38 CFR § 1.942 - Termination of collection activity.
Termination of collection activity involves a final determination. Collection activity may be terminated on cases previously suspended. The Department of Veterans Affairs may terminate collection activity and consider closing the agency file on a claim which meets any one of the following standards:
(a) Inability to collect any substantial amount. Collection action may be terminated on a claim when it becomes clear that VA cannot collect or enforce collection of any significant amount from the debtor, having due regard for the judicial remedies available to the agency, the debtor's future financial prospects, and the exemptions available to the debtor under State and Federal law. In determining the debtor's inability to pay, the following factors, among others, shall be considered: Age and health of the debtor, present and potential income, inheritance prospects, the possibility that assets have been concealed or improperly transferred by the debtor, the availability of assets or income which may be realized by means of enforced collection proceedings.
(b) Inability to locate debtor. The debtor cannot be located, no security remains to be liquidated, the applicable statute of limitations has run, and the prospects of collecting by offset are too remote.
(c) Death of debtor. The debtor is determined to be deceased and the Government has no prospect of collection from his/her estate.
(d) Cost will exceed recovery. The cost of further collection effort is likely to exceed the amount recoverable.
(e) Claim legally without merit. Collection action should be terminated on a claim whenever it is determined that the claim is legally without merit.
(f) Claim cannot be substantiated by evidence. VA will terminate collection action on once asserted claims because of lack of evidence or unavailability of witnesses only in cases where efforts to induce voluntary payment are unsuccessful.
(g) Discharge in bankruptcy. Generally, VA shall terminate collection activity on a debt that has been discharged in bankruptcy, regardless of the amount. VA may continue collection activity, subject to the provisions of the Bankruptcy Code, for any payments provided under a plan of reorganization. Offset and recoupment rights may survive the discharge of the debtor in bankruptcy and, under some circumstances, claims also may survive the discharge.
(h) Before terminating collection activity, VA should have pursued all appropriate means of collection and determined, based upon the results of the collection activity, that the debt is uncollectible. Termination of collection activity ceases active collection of the debt. The termination of collection activity does not preclude VA from retaining a record of the account for purposes of:
(2) Pursuing collection at a subsequent date in the event there is a change in the debtor's status or a new collection tool becomes available;
(3) Offsetting against future income or assets not available at the time of termination of collection activity; or
(4) Screening future applicants for prior indebtedness.