should be small enough to be considered a minor indebtedness;

NFC will collect the debt in one deduction.

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If the CEO wants collection in excess of 15 percent, a request must be sent to the Debt

Management Officer for a determination. If the Debt Management Officer determines that the

debt should be referred to DOJ for a judgment, Accounting Operations, Finance Branch, shall

prepare and send a Claims Collection Litigation Report (CCLR) to DOJ (refer to

https://www.justice.gov/sites/default/files/jmd/legacy/2014/05/26/cclr-form-fillable.pdf. This

form can be reproduced locally. For Accounting Operations to complete the CCLR correctly, the

CEO’s request must include the CCLR with the following information filled in:

■ Debtor’s name and address, block 4.

■ Debtor’s Social Security Number, block 4.

■ The date the debtor originally defaulted on the obligation or the date of the last payment on

the debt that caused default, block 7.

■ Whether the debtor has applied for chapter 7, 11, 12, or 13 bankruptcy, block 8c.

■ Information on the individual debtor, blocks 12-21.

Instructions on how to fill out each block on the CCLR are included at

(https://www.justice.gov/sites/default/files/jmd/legacy/2014/08/15/claims-collection-litigation-

report-instructions.pdf).

(3) Additional Information. In addition to the CCLR, the following information must also be

sent to DOJ:

■ Name, address, Social Security Number, current place of employment, and debtor’s salary,

all of which have been verified within six months of the referral.

■ Evidence that the debtor has the ability to pay a judgment or the potential to repay

(employment data, property, other income) and that a judgment is needed to protect the

Government’s interest.

■ Certificate of Indebtedness (BP-A1112) signed by the Debt Management Officer.

■ Copies of relevant account information documents.

■ A checklist or report of prior collection actions taken.

■ A credit report that is less than six months old at referral, which may be obtained through the

Federal Supply Schedule.

(4) Requests To/From Other Agencies. Requests for Salary Offset from other Federal

agencies shall be honored. In addition, if an employee transfers from the BOP to another Federal

agency, the BOP location shall request Salary Offset on that employee from the new Federal

employer.

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The request for Salary Offset to the debtor’s employing agency will occur after the notification

and due process period have ended and the debt is upheld, remains unchallenged, or

arrangements for voluntary repayment in full of the debt cannot be reached. The institution must

certify, in writing, the following facts to the debtor’s employing agency:

■ That the employee owes the debt.

■ The amount and basis of the debt.

■ Date on which payment was due.

■ That all due process steps have been taken.

■ Date the Government’s right to collect the debt first began.

■ Amount or percentage of disposable pay to be collected each pay period and the number of

installments.

d. IRS Offset. IRS Offset is used to recover delinquent debt of former employees by

withholding all or part of a Federal income tax refund. The IRS collects the money from tax

refunds and returns the money, less the IRS servicing fee, to the agency. The DOJ Debt

Accounting Operations Group (DAOG) is the host organizer for all DOJ agencies participating

in the IRS Offset Program. Accounting Operations, Finance Branch, manages the BOP IRS

Offset Program. The guidelines that the BOP must adhere to are issued by DAOG. The Debt

Management Officer determines the referral of debt to the IRS Offset Program after the debt has

been referred to the Central Office from the Regional Office for collection action.

(1) Criteria for IRS Offset. The criteria the Debt Management Officer shall use to determine if

a debt qualifies for the IRS Offset Program are:

■ The debt must be a past due obligation of an individual (excluding inmates).

■ The debt must be delinquent more than three months by January 1 of the coming tax year, but

less than 10 years, unless it is a judgment debt.

■ The debt must be at least $25.00.

■ A judgment has been obtained or administrative and salary offset remedies have been

exhausted for the debt.

■ The debt has been reported to a credit bureau, unless the debt is less than $100.

■ Agency records do not contain evidence that the debtor has filed bankruptcy under Title 11

or that, at the time of referral of the debt for offset, the automatic stay is not in effect and the

debt was not discharged.

(2) Information to Forward. Once the Debt Management Officer decides which debts are to

be referred to the IRS Offset Program, Accounting Operations will compile a list of these debts

and forward the list, with the following information, to DAOG:

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■ Debtor’s name, Social Security Number, and last known address – without this information,

names may not be submitted.

■ Reason for the debt – the reason should state the purpose and any available evidence that the

debt is legitimate.

■ Original amount of the debt – this should include the amount collected, how collected, and

amount outstanding.

■ Summary of collection efforts – copies of all correspondence to and from the debtor.

Even though a debt has been referred to the IRS for offset, collection efforts are to continue on

these accounts unless they have been referred to DOJ for litigation.

(3) IRS Offset Procedures. The IRS Offset is processed as follows:

■ DAOG forwards a pre-offset list to IRS for matching.

■ IRS returns the tape of eligible debtors to DAOG when matches occurred on last name and

Social Security Number and provides the last address of the debtor.

■ Accounting Operations receives a list from DAOG where matches occurred.

■ Debtor receives a 60-day letter from DAOG.

■ Debtor must submit evidence of an erroneous bill to Accounting Operations if he/she

contests the validity of the debt.

■ Accounting Operations submits a list of debts to be removed from the offset program or a list

of reduced balances to DAOG.

■ DAOG submits a certification tape to IRS for the flagging of accounts for offset.

IRS notifies the debtor in writing when an offset of the tax refund has occurred, how much

money was offset, and to whom the money was directed. Any remaining debt balance referred

into the program in the previous tax year that still meets the above criteria must be referred again

in subsequent years at the Debt Management Officer’s discretion.