Accounts and Reports Setoff Program
District Court
CRITERIA FOR SUBMITTING DEBTS FOR SETOFF
The setoff process begins with the
referral of debts to the Setoff Program. Debts submitted must meet the criteria
established by K.S.A. 75-6201 et seq. and as agreed to by the Director and
with the district court. A valid debt must exist and be due and owing and considered to be
delinquent, and at least three attempts should be made to collect the debt prior to its
submission. Further, the debt must be at least $25.
Per K.S.A. 75-6210 the court will receive only the net proceeds from the gross proceeds collected. To comply with K.S.A. 2013 Supp75-6210(b)(3), the court shall add the setoff collection assistance fee to the base amount owed to the court. The court can compute the certified debt amount by dividing the base amount by the net proceeds percentage. For example:
The court has a $100 debt to submit to the Setoff Program for collection and wants the debtor to incur the setoff collection fee amount. The process to collect and provide the court its base amount of $100 while also collecting the collection assistance fee from the debtor the court should use the following computation:
Divide the amount the court is to receive ($100) by 83% (the current net proceeds percentage that the court receives).
$100/.83 equals $120.4819277. This will round to $120.48. The court submits the certified debt amount as $120.48. If the setoff program collects $120.48 the court receives 83% of the collection. 83% of $120.48 = $100.
When the Creditor Agency is set up with Setoff, access to the web-based system (KDRS) is given to one or more system user(s) for the Creditor Agency. The Creditor Agency will be responsible in maintaining the debts for their respective agency. The system user(s) will have access to input debts, validate debt balances, request adjustments, and create miscellaneous reports. Using a social security number (SSN) or employer identification number (EIN) is the preferred method for submitting debts. However, if a SSN or EIN cannot be given, the debt must be entered manually in KDRS. All pertinent information about the debtor must be included in the reference box at the time of submitting the debt. Suggestions for additional pertinent information would be date of birth, Kansas driver’s license, address (service, forwarded, current, etc), name of spouse, spouse’s SSN, etc.
MATCHING AGAINST DIFFERENT TYPES OF PAYMENTS
The Setoff Program matches several
payment sources against the debtor file containing debts owed to district courts. The
types of payments we match against are:
Payroll
This payroll match process is only applicable to restitution and other debts owed to
the courts. For support debts, income withholding orders are to be issued by the court
and are not subject to this match process.
State employees became subject to setoff
with the matching of the debtor file against employee earnings which began in May 1981.
This was the first payment source that the Setoff Program started with. As you will see, a
piecemeal approach was used in adding payment sources to the program.
Wage garnishment laws define the wage
amounts that may be set off against debts. Twenty-five percent of disposable earnings
(gross pay less federal and state income taxes, social security tax, and KPERS retirement)
may be set off against most debts, but 100 percent may be set off against State tax debts.
Many state employees who have had their debts matched against their wages elect wage
assignments. By agreeing to a wage assignment, the debtor (state employee) acknowledges
the debt and authorizes a specific amount to be deducted each payroll period. Setoff
Program policy requires that a wage assignment deduction be at least $25 per bi-weekly
payroll period. Obviously, if the debt amount owed is larger and depending on their
ability to pay, a higher amount will be negotiated.
Income Tax Refunds
The debtor file is provided weekly to the
Department of Revenue to match against individual income tax refunds in process. Set off
of single individual income tax refunds was implemented in July 1981, and set off of joint
income tax refunds was added in January 1982. One-hundred percent of single filers' income
tax refunds can be set off against debts owed. A portion of joint filer's income tax
refund who is the debtor is available for set off based on the ratio of each spouse's
income contribution to total income.
Homestead Property Tax and Food Sales Tax
Set off of homestead property tax and food
sales tax refunds was implemented in January 1983. One-hundred percent of the homestead
and the debtor's proportionate share of the food sales tax refund can be set off.
Miscellaneous Payments
Set off of miscellaneous payments was
implemented in December 1982. This includes payments to individuals and vendors, KPERS
withdrawals of accumulated contributions, and Kansas Lottery winnings. One-hundred percent
of most of these payments can be set off. Some miscellaneous payments, however, cannot be
set off due to federal and state restrictions (e.g., emergency disaster relief payments).
Unclaimed Property
The State Treasurer matches payments for
unclaimed property against the Setoff Program debtor file. This process was implemented in
August 1987. One-hundred percent of these payments can be set off.
KPERS Retirement Benefits
Set off of KPERS retirement benefits
began in July 1990. KPERS matches its retirant benefit file with the file of
individuals submitted by the Department of Social and Rehabilitation Services who are
delinquent in payment of court-ordered child support and support debts owed to the
district court trustee.
Direct Payments
Many debtors may wish to enter into
repayment agreements with district courts once they have been notified of a match by the
Setoff Program. Payments can be processed through the Setoff Program or through the
district court. After the debtor has been notified by the Setoff Program, all payments
received from the debtor must be reported as Setoff Program collections.
STEPS IN COMPLETING SETOFF
The Setoff Program follows several steps in setting off debts:
- Substantially all state payments in process are matched against the debtor file
on social security numbers and employer identification numbers. Setoff Program
personnel review the listings of the matches to determine if the matches on both
identification numbers and names are the same. If the matches are valid, the payment
is intercepted for the setoff process.
- The debtor is notified by a letter of intent
to set off the payment in process against his/her debts. A copy is sent to the district
court to alert them of the pending set off and to allow the opportunity to review the
account and inform the Setoff Program of any necessary adjustments.
- The debtor is given 15 days in which to request an administrative
appeal. If no appeal is requested, final set off is effected.
- The funds are collected by the Setoff Program and applied to the
debtor's account balance.
- A receipt of payment is provided to the debtor.
- Funds collected are transferred twice a month after withholding the
collection assistance fee.
DEBTOR APPEAL RIGHTS
To assure due process, Kansas law requires
that the debtor be given the opportunity to appeal the setoff procedure. The debtor
initially has the right to appeal within 15 days from the date of the letter of intent to
set off. If an appeal is received within 15 days, further setoff procedures are delayed
until the dispute is resolved. Even if the debtor does not appeal within the 15-day
period, the debtor still has the right to appeal within two years from the date final set
off was effected. If the appeal request is received after the initial 15-day period, set
off may have already occurred. However, a hearing will be held to determine if the set off
was proper. Most hearings are conducted by telephone conference. There have been a few
cases where the debtor did not make the 15-day appeal, but did appeal within the two-year
period and prevailed in his/her appeal. Moneys that have been erroneously set off are
refunded. It is the district court's responsibility to issue a refund if an over
collection of a debt occurs providing the Setoff Program has already collected and
transferred the money to the district court.
When the Setoff Program receives a hearing
request from the debtor, the Setoff Program will notify the district court and request
that they try to resolve the dispute. If it cannot be resolved, the matter is scheduled
for hearing. At this hearing, the district court is responsible for providing evidence to
establish the debt's validity.
MAINTAINING CONTROL OF SETOFF ACCOUNTS
The district court will maintain control of
setoff accounts and are involved in every step of the setoff process. The debt is owed to
the district court and they maintain control of it. The Setoff Program's role is to assist
in collection on behalf of the district court.
The Setoff Program will provide the
district court a copy of all correspondence sent to the debtor and the district court is
responsible for: meeting with debtors, providing documentation regarding the validity of
the debts, resolving disputes, and arranging payment plans. The district court is also
responsible for updating debtor account balances which have been referred to the Setoff
Program, including the accounting for direct payments and adjustments to the debts.
A debt remains in the Setoff Program for as
long as the referring district court decides to leave it there. Historically, debts are
removed when: the debts are uncollectible; the debts are no longer delinquent because
payment has been made or because a deferment has been filed; or the debts are discharged
due to bankruptcy.
The Setoff Program remits collections of
setoff accounts twice a month after withholding the collection assistance fees. Included
with each remittance is the detail of all collections by debtor and amounts set off.
The Setoff Program is financed by the
collection assistance fees charged to state agencies, municipalities, municipal courts,
and district courts. For district courts, a fee of 17% is charged and please
note, the fee is charged only on the amount collected and remitted to the
district court. For debts submitted electronically by e-mail or diskette, the social security number (SSN) or employer identification
number (EIN) must be a part of the record for electronic submission. The Setoff
Program fee is quite reasonable when compared to the fees charged by other collection
firms and attorneys which generally range from 30 to 50 percent of the amounts they
collect. The Setoff Program is self sufficient because of the fees we charge, thus the
taxpayers do not pay for the operating cost of our program which is a refreshing concept
in today's governmental environment.
