CFR > Title 31 - Money and Finance: Treasury > SUBTITLE B—Regulations Relating to Money and Finance > CHAPTER II—FISCAL SERVICE, DEPARTMENT OF THE TREASURY (parts 200 to 391) > SUBCHAPTER A—FINANCIAL MANAGEMENT SERVICE (parts 200 to 285) > PART 256—OBTAINING PAYMENTS FROM THE JUDGMENT FUND AND UNDER PRIVATE RELIEF BILLS > SUBPART C—Debt Collection (§256.20 to §256.22) > 256.22—How does FMS set off an award under 31 U.S.C. 3728?

256.22—How does FMS set off an award under 31 U.S.C. 3728?

The setoff statute establishes a two-step process to collect debts that are owed to the United States. If an agency notifies FMS of a debt for which a court has issued a judgment against a debtor in favor of the United States, or for which the IRS has issued a tax levy pursuant to 26 U.S.C. 6331, then FMS will automatically set off the debt from the payment. If the debt owed to the United States has not been judicially determined, then FMS must notify the claimant of the debt and request the debtor's consent to a setoff. If the debtor consents, then FMS will set off the debt. If the debtor does not consent, then FMS will withhold from payment an amount equal to the debt. FMS also may withhold an amount sufficient to pay the cost of litigating the debt to judgment. FMS then will consult with the underlying agency and the Department of Justice regarding the necessity for a civil action to reduce the debt to judgment. If litigation proceeds and is successful, FMS will set off the debt. If the suit is unsuccessful, FMS will pay the withheld amount with interest accruing from the date when payment would have been made.