FAQ 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 can be combined under the debtor’s social security number and submitted to the Clearinghouse.

2. If a person has three tax 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.

3.  How far back can you go to collect bad debts?

Statue of limitations (see your attorney).

4.  Who adds the $15 local collection assistance fee?

The Clearinghouse will add the $15 fee; the local government should only submit the actual debt.  The local government is required to notify the debtor of the $15 fee.

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, 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.  The $5.00 amount is effective January 2005. 

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.

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 in the file. This will show you made reasonable efforts to contact the debtor.

10. Does the law allow us to cross state lines and share/seek information from the South Carolina database?

No

11. What happens if a bad debt is reported and the person or persons has 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 has filed for “rapid refund”?

The Rapid Refund business filing on behalf of the debtor has the problem.

14. Is the letter of understanding a contract that must be approved by the  Board/Council?

The letter 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 userid and password by the Local Coordinator. However, there will be only one identification number (Entity Code) per local government.  The userid 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.