§ 1177.32 Discharge of indebtedness; reporting requirements.

(a) Before discharging a delinquent debt (also referred to as a close out of the debt), NEH will take all appropriate steps to collect the debt in accordance with 31 U.S.C. 3711(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 this subpart and is governed by the Internal Revenue Code. When NEH suspends or terminates collection action on a debt, the debt remains delinquent and NEH may pursue further collection action at a later date, in accordance with the standards set forth in this part. When NEH discharges a debt in full or in part, further collection action is prohibited. Therefore, NEH will make the determination that collection action is no longer warranted before discharging a debt. NEH must also terminate debt collection action before discharging a debt. (b) Section 3711(i), title 31, United States Code, requires NEH 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), NEH may not discharge a debt until it meets the requirements of 31 U.S.C. 3711(i). (c) Upon discharge of an indebtedness, NEH must report the discharge to the IRS in accordance with the requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P-1. NEH may request Treasury or Treasury-designated debt collection centers to file such a discharge report to the IRS on NEH's behalf. (d) When discharging a debt, NEH must request that litigation counsel release any liens of record securing the debt.