Frequently Asked Questions

debts - (updated July 8, 2015)

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.


For example, a debtor owes $50 for one year's delinquent property tax, $45 for a utility debt and $25 for a parking ticket.  The local government would submit two separate debts for this debtor—1) the $50 property tax; 2) combined $70 (utility and parking ticket).
As another example, a debtor owes property taxes in the amount of $25 for an automobile and $20 for a vacant land parcel for 2 consecutive tax years ($40 total).   Both of these tax debts can be combined under the debtor’s social security number and submitted to the Clearinghouse.

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.

Best Practices for submitting debts and combining debts:

1a. What are some of the types of debts being submitted by local governments?

  • Animal Violations
  • Assessments
  • Cemetery
  • Daycare
  • Demolitions
  • Dental
  • Employees
  • Environmental Health
  • False Alarms
  • Fines (Library/other)
  • EMS
  • Health
  • Housing Authority (must be a final judgement)
  • Hydrant Usage
  • Insurance Premiums
  • Judgments
  • Maintenance (Lawns/trees)
  • Nuisance
  • Ordinance Violations
  • Parking Tickets
  • Property Damage
  • Privilege License (delinquent prior to June 30, 2015)
  • Recreation
  • Rental/lease agreements
  • Returned Checks
  • Room Occupancy
  • Sewer Tap
  • Solid Waste
  • Storm water
  • Tax-Property
  • Tax-Vehicle
  • Utilities

2. Do the types of debts have to be in the above list?

No, any debt to a local government is valid.

3. How many days delinquent does a debt need to be before the due process notification can begin?

The Clearinghouse requires a debt to be sixty (60) days delinquent before the required notification letter be sent to the debtor's last known address by regular mail. This letter gives the debtor thirty (30) days to request a hearing.

3. Can a debt be submitted to the Clearinghouse BEFORE the 30 day hearing request period has passed?

Yes, but the Compliance Date must be a date AFTER the 30 day period. The Clearinghouse does not send the debt to the NC Department of Revenue until the Compliance Date has passed.

4. If a person has multiple debts, each less than the $50 minimum, does the Clearinghouse combine them all into one debt amount before sending to the Department of Revenue?

No, the Clearinghouse does not modify and/or combine different debts. All debts less than $50 will not be submitted to the Department of Revenue or Education Lottery.

5. If a person has multiple debts, each less than the $50 minimum required to file, can they be combined together to reach the required amount for filing?

Any debts under the same SSN can be combined among even different types of debtsto meet the $50 minimum. If all debts are in excess of $50, they must be submitted individually.

6. Can delinquent tax debts be combined with non-tax debts?

No, we DO NOT recommend combining tax debts with any other type of debts. Tax debts can be combined to get to the $50 minimum.

7. What if a local government has a third-party vendor that states they cannot or will not combine debts?

Then your local government may be missing out on collections and should demand the vendor combine debts.

8. What if a local government has a third-party vendor that states they are combining ALL debts into one debt amount, regardless of the debt amounts?

They are in violation of the procedures set by the NC Local Government Debt Setoff Clearinghouse and are not recovering the proper fee amounts to support the program.

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

The Clearinghouse will add the $15 fee to each debt over $50. The local government can ONLY submit the actual delinquent debt amount.  The local government is required to notify the debtor of the $15 fee in the notification letter.

10.  What debts will incur the $15 Clearinghouse collection assistance fee?

All debts successfully setoff, whether collected in full or in part, will incur the $15 fee, unless the amount returned from the NC Department of Revenue is less than $50.  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, only one $15 fee will be assessed. Only ONE $15 Clearinghouse fee is taken per debt per calendar year.

11.  Can local governents add their own fee to the delinquent debt?

No, by law local governments cannot add any additional fees for the setoff debt collection. The only possibility is if when the debtor signed up for service and signed a document that stated there would be a collection fee added.

12.  Does the North Carolina Department of Revenue and/or Education Lottery add a fee to the debt?

Yes, the North Carolina Department of Revenue is legislated to add a $5.00 fee to the tax refund amount that is setoff.  If a debtor files multiple tax returns in the same year and has at least one debt over $50, then a $5.00 fee is charged for each tax return processed by the Department of Revenue.

13.  How do the fees apply if a debtor is setoff by the NC Department of Revenue and the Education Lottery?

There are often situations where a debtor's tax return is setoff and they have leducation lottery winnings that are also taken. The Cleainghouse will apply only one $15 fee per debt per calendar year. However, the NC Department of Revenue and Education Lottery are allowed to take their legislated $5 fees. Often this multiple setoff scenario results in a surplus which is deposited into the local government Capital Management account and is to be refunded to the debtor. A separate surplus excel file is provided that includes the address from the NC Department of Revenue.

14. What is the statutory liability of a local government for submitting a debt without providing required due process to the debtor?

The local government must return all setoff money, including the local collection assistance fee of $15 (if taken) and the $5 Department of Revenue’s and/or Education Lottery's collection assistance fee.  Keep good documentation to show how error occurred.

15. 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 (if taken) and the $5 Department of Revenue’s and/or Education Lottery's collection assistance fee.  Keep good documentation to show how the error occurred. If the Department of Revenue and/or Education Lottery setoff the SSN or ITIN that was submitted by the local government, then the local government is required to return all funds and fees to the debtor.

16. Does the notification letter have to be sent “certified mail”?

No, but you should keep good documentation of notices sent.  Keep any returned mail as required by state retention laws.  We suggest you keep a copy of the electronic file that created the letters as proof.  This will show you made reasonable efforts to contact the debtor.  A large percentage of letters sent will be returned. However, not only will debtors who had their letter returned due to a bad address object and even appeal, but many who receive the letter will deny that they did.  

17. Does the law allow us to cross state lines and share/seek information from other states or the Internal Revenue Service?

No. There has been legislation presented for IRS setoffs but nothing at this time.

18. What happens if a bad debt is reported and the person or persons filed for bankruptcy prior to sending the transmission for collection?

Do not send the individuals to the Clearinghouse.

19. 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.

20. What happens if the debtor obtained a loan from a tax preparation company but the refund is setoff?

The tax preparation company filing on behalf of the debtor must deal with the debtor directly for loan repayment.

21. 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.

22. 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 Username and password by the Local Coordinator. However, there will be only one identification number (Entity Code) per local government.  The Username and password code will also help you identify who keyed certain items by viewing the History log

23. 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

24. 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. 

25. What if a debt was more than $50 and was setoff but the setoff amount was not enough to pay it off, does it continue to be eligible for future setoff?

As long as the remaining debt balance is over $50 it will be sent each Tuesday to the Department of Revenue. The Department of Revenue then forwards on to the Education Lottery.

27. How is priority established on debts submitted to the Clearinghouse?

When the Clearinghouse loads a debt for the first time, it maintains the date and time and will setoff the debts in order by first submitted. As long as the debts are more than $50, the Compliance date has passed and the Expiration Date has not passed.