**§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:

\(1\) Selling the debt, if the Secretary of the Treasury determines that
such sale is in the best interests of the United States;

\(2\) 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. (Authority: 31
U.S.C. 3711; 38 U.S.C. 501).

\[32 FR 2615, Feb. 8, 1967, as amended at 52 FR 42111, Nov. 3, 1987; 69
FR 62200, Oct. 25, 2004\]