The Federal government voluntarily dropped yesterday a lawsuit it had brought against former U.S. Rep. Charles Diggs Jr. (D-Mich.) in an attempt to recover more than $240,000 in damages as a result of Diggs' 1978 conviction in a payroll kickback scheme.

Diggs, former chairman of the House District committee, entered a federal prison in Alabama on July 24 to begin a three-year jail term of his crimes.

A Justice Department official said yesterday that the lawsuit was dropped after an analysis of Diggs' financial situation made it "pretty evident" that the money would not be collected, even if the government won the case.

The lawsuit had contended that Diggs gained more than $120,000 through the kickback scheme. The government had hoped to collect double the amount in damages under the terms of the federal False Claims Act. The Justice Department official noted yesterday, however, that Diggs' debts were calculated recently at more than $130,000, not counting any damages that might have been assessed.

Moreover, the official said, the Internal Revenue Service has two claims for penalties and interest pending against Diggs, both of which would have to be paid before the government could collect any money from its lawsuit.