Yes, to delete a custom collection, press the Edit button (top right corner), then tap on the collections you want to remove. You will see a checkmark indicating each item you select. Then, press Remove (lower left corner). Any custom collections you've selected (like Favorites) will be removed.
(As a side note for reference: If you select any standard built-in collections and choose Remove, they won't be removed in the same way as a custom collection. Instead, what it does is uninstall [undownload] all the books/items in the collection.)
Samuel Bradshaw • If you desire to serve God, you are called to the work.