(a) The Secretary may terminate collection activity when:
(1) The Department is unable to collect any substantial amount through its own efforts or through the efforts of others;
(2) The Department is unable to locate the debtor;
(3) Costs of collection are anticipated to exceed the amount recoverable;
(4) The debt is legally without merit or enforcement of the debt is barred by any applicable statute of limitations;
(5) The debt cannot be substantiated; or
(6) The debt against the debtor has been discharged in bankruptcy.
(b)
(1) Collection activity will not be terminated before the Secretary has pursued all appropriate means of collection and determined, based upon the results of the collection activity, that the debt is uncollectible.
(2) Termination of collection activity ceases active collection of the debt. The termination of collection activity does not preclude the Secretary from retaining a record of the account for purposes of:
(i) Selling the debt, if the Secretary of the Treasury determines that such sale is in the best interest of the United States;
(ii) 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;
(iii) Offsetting against future income or assets not available at the time of termination of collection activity; or
(iv) Screening future applicants for prior indebtedness.
(c) Generally, the Secretary shall terminate collection activity on a debt that has been discharged in bankruptcy, regardless of the amount. The Secretary may continue collection activity, however, 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. For example, when the Department is a known creditor of a debtor the claims of the Department may survive a discharge if the Department did not receive formal notice of the bankruptcy proceedings. When the Department believes that it has claims or offsets that may have survived the discharge of the debtor, the Office of the General Counsel should be contacted for legal advice.