---
kind: "section"
citation: "38 C.F.R. § 1.944"
title: "38"
number: "1.944"
heading: "Discharge of indebtedness; reporting requirements."
url: "https://uscodex.org/cfr/38/1.944"
---

# §1.944. Discharge of indebtedness; reporting requirements.

- (a) Before discharging a delinquent debt (also referred to as a close out of the debt), VA shall take all appropriate steps to collect the debt in accordance with [31 U.S.C. 3711(g)](/usc/31/3711.md?p=g), including, as applicable, administrative offset, tax refund offset, Federal salary offset, referral to Treasury or Treasury-designated debt collection centers or private collection contractors, credit bureau reporting, wage garnishment, litigation, and foreclosure. Discharge of indebtedness is distinct from termination or suspension of collection activity under [§§ 1.940 through 1.943](/cfr/38/1.940..1.943.md) and is governed by the Internal Revenue Code (see [26 U.S.C. 6050P](/usc/26/6050P.md)). When collection action on a debt is suspended or terminated, the debt remains delinquent and further collection action may be pursued at a later date in accordance with the standards set forth in [§§ 1.900 through 1.953](/cfr/38/1.900..1.953.md). When VA discharges a debt in full or in part, further collection action is prohibited. Therefore, VA should make the determination that collection action is no longer warranted before discharging a debt. Before discharging a debt, VA must terminate debt collection action.
- (b) Upon discharge of an indebtedness, VA must report the discharge to the Internal Revenue Service (IRS) in accordance with the requirements of 26 U.S.C. [6050P](/usc/26/6050P.md) and [26](/usc/26/26.md) CFR 1.6050P-1. VA may request Treasury or Treasury-designated debt collection centers to file such a discharge report to the IRS on VA's behalf.
- (c) When discharging a debt, VA must request that any liens of record securing the debt be released.
- (d) [31 U.S.C. 3711(i)(2)](/usc/31/3711.md?p=i-2) requires agencies to sell a delinquent nontax debt upon termination of collection action if the Secretary of the Treasury determines such a sale is in the best interests of the United States. Since the discharge of a debt precludes any further collection action (including the sale of a delinquent debt), VA may not discharge a debt until the requirements of [§ 3711(i)(2)](/cfr/38/3711.md?p=i-2) have been met.

## Notes

### Amendments

[69 FR 62200, Oct. 25, 2004]

### Authority

Authority: Sections 1.900 through 1.953 are issued under the authority of 31 U.S.C. 3711 through 3720E; 38 U.S.C. 501, and as noted in specific sections.

### Source

Source: 32 FR 2615, Feb. 8, 1967, unless otherwise noted.

### Authority

Authority: 38 U.S.C. 501, and as noted in specific sections.

### Source

Source: 40 FR 33944, Aug. 12, 1975, unless otherwise noted.

### Amendments

[69 FR 62200, Oct. 25, 2004]