J.  Breaching the NHSC LRP Contract

1. A participant who breaches the NHSC LRP contract by failing to begin or complete the required NHSC LRP service will be placed in default and obligated to pay the United States an amount equal to the sum of the following:
   1. the total of the amounts paid by the NHSC LRP to, or on behalf of, the participant for loan repayments for any period of obligated service not served;
   2. an amount equal to the number of months of obligated service not completed multiplied by $7,500; and
   3. interest on the above amounts at the maximum legal prevailing rate, as determined by the Treasurer of the United States, from the date of breach; except that the amount the United States is entitled to recover will not be less than $31,000.
2. Any amounts the United States is entitled to recover, as set forth above, must be paid within one year from the date of breach.  Failure to pay the NHSC LRP debt by the due date has the following consequences:
   1. The debt will be reported to credit reporting agencies— During the one-year repayment period, the debt will be reported to credit reporting agencies as “current.”  If the debt becomes past due, it will be reported as “delinquent.”
   2. The debt will be referred to a debt collection agency and the Department of Justice—Any NHSC LRP debt past due for three months will be referred to a debt collection agency.  If the debt collection agency is unsuccessful in receiving payment in full, the debt will be referred to the Department of Justice for enforced collection.
   3. Administrative offset—Federal and/or State payments due to the participant (e.g., an IRS income tax refund) may be offset by the Department of Treasury to repay a delinquent NHSC LRP debt.  Also, recovery through Administrative Wage Garnishment may be enforced to repay a delinquent NHSC LRP debt.
   4. Bankruptcy - A financial obligation under the NHSC LRP may only be discharged in bankruptcy if the discharge is granted more than seven years after the due date and only if a bankruptcy court determines that the non-discharge of the debt would be unconscionable.

next page: Suspension, Waiver, Cancellation and Termination