(a) NEH will liquidate security or collateral through the exercise of a power of sale in the security instrument or a nonjudicial foreclosure, and apply the proceeds to the applicable debt(s), if the debtor fails to pay the debt(s) within a reasonable time after demand and if such action is in the best interest of the United States. Collection from other sources, including liquidation of security or collateral, is not a prerequisite to requiring payment by a surety, insurer, or guarantor unless such action is expressly required by statute or contract.

(b) When NEH learns that a bankruptcy petition has been filed with respect to a debtor, the agency will seek legal advice from its Office of the General Counsel concerning the impact of the Bankruptcy Code, including but not limited to 11 U.S.C. 362,to.