| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Attorney general--The Office of the Attorney General
of Texas, acting through the Bankruptcy and Collections Division of
the agency.
(2) Debtor--Any person or entity liable or potentially
liable for an obligation owed to the state or a state agency or against
whom a claim or demand for payment has been made.
(3) Delinquent--Payment is past due by law or by customary
business practice, and all conditions precedent to payment have occurred
or been performed.
(4) Make demand--To deliver or cause to be delivered
by United States mail, first class, a writing setting forth the nature
and amount of the obligation owed to the agency. A writing making
demand is a "demand letter."
(5) Obligation--A debt, judgment, claim, account, fee,
fine, tax, penalty, interest, loan, charge, or grant.
(6) Security--Any right to have property owned by an
entity with an obligation to a state agency sold or forfeited in satisfaction
of the obligation; and any instrument granting a cause of action in
favor of the State of Texas and/or the agency against another entity
and/or that entity's property, such as a bond, letter of credit, or
other collateral that has been pledged to the agency to secure an
obligation.
(7) State agency--Any agency, board, commission, institution,
or other unit of state government.
(b) Uniform guidelines for state agencies in collecting
delinquent obligations.
(1) A state agency shall adopt procedures to establish
and determine the liability of each person responsible for the obligation,
whether that liability can be established by statutory or common law.
Agency records shall contain and reflect the identity of all persons
liable on the obligation or any part thereof. All agency collection
procedures shall apply to every debtor, subject to reasonable tolerances
established by the agency. (See paragraph (8) of this subsection.)
(2) A state agency shall adopt procedures to ensure
that agency records reflect the correct physical address of the debtor's
place of business, and, where applicable, the debtor's residence.
Where a fiduciary or trust relationship exists between the agency
(or the state) as principal and the debtor as trustee, an accurate
physical address shall be maintained. A post office box address should
not be used. Agency records may reflect a post office box where it
is impractical to obtain a physical address, or where the post office
box address is in addition to a correct physical address maintained
on the agency's books and records.
(3) All demand letters should be mailed in an envelope
bearing the notation "address correction requested" in conformity
with 39 Code of Federal Regulations, Chapter III, Subchapter A, Part
3001, Subpart C, Appendix A, §911. If an address correction is
provided by the United States Postal Service, the demand letter should
be re-sent to that address prior to the referral procedures described
herein. Demand should be made upon every debtor prior to referral
of the account to the attorney general. The final demand letter should
include a statement, where practical, that the debt, if not paid,
will be referred to the attorney general.
(4) Where state law allows an agency to record a lien
securing the obligation, the agency shall file the lien in the appropriate
records of the county where the debtor's principal place of business,
or, where appropriate, the debtor's residence, is located or in such
county as may be required by law. The lien shall be filed as soon
as the obligation becomes delinquent or as soon as is practicable.
After referral of the delinquency to the attorney general, any lien
securing the indebtedness may not be released, except on full payment
of the obligation, without the approval of the attorney representing
the agency in the matter.
(5) Where practicable, agencies shall maintain individual
collection histories of each account in order to document attempted
contacts with the debtor, the substance of communications with the
debtor, efforts to locate the debtor and his assets, and other information
pertinent to collection of the delinquent account.
(6) Prior to referral of the obligation to the attorney
general, the agency shall:
(A) verify the debtor's address and telephone number;
(B) transmit no more than two demand letters to the
debtor at the debtor's verified address. The first demand letter should
be sent no later than 30 days after the obligation becomes delinquent.
The second demand letter should be sent no sooner than 30 days, but
not more than 60 days, after the first demand letter. Where agency
procedures, statutory mandates, or the requirements of this section
indicate that a lawsuit on the account may be filed by the Attorney
General, the demand letters shall so indicate;
(C) verify that the obligation is not legally uncollectible
or uncollectible as a practical matter. Agencies shall adopt procedures
to ensure that referred obligations are not uncollectible. By way
of example, the following illustrations apply.
(i) Bankruptcy. Agencies should prepare and timely
file a proof of claim, when appropriate, in the bankruptcy case of
each debtor, subject to reasonable tolerances adopted by the agency.
Copies of all such proofs of claims filed should be sent to the attorney
general absent the granting of a variance. Agencies shall maintain
records of notices of bankruptcy filings, dismissals and discharge
orders received from the United States bankruptcy courts to enable
the agency to ascertain whether the collection of the claim is subject
to the automatic stay provisions of the bankruptcy code or whether
the debt has been discharged. Agencies may seek the assistance of
the attorney general in bankruptcy collection matters where necessary,
including the filing of a notice of appearance and preparation of
a proof of claim.
(ii) Limitations. If the obligation is subject to an
applicable limitations provision that would prevent suit as a matter
of law, the obligation should not be referred unless circumstances
indicate that limitations has been tolled or is otherwise inapplicable.
(iii) Corporations. If a corporation has been dissolved,
has been in liquidation under Chapter 7 of the United States Bankruptcy
Code, or has forfeited its corporate privileges or charter, or, in
the case of a foreign corporation, had its certificate of authority
revoked, the obligation should be referred unless circumstances indicate
that the account is clearly uncollectible.
(iv) Out-of-state debtors. If the debtor is an individual
and is located out-of-state, or outside the United States, the matter
should not be referred unless a determination is made that the domestication
of a Texas judgment in the foreign forum would more likely than not
result in collection of the obligation, or that the expenditure of
agency funds to retain foreign counsel to domesticate the judgment
and proceed with collection attempts is justified.
(v) Deceased debtors. If the debtor is deceased, agencies
should file a claim in each probate proceeding administering the decedent's
estate. If such probate proceeding has concluded and there are no
remaining assets of the decedent available for distribution, the delinquent
obligation should be classified as uncollectible and not be referred.
In cases where a probate administration is pending, or where no administration
has been opened, all referred obligations should include an explanation
of any circumstances indicating that the decedent has assets available
to apply toward satisfaction of the obligation.
(7) Not later than the 90th day after the date an obligation
becomes delinquent, the agency shall report the uncollected and delinquent
obligation to the attorney general for further collection efforts
as hereinafter provided. See §2107.003, Texas Government Code.
(8) Agencies shall adopt reasonable tolerances, subject
to review by the attorney general, below which an obligation shall
not be referred. Factors to be considered in establishing tolerances
include the size of the debt; the existence of any security; the likelihood
of collection through passive means such as the filing of a lien where
applicable; expense to the agency and to the attorney general in attempting
to collect the obligation; and the availability of resources both
within the agency and within the Office of the Attorney General to
devote to the collection of the obligation.
(9) An agency should utilize the "warrant hold" procedures
of the Comptroller of Public Accounts authorized by the Texas Government
Code, §403.055, to ensure that no treasury warrants are issued
to debtors until the debt is paid. Please see Accounting Policy Statement
28, "Reporting of Debts and Certain Tax Delinquencies to the State,"
issued April 16, 1999 and reissued October 6, 2000 available on the
Comptroller of Public Accounts' website at www.cpa.state.tx.us.
(c) Referral to attorneys.
(1) Suit on the obligation by in-house attorneys.
(A) Agencies seeking to use in-house attorneys to collect
delinquent obligations through court proceedings must submit a written
request to the attorney general's Bankruptcy and Collections Division.
Upon written approval, a state agency may file suit to collect a delinquent
obligation through an attorney serving as a full-time employee of
the agency. Where circumstances make it impractical to secure attorney
general approval for every delinquent obligation upon which a lawsuit
is to be filed, a state agency may apply to the attorney general for
an authorization to bring suit on particular types of obligations
through attorneys employed full-time by the agency. Such authorization,
if given, must be renewed at the beginning of each fiscal year.
(B) After an obligation is referred to agency attorneys
employed as in-house counsel, the obligation shall be reduced to judgment
against all entities legally responsible for the obligation where
the lawsuit and judgment will make collection of the obligation more
likely and the expenditure of agency resources in recovering judgment
on the obligation is justified.
(C) Where authorized by law, the agency shall plead
for and recover attorney's fees, investigative costs, and court costs
in addition to the obligation.
(D) Every judgment taken on a delinquent obligation
should be abstracted and recorded by the agency in every county where
the debtor: owns real property; operates an active business; is likely
to inherit real property; owns any mineral interest; or has maintained
a residence for more than one year.
(2) Referral to the attorney general.
(A) Agencies are encouraged to explore the exchange
of accounts with the Attorney General by computer tape or other electronic
data transfer and to discuss any variances as may be appropriate.
The agency and the Attorney General may agree upon an exchange of
certain minimum account information necessary for collection efforts
by the Attorney General.
(B) Agencies may refer individual accounts to the attorney
general after the procedures set forth in subsection (b)(6) - (8)
of this section. Individual accounts referred to the attorney general
should include by the following:
(i) copies of all correspondence between the agency
and the debtor;
(ii) a log sheet (see subsection (b)(5) of this section)
documenting all attempted contacts with the debtor and the result
of such attempts;
(iii) a record of all payments made by the debtor and,
where practicable, copies of all checks tendered as payment;
(iv) any information pertaining to the debtor's residence
and his assets; and
(v) copies of any permit application, security, final
orders, contracts, grants, or instrument giving rise to the obligation.
(C) Delinquent accounts upon which a bond or other
security is held shall be referred to the attorney general no later
than 60 days after becoming delinquent. All such accounts where the
principal has filed for relief under federal bankruptcy laws shall
be referred immediately, since collection of the security may obviate
the need to file a claim or to appear in the bankruptcy case.
(D) The attorney general may decide that a particular
obligation or class of obligations may be assigned after referral
to the appropriate division within the Office of the Attorney General.
(3) Referral to collection firms or private attorneys.
(A) Prior approval of attorney general. Except as provided
by §2107.003, Texas Government Code, no agency may contract with,
retain, or employ any person other than a full-time employee of the
agency to collect a delinquent obligation without prior written approval
of the attorney general. Any existing arrangements must receive the
written approval of the attorney general to be renewed or extended
in any fashion.
(i) Approval of contract with private firm or attorney.
Prior to contracting with, retaining, or employing a person other
than a full-time employee of the agency to collect a delinquent obligation,
an agency must submit a proposal to the attorney general requesting
the attorney general to collect the obligation(s). Any agency contracting
with any person other than a full-time employee of the agency for
the collection of a delinquent obligation must submit the proposed
contract to the attorney general for written approval. The proposal
must disclose any fee that the agency proposes to pay the private
collection firm or attorney. The attorney general may elect to undertake
representation of the agency on the same or Cont'd... |
