(a) When an obligation has been determined to be delinquent, pursuant to §353.121 of this title (relating to Procedures For Establishing A Delinquent Obligation), the board shall take the following steps.

(1) Verify the debtor's address and telephone number, to the extent possible.

(2) Use the comptroller of public account's "Warrant Hold" procedures to prevent payment to a delinquent debtor.

(3) Within 30 days of the obligation being determined to be delinquent, send the debtor a demand letter for the full amount of the obligation.

(4) If the debtor does not respond to the demand letter, send a second demand letter no sooner than 30 days but not more than 60 days after the first demand letter was mailed.

(5) Verify that the obligation is not legally uncollectible or uncollectible as a practical matter. (A) In cases of bankruptcy, the board shall prepare and timely file a proof of claim, when appropriate, in the bankruptcy case of each debtor. Copies of all such proofs of claims filed shall be sent to the attorney general. The board shall maintain records of notices of bankruptcy filings, dismissals, and discharge orders to enable it to ascertain whether the collection of the claim is subject to automatic stay provisions or whether the debt has been discharged. (B) If the obligation is subject to an applicable limitation provision that would prevent suit as a matter of law, the obligation will not be referred to the attorney general unless circumstances indicate the limitations provision has been tolled or is otherwise inapplicable. (C) If a corporation has been dissolved, has been liquidated under Chapter 7 of the United States Bankruptcy Code, or has forfeited its corporate privileges or charter, or, in the case of a foreign corporation, had its certificate of authority revoked, the obligation shall be referred to the attorney general unless circumstances indicate the account is clearly uncollectible. These circumstances shall be documented in the appropriate account file. (D) If the debtor is an individual and is located out-of-state, or outside the United States, the matter shall not be referred to the attorney general 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 board funds to retain foreign counsel to domesticate the judgment and proceed with collection attempts is justified. The board shall consult with the attorney general in making such determinations. (E) If the debtor is deceased, the board shall file a claim in each probate proceeding administering the decedent's estate. If such probate proceeding has concluded and there are no remaining assets of the decedent available for distribution, the delinquent obligation shall be classified as uncollectible and not referred to the attorney general. If probate administration is pending or if none has been opened, any referral to the attorney general shall include an explanation of any circumstances indicating that the decedent has assets available to apply towards satisfying the obligation.

(6) If the debtor does not respond to the second demand letter within 30 days of it being mailed, and if the debt is not determined to be legally uncollectible or uncollectible as a practical matter, the board shall report the uncollected and delinquent obligation to the attorney general for further collection efforts. However, delinquent obligations upon which a bond or other security is held shall be referred to the attorney general no later than 60 days after becoming delinquent. If the principal has filed for relief under federal bankruptcy laws, the account shall be referred to the attorney general immediately upon notice or as soon as the board knows of the filing.

(b) Demand letters sent by the board shall include a statement, where practical, that the debt, if not paid, will be referred to the Texas attorney general's office. The demand letters shall be mailed in envelopes bearing the notation "address correction requested" in conformity with the current regulations and policies of the United States Postal Service. If an address correction is provided by the United States Postal Service, the affected demand letter shall be resent to the address provided.

(c) Where permitted by state law, the board shall file a lien securing an 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. The lien shall be filed as soon as the obligation becomes delinquent or as soon as is practicable. If the delinquent obligation is referred to the attorney general in accordance with this section, the lien may not be released unless the board receives written approval from the attorney general or if the delinquent obligation is paid in full.

(d) Where practicable, the board shall maintain individual collection histories of each account in order to document attempted contacts with the debtor, the substance of the communications with the debtor, efforts to locate the debtor and assets, and other information pertinent to collection of the delinquent account.

(e) The procedures of this section do not apply to:

(1) bonds or other debt obligations held by the board as evidence of debt incurred through the board's financial assistance programs for which collection remedies are provided by the debt vehicle or by law; or

(2) any debt for which a collection process is already determined by law.

Source Note: The provisions of this §353.122 adopted to be effective January 6, 2004, 29 TexReg 214; amended to be effective March 20, 2007, 31 TexReg 1581; amended to be effective April 26, 2023, 48 TexReg 2134