1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Attorney general--The Office of the Attorney General of Texas.
   2. (2) Debtor--Any person or entity liable for an obligation owed to the department or against whom a claim or demand for payment has been made.
   3. (3) Delinquent--When a payment is past due by law or by customary business practice, and all conditions precedent to payment have occurred or been performed.
   4. (4) Department--The Texas Department of Transportation.
   5. (5) Demand letter--A writing setting forth the nature and amount of an obligation owed to the department that is delivered by United States certified mail, first class.
   6. (6) District--A subdivision of the department responsible for the day-to-day operations of the department in a specific geographically defined area.
   7. (7) Division--An organizational unit in the department's Austin headquarters.
   8. (8) Obligation--A debt, judgment, claim, account, fee, fine, tax, penalty, interest, loan, charge, or grant.
   9. (9) Person--An individual, corporation, organization, business trust, estate, trust, partnership, association, and any other legal entity.
   10. (10) Security--Any right to have property owned by an entity with an obligation to the department sold or forfeited in satisfaction of the obligation, and any instrument granting a cause of action in favor of the department against another entity or that entity's property, such as bond, letter of credit, or other collateral that has been pledged to the department to secure an obligation.
2. (b) Determination of liability. When a person who is responsible for an obligation to the department has failed or refused to make payments, the department will deem the obligation delinquent.
3. (c) Collection from contractors. If a contractor of the department is delinquent and the department owes payment to that contractor, then the department will subtract the delinquent amount from payment.

4. (d) Demand letters.

   1. (1) The division or district responsible for determining that an obligation is owed to the department will issue a first demand letter no later than 30 days after the obligation becomes delinquent.
   2. (2) If no satisfactory response is received within 30 days after the date of the first letter, the division or district will send a second and final demand letter no later than 60 days after the obligation becomes delinquent. The second demand letter will include a deadline to respond and a notation, where practicable, that a copy is being sent to the attorney general who may file a lawsuit on the account.
   3. (3) Demand letters will be mailed in an envelope bearing the notation "address correction requested" in conformity with 39 Code of Federal Regulations §265(d). If an address correction is provided by the United States Postal Service, the division or district will resend the demand letter to that address prior to referral to the attorney general.

5. (e) Records. The department will retain records of a delinquent obligation. A record shall contain documentation of the following information:

   1. (1) the identity of the person or entity liable on any part of the obligation;
   2. (2) the physical address of the debtor's place of business;
   3. (3) the debtor's residence, where applicable;
   4. (4) a post office box address where it is impractical to obtain a physical address, or when the post office box address is in addition to a correct physical address;
   5. (5) attempted contacts with the debtor;
   6. (6) the substance of communications with the debtor;
   7. (7) efforts to locate the debtor and the assets of the debtor;
   8. (8) state warrants that may be issued to the debtor;
   9. (9) current contracts with the department;
   10. (10) security interests that the department has against any assets of the debtor;
   11. (11) notices of bankruptcy, proofs of claim, dismissals and discharge orders received from the United States bankruptcy courts; and
   12. (12) other information relevant to collection of the delinquent account.

6. (f) Referrals of a delinquent obligation to the attorney general.

   1. (1) Prior to referral of a delinquent obligation to the attorney general, the department will:

      1. (A) verify the debtor's address and telephone number;
      2. (B) transmit no more than two demand letters to the debtor;
      3. (C) verify that the obligation is not uncollectible;
      4. (D) prepare and file a proof of claim in the case of a bankruptcy unless the department is represented by the attorney general; and
      5. (E) file a claim in the probate proceeding if the debtor is deceased unless the department is represented by the attorney general.

   2. (2) The department will consider a delinquent obligation uncollectible and will make no further effort to collect if the obligation:

      1. (A) has been dismissed or discharged in bankruptcy;
      2. (B) is subject to an applicable limitations provision that would prevent collection as a matter of law;
      3. (C) is owed by a corporation which has been dissolved, is in liquidation under Chapter 7 of the United States Bankruptcy Code, has forfeited its corporate privileges or charter, or, in the case of a foreign corporation, had its certificate of authority revoked unless circumstances indicate that the account is nonetheless collectible or that fraud was involved;
      4. (D) is owed by an individual who is located out-of-state, or outside the United States, 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 department funds to retain foreign counsel to domesticate the judgment and proceed with collection attempts is justified;
      5. (E) is owed by a debtor who is deceased, where probate proceeding have concluded, and where there are no remaining assets available for distribution; or
      6. (F) is owed by a debtor whose circumstances demonstrate a permanent inability to pay or make payments toward the obligation.

   3. (3) In making a determination of whether to refer a matter to the attorney general, the department will consider:

      1. (A) the expense of further collection procedures;
      2. (B) the size of the debt;
      3. (C) the existence of any security;
      4. (D) the likelihood of collection through passive means such as the filing of a lien;
      5. (E) the availability of resources to collect the obligation; and
      6. (F) policy reasons or other good cause.
   4. (4) The department will refer a delinquent obligation to the attorney general for further collection efforts not later than the 30th day after the date the department determines that normal department collection procedures for a delinquent obligation have failed.

7. (g) Supplemental and alternative collection procedures.

   1. (1) Liens. The department, unless represented by the attorney general, will record a lien securing the delinquent obligation 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 as soon as is practicable. Unless the delinquent obligation has been paid in full, any lien securing the indebtedness may not be released without the approval of the attorney representing the department after the matter has been referred to the attorney general.
   2. (2) Warrants. The department will utilize the "warrant hold" procedures of the Comptroller of Public Accounts authorized by Government Code, §403.055, to ensure that no treasury warrants are issued to debtors until the debt is paid.

Source Note:The provisions of this §5.10 adopted to be effective October 27, 1995, 20 TexReg 8482.