1201 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies relating to the suspension of collection action on debts owed to VA, as well as the policies relating to the reinstatement of collection action on debts owed to VA.

Key points covered in this chapter:

  • VA may suspend collection activity when it appears that the debtor does not have the present or future ability to pay a significant amount of the claim or the cost of collecting the claim is more than the amount that may be recovered;
  • The Chief of Finance Activity or the Executive Director of the Debt Management Center (DMC) may suspend collection activity on debts up to $40,000;
  • Administrations’ CFOs and the Deputy Assistant Secretary (DAS) for Finance have authority to suspend debt collection action for debts with principal amounts greater than $40,000 and up to $100,000;
  • VA must refer debts for suspension greater than $100,000 to Department of Justice (DOJ); and
  • VA will reinstate collection activity when the conditions causing the suspension action change.
SectionRevisionOfficeReason for changeEffective Date
120504Revised suspension per Treasury Debt TreatiseOFP
Leadership directedJune 2023
120503Added a new section to address hardship suspensionsOFP (047G)Leadership directedMarch 2023
1206Updated Authorities and References to add 38 C.F.R. 1.941(a-
b) that provides VA authority to suspend collection activity.
OFP (047G)Leadership directedMarch 2023
AllNew ChapterOFP (047G)Provide policy on suspension of debt collectionFebruary 2021

1203 Definitions

Compromise – Governed by 31 U.S.C. § 3711, a compromise is an offer and acceptance of a partial payment in settlement and full satisfaction of the offeror’s indebtedness as it exists at the time the offer is made. It is a final settlement, binding on the parties to the compromise, unless procured by fraud, misrepresentation of a material fact or mutual mistake of fact.

Debt Collection – The process of pursuing repayment of a debt owed to VA.

Financial Status Report (VA Form 5655) – A VA form used by debtors to list their current income, expenses and financial condition.

Notice of Indebtedness (NOI) – Written communication sent by VA providing the debtor with notification of the existence and amount of the debt, payment remittance information, accrual of interest, penalties, and administrative costs, and due process rights. A NOI is sometimes referred to as a demand letter.

Suspension of Collection Action – Temporary delay of collection actions on a debt owed to VA.

Termination of Collection Action – A decision, under the guidance of the Federal Claims Collection Standards 31 C.F.R. § 903, to cease active collection action on a debt when it appears that no person liable on the claim has the present or prospective ability to pay a significant amount of the claim or the cost of collecting the claim is likely to be more than the amount recovered.

Treasury Cross-Servicing Program (CS) – A consolidated government-wide program operated by the Bureau of Fiscal Service’s Debt Management Services fulfilling the requirement of the Debt Collection Improvement Act of 1996. The program consists of collection tools including Treasury demand letters, telephone calls to debtors, administrative wage garnishment (AWG) and the use of Private Collection Agencies (PCAs).

Treasury Offset Program (TOP) – A centralized offset program, administered by the Bureau of the Fiscal Service’s Debt Management Services (DMS), to collect delinquent debts owed to federal agencies and states (including past-due child support), in accordance with 26 U.S.C. § 6402(d), and 31 U.S.C. § 3720A.Waiver – A decision that conditions exist which should result in cancellation, forgiveness, or non-recovery of a debt owed, including interest and other late payment charges assessed on such debts under the applicable statutes and implementing regulations 38 C.F.R. § 1.955, through 38 C.F.R. § 1.969, and 38 C.F.R. § 17.105.

1204 Roles and Responsibilities

Debt Management Center (DMC) is a franchise fund (fee-for-service) organization of VA. DMC offers a wide range of debt management services including debt resolution activities, as well as waivers and compromises under their jurisdiction.

Secretary of Veterans Affairs has the authority, which cannot be delegated, to suspend or terminate debt collection action, or to refund amounts collected after death.

Chief of the Local Finance Activity is responsible for ensuring that compliance with the policies and appropriate procedures are followed for the administration of VA’s debt collection activities. Any reference to Chief of the Local Finance Activity also includes the: Executive Director of the Debt Management Center (DMC), Director of the Financial Service Center (FSC) where appropriate, as well as Chief Fiscal Officers in VA Medical Centers, Chief Finance Officers in Regional Offices, and Chief Fiscal Officers in the Consolidated Patient Account Centers (CPAC).

1205 Policies

120501 Suspension of Benefit Debt Collection

120502 Suspension of Non-benefit Debt Collection

120503 Veteran Hardship Suspension

120504 Review of Suspension Action

120505 Delegation of Authority

1206 Authorities and References

1207 Rescissions

VA Financial Policy Volume XII, Chapter 12 Suspension of Debt Collection, March 2023

1208 Policy Approval

This policy was approved by the VA Chief Financial Officers’ Council on June 14, 2023.