Frequently Asked Questions
debts
1. What is the definition of a delinquent debt?
Delinquent debt is defined to
mean:
(i) a single account or monetary obligation
which is at least $50 owed by a debtor to a local government; or,
(ii) a group of accounts or single monetary obligations,
each of which is less than $50, that have been combined to total at least $50,
owed by the same debtor to a local government; or,
(iii) a combination of two or more accounts or monetary
obligations, one of which is at least $50 and the remainder of which when added
together equal less than $50, owed by the same debtor to a local government.
In addition, the Clearinghouse requires that a period of 60 days must have
elapsed between the time the local government declares all of the applicable
accounts or monetary obligations delinquent and the date the delinquent debt is
submitted to the Clearinghouse for collection.
For example, a debtor owes $45 for an ambulance trip, $50 for one
year’s delinquent property tax on one parcel, and $25 for water and sewer
service. The local government would submit two debts for the debtor—the
$50 property tax as one debt and the combined $70 (ambulance and water and
sewer) for the second.
As another example, a debtor owes property taxes in the amount of $25
for an automobile, $10 for a vacant land parcel for 2 consecutive tax years ($20
total), and $55 for a house. All of these tax debts can be combined under the
debtor’s social security number and submitted to the Clearinghouse.
2. If a person has multiple debts each less than the $50 minimum required to file, can they be combined together to reach the required amount for filing?
Any debts from any time period under the same SSN can be combined to meet the $50 minimum. Debts in excess of $50, even if from the same debtor and under the same SSN, must be submitted individually. We DO NOT recommend combining tax debts with any other type of debts.
3. How far back can you go to collect bad debts?
There are state statues of limitations and we suggest you consult your attorney. Most local governments are attemptingto collect on taxes for 10 years and 3 years on any other type of debt.
4. Who adds the $15 local collection assistance fee?
The Clearinghouse will add the $15 fee; the local government should only submit the actual delinquent debt amount. The local government is required to notify the debtor of the $15 fee in the notification letter.
5. What debts will incur the $15 local collection assistance fee?
All debts successfully setoff, whether collected in full or in part, will incur the $15 fee. If the same debtor has multiple debts in excess of $50, each debt will incur the $15 fee. If the local agency combined debts under the same SSN to meet the $50 minimum, only one $15 fee will be assessed.
6. Does the North Carolina Department of Revenue add a fee to the debt?
Yes, the North Carolina Department of Revenue is legislated to add a flat $5.00 fee to the tax refund amount that is setoff. If a debtor files multiple tax returns in the same year and has at least one debt over $50, then a $5.00 fee is charged for each tax return processed by the Department of Revenue.
7. What is the statutory liability of a local government for submitting a debt without providing required notice to the debtor?
The local government must return all setoff money, including the local collection assistance fee of $15 and the Department of Revenue’s collection assistance fee. Keep good documentation to show how error occurred.
8. What is the statutory liability for collecting from the wrong person?
The local government must return all setoff money, including the local collection assistance fee of $15 and the Department of Revenue’s collection assistance fee. Keep good documentation to show how error occurred. If this occurs, the local government can contact the Clearinghouse who will work with the Department of Revenue in generating a letter requesting all funds recovered for this debtor. The Clearinghouse will return its fees as will the Department of Revenue.
9. Does the notification letter have to be sent “certified mail”?
No, but you should keep good documentation of notices sent. Keep any returned mail as required by state retention laws. We suggest you keep a copy of the electronic file that created the letters as proof. This will show you made reasonable efforts to contact the debtor. A large percentage of letters sent will be returned. However, not only will debtors who had their letter returned due to a bad address object and even appeal, but many who receive the letter will deny that they did.
10. Does the law allow us to cross state lines and share/seek information from the South Carolina debt setoff system?
No
11. What happens if a bad debt is reported and the person or persons filed for bankruptcy prior to sending the transmission for collection?
Do not send the individuals to the Clearinghouse.
12. What happens if a bad debt is reported and the person or persons file for bankruptcy after you have sent the transmission for collection?
Modify the debt amounts to $.00 and send an update to the Clearinghouse.
13. What happens if the debtor obtained a loan from a tax preparation company but the refund is setoff?
The tax preparation company filing on behalf of the debtor must deal with the debtor directly for loan repayment.
14. Is the Memorandum of Understanding a contract that must be approved by the Board/Council?
The Memorandum of Understanding is a contract and we strongly advise resolution of the Board/Council to join the program.
15. What should be done if a debtor files an appeal and the collection process has already been started? What is the liability to the town/county?
None, the town/county could review the case and delete it from the process if a valid error has been made.
16. Can you have more than one person assigned to perform data entry into the Client application system developed by the Clearinghouse?
Yes, each person entering data may be assigned a Username and password by the Local Coordinator. However, there will be only one identification number (Entity Code) per local government. The Username and password code will also help you identify who keyed certain items by viewing the History log
17. Can a city, town, or county have more than one contract and more than one identification number (Entity Code)?
No, only one contract per local government entity
18. How do you handle a debt if there are two parties involved? Do you file for collection in both names? Do you file for partial payment under each name?
File under one name and SSN, and it usually would be the husband.
19. What if a debt was more than $50 and was setoff but the setoff amount was not enough to pay it off, does it continue to be eligible for future setoff?
As long as the remaining debt balance is over $50 it will be sent each Tuesday to the Department of Revenue and the Education Lottery.
20. Does the Clearinghouse combine debts less than $50 and submit tem to the Department of Revenu enad Education Lottery?
No, the Clearinghouse treats each debt separately and does not combine, even if one or all are less than $50. The Local Government is repsonsible for all combiining of debts.