---
kind: "section"
citation: "31 C.F.R. § 903.5"
title: "31"
number: "903.5"
heading: "Discharge of indebtedness; reporting requirements."
url: "https://uscodex.org/cfr/31/903.5"
---

# §903.5. Discharge of indebtedness; reporting requirements.

- (a) Before discharging a delinquent debt (also referred to as a close out of the debt), agencies shall take all appropriate steps to collect the debt in accordance with [31 U.S.C. 3711(g)](/usc/31/3711.md?p=g), including, as applicable, administrative offset, tax refund offset, Federal salary offset, referral to Treasury, Treasury-designated debt collection centers or private collection contractors, credit bureau reporting, wage garnishment, litigation, and foreclosure. Discharge of indebtedness is distinct from termination or suspension of collection activity under [part 903 of this title](/cfr/31/part903.md) and is governed by the Internal Revenue Code. When collection action on a debt is suspended or terminated, the debt remains delinquent and further collection action may be pursued at a later date in accordance with the standards set forth in this chapter. When an agency discharges a debt in full or in part, further collection action is prohibited. Therefore, agencies should make the determination that collection action is no longer warranted before discharging a debt. Before discharging a debt, agencies must terminate debt collection action.
- (b) [Section 3711(i)](/cfr/31/3711.md?p=i), [title 31](/cfr/31.md), United States Code, requires agencies to sell a delinquent nontax debt upon termination of collection action if the Secretary determines such a sale is in the best interests of the United States. Since the discharge of a debt precludes any further collection action (including the sale of a delinquent debt), agencies may not discharge a debt until the requirements of [31 U.S.C. 3711(i)](/usc/31/3711.md?p=i) have been met.
- (c) Upon discharge of an indebtedness, agencies must report the discharge to the IRS in accordance with the requirements of 26 U.S.C. [6050P](/usc/26/6050P.md) and [26](/usc/26/26.md) CFR 1.6050P-1. An agency may request Treasury or Treasury-designated debt collection centers to file such a discharge report to the IRS on the agency's behalf.
- (d) When discharging a debt, agencies must request that litigation counsel release any liens of record securing the debt.

## Notes

### Authority

Authority: 31 U.S.C. 3711.

### Source

Source: 65 FR 70403, Nov. 22, 2000, unless otherwise noted.