CHAPTER 5. BANKRUPTCY

5.01 GENERAL

If an individual has an existing accounts receivable when a bankruptcy notice is received, collection action on the debt must cease. The notice of bankruptcy and a statement of the debt must be sent to the DC immediately for further action unless the debt was previously referred to DOJ for enforced collection. (See paragraph c. below for instructions on DOJ cases.) The report to DC will include a complete statement of the basis for the debt and any other pertinent information such as pendency of claim for waiver.

5.02 FISCAL PROCEDURES

a. If the DC determines that collection action on the debt will be pursued, the DC will notify the Fiscal activity of the action(s) to take on the debt.

b. If the DC determines that a debt has been discharged in bankruptcy, the DC will advise the Fiscal activity if benefits earned prior to the date the bankruptcy petition was filed may be offset and that the remaining balance of the debt should be written off, i.e.:

(1) If Federal salary is being offset to apply to a receivable, only amounts due the debtor which were earned prior to the date the petition in bankruptcy was filed and which are available for application to the debt will be offset.

(2) If a veteran is in receipt of VA benefits, only benefits withheld before the date the petition in bankruptcy was filed may be applied to the debt. Any amounts withheld after that date should be paid to the person entitled, i.e., basic payee, apportionee, etc.

5.03 FISCAL PROCEDURES FOR DOJ CASES

If the debt was previously referred to DOJ for enforced collection, the notice of bankruptcy will be sent to DOJ for their action. These debts and debts referred by DC to DOJ for bankruptcy proceeding, are under the jurisdiction of DOJ and no further collection action will be pursued by VA. However, the field station may accept a collection to liquidate the debt, in whole or in part, but must immediately notify the DC or U.S. Attorney of the collection.