Government Receivables: Collection, Debtor Rights, and Bankruptcy

A government receivable is any legally enforceable claim for money or property that the federal government holds against a person, business, or other non-federal party. At the end of fiscal year 2024, federal non-tax receivables totaled roughly $2.4 trillion, one of the largest categories of financial assets on the federal balance sheet.¹ If you owe one, the collection powers behind it go beyond what any private creditor can use. The government can intercept your tax refund, garnish your wages without a court order, and block you from getting future federal loans.

When You Become a Federal Debtor

You become the subject of a federal receivable the moment an agency determines you owe money. That happens in ordinary ways: defaulting on a federal student loan, receiving an overpayment of Social Security or veterans’ benefits that you have to pay back, being fined by a regulator, or owing fees for a government service. Federal law requires agency heads to pursue collection on these debts rather than letting them sit.²

Agencies do have room to work with you. If the claim is $100,000 or less (excluding interest), the agency head can independently settle for less than the full amount; larger compromises need Attorney General authorization.² Collection can also be suspended when chasing the money would cost more than it would recover. Meanwhile, interest, penalties, and administrative costs are being added to the balance the whole time you’re delinquent, so the amount does not stay still.

One boundary worth noting up front: tax debts owed to the IRS are their own system, governed by the Internal Revenue Code, and most of what follows describes the non-tax side.³ The bulk of federal non-tax debt comes from loan programs, with student loans as the largest single component, followed by SBA-guaranteed loans and USDA rural development loans. The rest is administrative: fines, civil penalties, benefit overpayments, and service fees.¹

How the Government Collects

Collection starts at the agency that’s owed the money. It notifies you, tries to work out payment, and certifies the debt as valid.⁴ If nothing is resolved, the agency transfers the debt to the Bureau of the Fiscal Service, which runs the government-wide collection machinery.⁵ From there, Treasury has three main tools.

Treasury Offset Program

The most efficient of them is the Treasury Offset Program. Fiscal Service keeps a database of delinquent debts and screens every federal payment about to go out. When a debtor matches, the disbursing official withholds part or all of the payment. Nearly every federal payment is eligible: tax refunds, federal salary, retirement checks, vendor payments, travel reimbursements, and certain benefit payments.⁶

Administrative Wage Garnishment

The government can also order your employer to garnish your paycheck without going to court first. The cap is 15 percent of your disposable pay per pay period, though a higher amount is allowed if you consent in writing.⁷ A separate floor protects low earners: the amount withheld can’t exceed the portion of disposable pay above 30 times the federal minimum wage for that week.⁸

Private Collection Contractors

Treasury can also assign the debt to a private collection agency.⁵ These contractors have to follow federal and state debt collection laws, including the Fair Debt Collection Practices Act.⁹ The originating agency keeps authority to settle disputes, compromise the claim, or stop collection, even after the file is with a contractor.

Your Rights Before Any of This Happens

The rules do not let an agency skip straight to taking your money. Before collecting through administrative offset, the agency must give you:

Written notice describing the type and amount of the debt and the intent to offset.
An opportunity to inspect and copy the agency’s records on your debt.
A chance for the agency itself to reconsider its determination.
An opportunity to enter a written repayment agreement with the agency head.

These come directly from the administrative offset statute.¹⁰

Wage garnishment has its own notice rules. The agency must mail written notice at least 30 days before garnishment starts, explaining the debt, its intent to garnish, and your rights. You can inspect records, propose a repayment plan, and request a hearing on whether you actually owe the debt, the amount, or the terms of repayment.⁸ The hearing right is real: if you dispute the debt, the agency has to give you a chance to be heard before the garnishment order takes effect.

Credit Reporting and Losing Federal Loan Eligibility

Before reporting your delinquent debt to the credit bureaus, the agency has to notify you in writing and give you at least 60 days to respond. In that window you can dispute the debt, ask for a full explanation, or request administrative review.² Miss the window and the report goes through.

The consequence that surprises people the most is separate from credit reporting. Under federal law, someone with an outstanding delinquent federal debt cannot get a federal loan or loan guarantee. That includes FHA mortgages, VA home loans, and SBA business loans. Narrow exceptions exist for disaster loans and certain agricultural marketing loans, and nothing else.¹¹

Federal lenders check this through the Credit Alert Verification Reporting System, a shared database with records from HUD, USDA, the VA, and the SBA.¹² Standard credit reports don’t reliably flag federal debts, so CAIVRS is the backstop lenders actually rely on. You regain eligibility only after resolving the delinquency through full payment, a repayment agreement, or an agency waiver. The agency head can delegate waiver authority, but only to the Chief Financial Officer.¹¹

How Long the Government Has to Sue You

Federal law caps how long the United States has to file a lawsuit to collect. The main time limits:

Contract-based debts, including loans and overpayments under an agreement: six years from when the right to collect first arises.
Tort-based claims: three years.
Erroneous payments to civilian employees or uniformed service members: six years.

All three come from the same statute.¹³

Watch out for one trap. Making a partial payment or acknowledging the debt in writing restarts the clock on contract-based and erroneous-payment claims.¹³ A small good-faith payment years into a delinquency can hand the government a fresh six years to sue.

The other important limit: this statute applies only to lawsuits. Administrative offset and wage garnishment can continue regardless. An expired litigation deadline does not make the debt go away. And tax debt is not covered here at all; the Internal Revenue Code sets its own collection timelines.¹³

Whether Bankruptcy Wipes Out Federal Debt

Filing for bankruptcy does not automatically erase what you owe the government. The Bankruptcy Code protects several categories from discharge:

Government fines, penalties, and forfeitures. These are non-dischargeable unless they compensate for actual financial loss rather than serving as punishment.¹⁴
Student loans made, insured, or guaranteed by a government entity or funded by a government program. These survive bankruptcy unless repayment would cause “undue hardship,” a standard courts apply very narrowly.¹⁴
Overpayments of educational benefits and scholarships, under the same rule as student loans.¹⁴

Other federal debts, such as overpayments of non-educational benefits, may be dischargeable depending on the facts of the case. But the fines and student loan exceptions cover a large share of what individuals owe the federal government, which is why bankruptcy is often the wrong tool for federal debt.

If you think you owe a federal receivable, the first move is a call or letter to the agency named in the notice. You have review rights, hearing rights, and repayment-agreement rights that only work if you use them before the offset or garnishment starts. Once the machinery is running, it is much harder to slow down.

1
Bureau of the Fiscal Service. U.S. Government Non-Tax Receivables and Debt Collection Activities
2
Office of the Law Revision Counsel. 31 USC 3711 – Collection and Compromise
3
Office of the Law Revision Counsel. 26 USC 6306 – Qualified Tax Collection Contracts
4
U.S. Department of the Treasury. Agreement to Certify Federal Nontax Debts
5
eCFR. 31 CFR 285.12 – Transfer of Debts to Treasury for Collection
6
eCFR. 31 CFR 285.5 – Centralized Offset of Federal Payments to Collect Nontax Debts
7
GovInfo. 31 USC 3720D – Garnishment
8
eCFR. 31 CFR 285.11 – Administrative Wage Garnishment
9
Office of the Law Revision Counsel. 31 USC 3718 – Contracts for Collection Services
10
Office of the Law Revision Counsel. 31 USC 3716 – Administrative Offset
11
GovInfo. 31 USC 3720B – Barring Delinquent Federal Debtors From Obtaining Federal Loans or Loan Insurance Guarantees
12
U.S. Department of Housing and Urban Development. Credit Alert Verification Reporting System (CAIVRS)
13
Office of the Law Revision Counsel. 28 USC 2415 – Time for Commencing Actions Brought by the United States
14
Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge