The paper presents a new method and an algorithm for structural fault collapsing to reduce the search space for test generation, to speed up fault simulation and to make the fault diagnosis easier in digital circuits. The proposed method is based on hierarchical topology analysis of the circuit description at two levels. First, the gate-level circuit will be converted into a macro-level network of Fan-out Free Regions (FFR) each of them represented as a special type of structural BDD. This conversion procedure represents as a side-effect the first step of fault collapsing, resulting in a compressed Structurally Synthesized BDD (SSBDD) model explicitly representing the collapsed set of representative fault sites. The paper presents an algorithm which implements a complementary step of further fault collapsing. This algorithm is carried out at the macro-level FFR-network by topological reasoning of equivalence and dominance relations between the nodes of the SSBDDs. The algorithm has linear complexity and is implemented as a continuous scalable fault eliminating procedure. We introduce higher and lower bounds for fault collapsing and provide statistics of distribution of fault collapsing results over a broad set of benchmark circuits. Experimental research has demonstrated considerably better results of structural fault collapsing in comparison with state-of-the-art.