Close-Out

A close-out is one of two classifications of write-off. An agency closes out a debt when it determines that further debt collection actions are prohibited (e.g., a debtor is released from liability in bankruptcy) or the agency does not plan to take any future actions (either active or passive) to try to collect the debt. At close out, an agency may be required to report to the Internal Revenue Service (IRS) the amount of the debt as potential income to the debtor on IRS Form 1099. See also definition of term Discharge of Indebtedness.