CHAPTER 8. COMMITTEE ON WAIVERS AND COMPROMISES

SECTION A. GENERAL POLICY

8A.01 INTRODUCTION

a. Pub. L. 92-328 (June 30, 1972) consolidated authority for waiver of VA benefit and home loan program debts into 38 U.S.C. 3102 (now section 5302 as the result of Public Laws 102-40 and 10283). The legislation also established a single standard of equity and good conscience to determine whether the collection of a debt should be waived. However, section 5302(c) precluded waiver consideration if any indication of fraud, misrepresentation, material fault, or lack of good faith was found in connection with the creation of the debt. Pub. L. 101-237 (December 18, 1989) removed the elements of material fault and lack of good faith from section 5302(c) and replaced them with the element of bad faith. The standards for waiver of VA benefit and home loan program debts are found at 38 CFR 1.9621.969. VA benefit debts include the overpayment or erroneous payment of pension, compensation, Dependency and Indemnity Compensation (DIC), burial allowance, plot allowance, subsistence allowance, education (including debts from work-study and education loan defaults), insurance benefits, clothing allowance, automobile or other conveyance allowance, and adaptive equipment allowance.

b. Pub. L. 90-616 (October 21, 1968) and Pub. L. 92-453 (October 2, 1972) established and revised 5 U.S.C. 5584, which authorizes waiver of erroneous payments of pay and allowances made to employees when collection would be against equity and good conscience and not in the best interest of the government. Pub. L. 99-224 (December 28, 1985) expanded the waiver authority of section 5584 to include travel, transportation, and relocation expenses. Pub. L. 100-702 (November 19, 1988) raised the amount of a debt for which an agency could grant waiver in whole or part from $500 to $1500. Waiver decisions under authority of section 5584 will be in the narrative format (see sec. D of this chapter) and comply with the provisions of 38 CFR 1.963a. Further information pertaining to waiver of these debts may be found in 4 CFR 91.1-92.9 and MP-4, Part VIII, paragraph 3.07.

c. Pub. L. 97-365 (Debt Collection Act of 1982) created 31 U.S.C. Subchapter II of Chapter 37, amended the Federal Claims Collection Act of 1966, and led to the subsequent revision of the Federal Claims Collection Standards (4 CFR Parts 101-105). This legislation expanded the capabilities of federal agencies to collect debts owed to the government. Pub. L. 101-552 (November 15, 1990) raised the limit on the amount of indebtedness that can be compromised, terminated, or suspended from $20,000 to $100,000 per debt. Standards for the compromise of debts are found at 38 CFR 1.930-1.938 and 1.970. Standards for the suspension or termination of debts are found at 38 CFR 1.940-1.943.

d. Implementation. As to all laws implemented by the Committee on Waivers and Compromises, it has been determined:

(1) Basic collection efforts remain a Fiscal activity responsibility.

(2) The Committee on Waivers and Compromises has independent decisionmaking authority.

(3) Normally, service on the Committee is in addition to the regular duties of the members. Each member while serving on the Committee will be performing duties as a member of the Committee rather than as an employee of the operating division.

(4) Administrative control of the Committee is placed under the Chief of the Fiscal activity. He/she is responsible for all correspondence with the debtor or representative and the full development of all cases, prior to submission to the Committee, including the acquisition of the claims folder/loan docket, and the financial status report.

(5) Supervision and overall quality control of the Committee and its professional and clerical staff are the responsibilities of the Chairperson. This control also includes a quality review of Committee actions, including lapsed time standards review.

(6) Regular channels of communications are to be used concerning administrative, quality control, jurisdictional, policy and procedural aspects of Committee operations.

8A.02 APPOINTMENT OF COMMITTEE CHAIRPERSON, MEMBERS AND ALTERNATES

In complying with 38 CFR 1.955(b), the VA regional office Director, VA medical and regional office center Director, or medical center Director will be responsible for:

a. Appointing

(1) A capable Chairperson and alternate Chairperson.

(2) Members with the required special competence.

(3) Sufficient alternates with the required special competence to expeditiously handle the workload.

(4) Replacements for any appointees who are unable for any reason to continue to serve. Appointments may be indefinite, or for a stated term and until a successor is appointed.

b. Assuring that appointees are available for Committee duty, including necessary time for both familiarization with requirements pertaining to such duty and the preparation and completion of proper Committee decisions.

8A.03 COMMITTEE RELATIONSHIP TO MANAGEMENT

a. Generally. In all matters except Committee decisionmaking, the Chairperson, members,

and their alternates are subject to the same degree of management controls as when performing their regular duties.

b. In Performing Duty on Committee. All levels of management will cooperate to assure that the Chairperson, members, and their alternates are available for Committee duty when assigned by the Chairperson.

c. In Decisionmaking. Committee or panel members are responsible for arriving at their decisions independently. Neither the Director nor the Chairperson nor any division chief or employee will attempt to dictate or influence the vote of any assigned member on any issue. This prohibition does not pertain to instructional or interpretive presentations by the District Counsel or others not related to an impending vote on a particular matter. Basically, what is sought is total independence in decisionmaking within the confines of understanding and acceptance of necessary limitations applicable to all similar situations.

d. In Administrative Matters. Normally, the Chairperson will represent the Committee in dealing with other divisions and top management.

8A.04 CENTRAL OFFICE ACTION

a. In accordance with 38 CFR 1.956(b), the Under Secretary for Benefits may assume original jurisdiction of any matter which the Committee has authority to consider but on which it has not rendered a decision on the issue involved. An ad hoc Board will be established to determine the particular issue. It is contemplated such authority will be used sparingly.

b. The Central Office Staff (047) will supply advice for general application on its own initiative on questions of jurisdiction, policy and procedure not limited to a particular case, over the Under Secretary's or Area Director's signature. This staff (047) will do the same on principles for evaluation, adequacy of evidence and factors for consideration in individual cases on request of any Committee Chairperson, over the signature of the Chairperson or station Director.

8A.05 APPLICABLE VA REGULATIONS

38 CFR 1.900-1.970 implement the requirements of 38 U.S.C. 5302, 5 U.S.C. 5584,

31 U.S.C. Subchapter II of Chapter 37, and 4 CFR Parts 101-105. 38 CFR 1.955-1.970 establish policy and procedures for the Committees on Waivers and Compromises. Sections 1.930-1.938 and 1.970 establish the VA authority, and set criteria for, the compromise of debts. Sections 1.940-1.943 establish VA authority, and set criteria for, the suspension or termination of debt collection.

8A.06 PROCEDURES

This manual contains the basic procedures to be followed by the Committees on Waivers and Compromises.

8A.07 NATURE OF COMMITTEE

a. A Committee on Waivers and Compromises is essentially a decisionmaking body. It will consider evidence presented to it and reach conclusions based on such evidence respecting the debt problem presented.

b. The Committee will help the debtor obtain additional evidence relating to any issue raised by the debtor in conjunction with his/her waiver request.

c. The Committee will not criticize nor attempt to manage any aspect of VA operations.

d. Any request for Committee action not within the Committee's delegated authority will be rejected.

e. Case files normally will not be established by the Committee.

f. The Chairperson will maintain a statistical record of Committee actions (see paragraph 8F.07) and material of precedent value.

g. Where the Committee has a substantial reason for questioning the propriety of the action on which the overpayment is established or the amount of the overpayment established, the Committee will refer the issue in a memorandum to the appropriate division chief of the program concerned with a statement of reason for referral. The memorandum will be signed by the Chairperson. It will be the responsibility of the operating division to take whatever action it deems necessary. The division chief concerned will notify the Chairperson of the action taken, or if the prior decision is confirmed, a statement in a memorandum will be sufficient.

8A.08 THE COMMITTEE CHAIRPERSON

The Chairperson of the Committee on Waivers and Compromises will have several diverse responsibilities, including:

a. Knowledge of Competence of Alternate Chairperson, Members and Alternates. In order to designate efficient panels, the Chairperson must be aware of the competence of each of the individuals available for panel assignment.

b. Assignment of Panel Members and Designation of Reporting Member.

(1) When a claim is properly referred to the Committee for either waiver consideration or the consideration of a compromise offer, the Chairperson shall designate a panel from the available Committee members to consider the waiver request or compromise offer. The Chairperson may assign himself/herself as a panel member. If the debt is less than $20,000, the Chairperson will assign one Committee member as the panel. The Committee member should have experience in the program area where the debt is located.

(2) The single panel member's decision shall be the decision of the Committee. This single panel member is also the reporting member and will have all of the responsibilities described for a reporting member in paragraph 8A.09 and elsewhere in this manual. If the debt is $20,000 or more, the Chairperson shall assign two Committee members. One of the two members should be knowledgeable in the program area where the debt arose and this panel member should also be designated as the Reporting Member. If the two member panel cannot reach a unanimous decision, the Chairperson shall assign a third member of the Committee to the panel and the majority vote shall determine the Committee decision. In the event that the original Reporting Member is also the dissenting member of this three member panel, either of the other members shall become the Reporting Member.

(3) The assignment of a one or two member panel as described in subparagraph (1) above is applicable if the debtor files a Notice of Disagreement (NOD) with a Committee decision to deny waiver. Whenever a debtor files an NOD, the panel assigned to consider the NOD should contain the same number of members as the panel that initially denied the waiver request. However, a Chairperson must assign the NOD to a different one, two, or three member panel than the panel that made the original Committee decision that is now the subject of the NOD.

c. Meeting or Rotation. The Chairperson shall determine and advise the panel members whether consideration of the particular case shall be accomplished in a meeting of the panel or by rotating the case among the members. He or she may, for cause, change this decision.

d. Receiving, Recording and Transmitting Decision. The Reporting Member will submit the signed decision to the Chairperson. The decision will be recorded and then transmitted to the Fiscal activity.

e. Management of Workload. The Chairperson is responsible for prompt decisions in all cases. The Chairperson will look to the Reporting Member for prompt action on each individual case.

f. Chronological Assignment. Committee assignments will be made by the Chairperson on the basis of date of receipt except in emergency conditions. Cases should not be accumulated for assignment.

g. Problem Recognition and Solution. The Chairperson will analyze any problems which may arise. He or she may convene the Committee to assist in identification, analysis, and solution of any problem. Matters that require assistance outside of the Committee's authority or expertise will be referred to the District Counsel with the Chairperson's recommendation for solution.

h. Requesting Advice From the District Counsel. Requests for advice from the District Counsel will fall into two distinct groupings:

(1) Formal Opinions. In those cases where the Committee requires a formal opinion of the District Counsel before it can arrive at a decision, the Reporting Member will prepare the request for the Chairperson's signature. The Chairperson will determine whether an applicable precedent exists and, if so, provide it to the Reporting Member. Otherwise, the Chairperson will sign and record the issuance of the request, deliver it to the District Counsel, and notify the Committee to suspend consideration (see paragraph 8F.02). Upon receipt of the District Counsel's opinion, the Chairperson will record its receipt and deliver it to the Reporting Member for consideration. It is not contemplated that there will be a high volume of requests for opinion. Litigative probabilities and legal merits (not solvable prior to referral to the Committee) are examples of matters requiring advice of the District Counsel.

(2) General Information. The Chairperson may seek and obtain from the District Counsel any required information on general matters of concern to the Committee. Examples are: approximate backlog of Government civil claims cases in the local district court (time from filing to judgment and time lapse to collect by enforced collection); probable court costs against the United States in the event of unsuccessful suit; approximate reduction from fair market value of assets if sold at forced sale in the particular locality.

i. Requesting Advice From the Central Office Staff (047). The Chairperson may request advice from the Central Office Staff on:

(1) Individual cases when the Committee is uncertain as to the proper action to be taken.

(2) General questions as to jurisdiction, policy, or procedure of the Committee. Submission to Central Office Staff should not be requested when it would have the effect of merely affording an intermediate step between the Committee and the Board of Veterans Appeals.

j. Influencing the Committee or Panel

(1) Assigned Case. The Chairperson is not authorized to direct a panel of the Committee to arrive at a particular decision in a case. As a panel member (or in situations when his or her vote is required in a Committee decision), he or she may, as any member, attempt only to persuade other members as to the correctness of his or her viewpoint.

(2) General Application of Policy or Procedure. The Chairperson may and should convene the Committee and alternates to inform them of any variations from established policy or mandatory procedure which have come to his or her attention in connection with Committee or panel action on cases.

k. Signature on Statement of the Case. The Chairperson will sign the Statement of the Case as approving official. The Chairperson will also review all cases prior to certification to BVA in order to determine whether the debtor has submitted any new evidence since the issuance of the Statement of the Case which relates to the issues before the Committee. If such new evidence has been submitted, the Chairperson will refer such evidence to the panel member(s) who issued the Statement of the Case for further review and a determination whether the new evidence is pertinent. If the new evidence is pertinent to the issue before the Committee, the panel must issue a Supplemental Statement of the Case. The Chairperson also will sign Supplemental Statements of the Case, if any. However, if the evidence which has been submitted does not relate to issues before the Committee, the case should be referred to either the Adjudication or Loan Guaranty Officer for consideration.

l. Signature on Correspondence. The Chairperson will sign correspondence concerning the development of evidence relating to an issue pending before the Committee. The correspondence will usually be prepared by the Reporting Member.

8A.09 THE REPORTING MEMBER

The member designated by the Chairperson as the Reporting Member shall be responsible for:

a. The timely consideration, individually or by the panel, of the matter at issue.

b. Preparation of necessary correspondence.

c. Preparation of the panel or single signature decision. In cases where there is either a waiver denial or compromise rejection, the Reporting Member will exercise special care to write the reasons for the decision (item 14 "Reasons for Decision" on either the VA Form 4-1837, Decision on Waiver of Indebtedness, or the VA Form 4-1838, Decision on Compromise Case). It must be written in a manner which can be transcribed, exactly as is, into the subsequent Fiscal activity letter which notifies the debtor of either the waiver denial or compromise rejection. This procedure necessitates well written and fully documented decisions, identifying appropriate regulations being applied to the individual facts, which fully support the decisionmaker's conclusion(s). Every decision must fully explain to the debtor the basis for the decision and must relate the facts and evidence which support the decision, and, if appropriate, the specific reasons why other facts of record do not support the debtor's request.

d. Notification to the Chairperson when a two member panel is not in agreement.

e. Obtaining the members' signatures on the decision.

f. Preparation of supporting documents, if necessary.

g. Submission of signed decisions, with file, to the Committee Chairperson. Copies of the decision forwarded to other stations or the Debt Management Center (DMC) must be signed copies.

h. Preparation of necessary copies of decision, before or after submission, as is feasible.

i. Preparation of and obtaining signatures on Statements of the Case and Supplemental Statements of the Case when necessary. At this time, the Reporting Member must insure that he or she has specifically answered all substantive arguments advanced by the claimant.

j. Notification to the accredited representative, if any, to file VA Form 1-646, Statement of Accredited Representative in Appealed Case.

k. Preparation of VA Form 1-8, Certification of Appeal, when needed.

l. Presiding over any meetings of panel members or hearings conducted at the debtor's request.

8A.10 SIGNING DECISIONS

Single signature and unanimous panel decisions will be signed (with correspondence symbols) by the Reporting Member and other panel members as appropriate. The Chairperson will sign a decision only if authorized to vote as a panel member. In a case where the two member panel disagrees, no decision is made by the panel. The disagreement will be indicated on the appropriate form by signature and the word "Disagree". There will be stamped or endorsed across the decision form "No Decision-Referred to Full Committee". This form will be attached to a new decision form which reflects the decision of the full three member panel of the Committee. When the full three member panel is not in agreement, the dissenting member will so indicate by adding the word "Disagree" after his or her signature. The dissenting member should attach a statement to the new decision which provides the reasons for his or her dissent.

8A.11 REASONS FOR DECISIONS

a. All decisions of a Committee shall explain how they were reached. The reasons given must reflect the facts that are material to the issue actually decided, and be conscientiously written for incorporation into the subsequent Fiscal activity letter when appropriate, as provided in subparagraph 8A.09c. If information requested of the debtor is not received, the decision is normally made on the evidence of record and will reflect this fact.

(1) A Committee on Waivers and Compromises should make every effort to render a decision based on all available evidence. This would include information contained in a debtor's claims folder, as well as any other information that the debtor could provide at the time of the waiver request or hearing. In the event that a waiver decision cannot be made because of a lack of evidence or a lack of information pertaining to the debt, the Committee members considering the waiver request should state in a signed memorandum to the Chairperson that they are unable to render a decision because of a lack of information or evidence. The case, along with the Committee's memorandum, should be forwarded by the Finance Officer to the District Counsel for a decision on whether the agency's claim is legally enforceable. If the District Counsel concludes that the debt is legally enforceable, the case must be sent back to the Committee to make a waiver decision on whatever evidence there is of record, including the debtor's submissions. However, if the District Counsel determines that the claim is not enforceable, the Finance Officer must terminate any further collection action and all amounts previously collected must be refunded.

(2) A case with insufficient evidence will arise most often involving an old loan guaranty indebtedness where the loan docket no longer exists and the VA is now attempting to collect this debt by means of offset from the debtor's current benefit payments. Many of these cases will involve waiver requests on debts that were created many years ago, since there was no statutory time limit on requesting waiver of these loan guaranty debts. The fact that the loan docket no longer exists is not reason enough, by itself, for a Committee to claim that a waiver decision cannot be made because of a lack of evidence. In all probability, sufficient evidence may exist in the claims folder, even without a loan docket, to allow a Committee to render a proper waiver decision.

8A.12 HEARINGS BEFORE COMMITTEE

a. General. In accordance with 38 CFR 1.966, personal hearings will be granted upon the receipt of a specific request from the debtor or his/her representative, provided no expense as a result of reporting for a hearing is incurred by the Government. The Chairperson will notify the interested parties of the time and place of the hearing.

b. Waiver Cases. When a request for a Committee hearing is made in a waiver case, the hearing will be conducted in the manner prescribed in 38 CFR 3.103(c) and M21-1, Part I, paragraphs 18.17 and 18.18. Normally, the debtor will be provided with a hearing prior to the initial Committee decision and prior to the issuance of a Statement of the Case (SOC), if the debtor files a Notice of Disagreement. The hearing panel must be composed of the same Committee members making the waiver decision. The number of hearing panel members must correspond to the number of Committee members required to render the decision on the waiver request or Notice of Disagreement. For example, if only one Committee member is required to render a Committee decision, then only one hearing panel member is necessary and that member is the same person who will render the Committee decision. However, if more than one Committee member is required to render a decision, then there must be the same number of Committee members on the hearing panel. Again, the members assigned to the hearing panel must be the same members assigned to render the decision on behalf of the Committee, except as provided in subparagraph (1) below as to loan program debts. However, if the debtor requests a hearing (or rehearing) after a Committee decision, then the hearing panel must be composed of different Committee members than those members who rendered the previous Committee decision.

(1) If VA determines that the debtor cannot travel to the station where the Committee of normal jurisdiction is located (see paragraph 8A.19), the hearing may be held before another Committee at a station which is more accessible to the debtor. The station Committee that conducts the hearing must also consider and render the decision on the debtor's request for waiver, except when the request is for a waiver of a home loan program indebtedness. A request for a waiver of a home loan program indebtedness must always be decided by the Committee at the station where the debtor's loan docket is permanently located, regardless of where the debtor may have had a hearing. If a hearing is held before a panel or member from a Committee other than the Committee that will make the decision on the waiver request (as in a home loan program debt), the transcript of the hearing must be sent immediately to the Committee of jurisdiction for the decision. The Committee conducting the hearing may request transfer of the claims folder and/or loan docket if necessary.

(2) A Committee's decision should always refer to and contain a discussion of any evidence derived from a hearing.

(3) A hearing will normally be rescheduled for good cause at the debtor's request if he or she is unable to attend the scheduled hearing. Examples of good cause include the following: illness of the debtor or representative, difficulty in obtaining records, and unavailability of a witness. If possible, the debtor should be contacted to determine that he/she was aware of the scheduled hearing and the reason, if any, for his/her failure to attend the hearing. A third hearing date will be scheduled only if it is found that there were compelling reasons which prevented the debtor from attending the first two dates upon which hearings were scheduled and there is reasonable cause to believe that the debtor will be able to report for a hearing on the new date. However, if a debtor fails to appear at a scheduled hearing without good cause, the Committee will render a decision based on the available evidence. This decision will note the debtor's failure to appear for the hearing and will include an explanation of the basis for the Committee finding that such failure to appear was without good cause.

(4) Hearing Conducted After Committee Decision. As stated in subparagraph (b) above, a hearing will normally be conducted prior to either the initial Committee decision or the issuance of a Statement of the Case (SOC). However, a hearing will be conducted after the issuance of either the initial waiver decision or after the issuance of the SOC, if the debtor so requests.

(5) A debtor must be accorded a hearing on appeal, if requested, irrespective of whether he/she was granted a hearing in connection with the initial Committee consideration of the waiver application.

(6) Notice of Hearing. The notice of time and place of hearing will be signed by the Chairperson.

(7) Committee Consideration of Hearing Evidence. Argument, testimony of witnesses, if any, and evidence received during the hearing will be considered by the Committee in making its determination. A complete transcript must be incorporated in the record. In any instance where a formal hearing is not requested but there is personal contact and discussion, a report of contact will be made of the conversation with the claimant and/or representative. In such event, the report of contact must be complete and reflect an accurate summary of the conversation which took place. Any evidence incorporated therein will be considered by the Committee. If it is not clear whether a claimant or representative desires a hearing, this should be clarified and a hearing held, if requested.

(8) BVA Hearings. If the claimant requests a hearing before BVA after the receipt of a statement of the case (SOC) or supplemental statement of the case (SSOC), field station personnel cannot conduct a hearing as agents for BVA. Rather such hearings must be conducted by BVA members either in Washington, DC or by the BVA Travel Board (38 CFR 19.75-19.77; 20.704). Travel Board hearing requests must be marked to show the date of receipt and must be promptly entered on the local Traveling Board Hearing Docket.

c. Compromise Cases. There is no right to a hearing before the Committee concerning any issue raised with a compromise offer.

8A.13 DEFINITIONS

a. As used in connection with the Committee on Waivers and Compromises, the following are the meanings of the terms mentioned:

(1) Debt. A claim for money made by, or owed to the Government, arising out of activities of VA. It includes overpayments (38 CFR 1.962).

(2) Waiver. Decision that conditions exist which, under the applicable statutes (38 U.S.C. 5302 and 5 U.S.C. 5584) and regulations, preclude recovery by VA of the amount paid or overpaid, including interest and other late payment charges.

(3) Compromise. Acceptance of less than the full amount of a debt in settlement and full satisfaction of the debt.

(4) Reporting Member. The individual who is designated by the Chairperson to be the presiding officer over a panel. The duties are stated in paragraph 8A.09, and elsewhere throughout this chapter.

b. As used in this manual, unless the context indicates the contrary:

(1) Chairperson includes alternate Chairperson; and

(2) Member includes alternate members.

(3) Committee refers to the particular decisionmaking body, which may be composed of a one person panel (38 CFR 1.955(d)) or a panel composed of two or three members.

(4) Fiscal activity includes finance and fiscal operations, where applicable.

(5) Regional office includes a VA medical and regional office center.

8A.14 COMMITTEE ON WAIVERS AND COMPROMISES CORRESPONDENCE

a. The sole purpose of this paragraph is to establish procedures for correspondence with the debtor on Committee matters. The jurisdiction of the Committees is established in paragraphs 8A.12, 8A.17, and 8A.19 of this chapter. These paragraphs should be consulted to determine which Committee has jurisdiction over a particular waiver request or compromise offer.

b. The station where the Committee of jurisdiction is located, as established in paragraph 8A.19, is responsible for all correspondence to the debtor concerning Committee matters, except in CARS cases and cases involving waiver of erroneous payments of pay and allowances which are discussed below (NOTE: Correspondence concerning hearing dates is the responsibility of the station where the Committee conducting the hearing is located). If the station where the Committee of jurisdiction is located is not the station where the debtor's claims folder is permanently located or is not the station responsible for the collection of the debt, the station where the Committee of jurisdiction is located must provide copies of all correspondence and Committee decisions to these other stations for insertion in the claims folder. Also see Paragraph 8D.03e for information on control of a veteran's records.

c. In cases involving the erroneous payment of pay and allowances, the Chief of the Fiscal activity at the station responsible for preparation of the report of investigation and collection of the debt is responsible for all correspondence to the debtor (including the initial notice of indebtedness with the right to request waiver), as well as the forwarding of materials to Central Office for referral to GAO (see MP-4, Part VIII, para. 3.06). The Chief of the Fiscal activity where the Committee of jurisdiction is located is responsible for forwarding the Committee's decision or recommendation on the request for waiver to the station responsible for collection of the debt. If the Chief of the Fiscal activity where the Committee of jurisdiction is located is not responsible for collection of the debt, then he/she is not responsible for any correspondence to the debtor or the forwarding of any material to Central Office for referral to GAO.

d. In CARS cases, the station where the Committee of jurisdiction is located is responsible for all correspondence to the debtor pertaining to the waiver decision or subsequent appellate action on that decision whenever the Committee either denies waiver or grants a partial waiver. However, where the Committee of jurisdiction grants a full waiver, the Debt Management Center (DMC) has sole responsibility for notifying the debtor of the Committee's decision. The DMC will be provided with a copy of all signed Committee decisions and notified of any appellate actions on a Committee decision. The station of Committee jurisdiction should also provide copies of correspondence and Committee decisions to other stations in accordance with subparagraph (b) of this paragraph.

8A.15 DEBTS RESULTING FROM MEDICAL CARE OR SERVICES

a. (1) In accordance with 38 CFR 17.65a, a Committee on Waivers and Compromises is authorized to consider a request for waiver on debts, as described in section 17.62(a), resulting when Veterans Health Administration (VHA) hospital care or medical services are provided to a person who was thought to be an eligible veteran, or was tentatively determined to be an eligible veteran, but who was subsequently determined to be ineligible for such care or services.

(2) Section 17.65a does not authorize debts identified in section 17.62(b) as eligible for waiver consideration. Section 17.62(b) refers to debts incurred when medical treatment or services are rendered in an emergency or for humanitarian purposes to persons not otherwise eligible for treatment. However, section 17.65a does not preclude waiver consideration of debts for services furnished under circumstances described in section 17.62(b), when the individual receiving such treatment would be otherwise eligible for waiver consideration under the conditions set forth in section 17.62(a).

(3). In accordance with General Counsel Advisory Opinion 31-92 (September 1, 1992), a debt resulting from the failure to pay a medication copayment required by 38 U.S.C. 1722A is subject to waiver consideration.

b. A Committee may consider a compromise offer on most debts which result from care or services furnished by VHA. However, in accordance with 38 CFR 2.6(e)(4) and (11), the Office of General Counsel has exclusive jurisdiction over debts for care and services where the liability for such debts rests with a third party or legal entity or where such debts involve claims under workmen's compensation or employer liability status.

c. A request for waiver of a debt resulting from medical care or services furnished in error will normally be submitted by the debtor to the VHA Fiscal activity where the debt arose. The Chief of the VHA Fiscal activity will forward this request to the Fiscal activity at the VBA station of jurisdiction. The Chief of the VBA Fiscal activity will process the waiver request in the same manner as any other request for waiver of a benefit indebtedness, in accordance with the provisions of this chapter and MP-4, Part VIII. The VHA Fiscal activity will be responsible for the development of evidence pertaining to the creation of the debt, which will be forwarded along with the request to the VBA fiscal activity. The Chief of the VBA Fiscal activity and the Chairperson of the Committee are responsible for complete development of the waiver decision, any statement of the case based upon a notice of disagreement with the waiver decision, the submission of any substantive appeal of the waiver decision to the Board of Veterans Appeals (BVA) and all correspondence to the debtor pertaining to Committee activity. The VBA fiscal activity is to promptly inform the VHA fiscal activity of both the Committee's decision on the waiver request and any appellate action related to such decision so that collection by the VHA fiscal activity may proceed accordingly.

d. A written record of each case considered by a Committee shall be maintained by the Committee chairperson or the Chief of the VBA Fiscal activity at the station where the Committee of jurisdiction is located, when the debtor's claims folder is permanently located at another station. The record will be established under the name of the debtor and will consist of a copy of the Committee decision(s), as well as any other information pertaining to evidence on which the Committee based its decision(s) and any materials or decision pertaining to appellate action. Copies of all pertinent documents will be forwarded by the Committee of jurisdiction to the station where the debtor's claims folder is located. Such copies will be included in the claims folder.

8A.16 REQUEST FOR WAIVER OR COMPROMISE OF INDEBTEDNESS BY VA EMPLOYEE

In the interest of fairness, and to assure the utmost objectivity in considering a request for waiver or compromise by a VA employee, it is VA policy that a Committee will not exercise jurisdiction over a request for waiver or compromise made by an employee of the same station. If the debtor who requests waiver or offers a compromise is an employee of the station where the Committee of jurisdiction is located, then the Chief of the Fiscal activity at that station will refer the request or offer to another regional office or center in accordance with M23-1, Part 1, paragraph 13.07.

8A.17 REQUEST FOR WAIVER OF ERRONEOUS PAYMENT OF PAY AND ALLOWANCES

a. All requests for waiver of an erroneous payment of pay or allowances must be submitted to the Committee on Waivers and Compromises of jurisdiction, regardless of the amount of the indebtedness. A Committee has authority to deny waiver of collection of an erroneous payment of pay or allowances no matter what the aggregate amount of the debt. However, a Committee only has authority to grant waiver, or partial waiver, of collection of such debts which are not in excess of $1500, exclusive of interest and other late payment charges. The GAO (General Accounting Office) has exclusive authority to grant full or partial waiver for debts in excess of $1500 resulting from the erroneous payment of pay or allowances.

b. Where a debt resulting from an erroneous payment of pay or allowances is in excess of $15OO and a Committee determines that a denial of waiver is not appropriate, the Committee should then state in a written and signed memorandum its recommendation and reason for full or partial waiver. The request for waiver of such a debt in excess of $1500 and the Committee's recommendation for full or partial waiver, as well as other documents described in MP-4, Part VIII, paragraph 3.07, will be forwarded by the Chief of the Fiscal activity at the station having responsibility for collection of the debt to the Office of Financial Management (047G) for referral to GAO for waiver consideration.

c. Procedures and standards for waiver consideration of an erroneous payment of pay or allowances are found in 38 CFR 1.963a and MP-4, Part VIII, paragraph 3.07. In accordance with 5 U.S.C. 5584, GAO publishes governmentwide standards for waiver of collection of erroneous payment of pay or allowances in 4 CFR 91.1-92.9.

d. The collection of an erroneous payment of pay or allowances, as well as any accrued interest, administrative costs, or penalties, will be waived when the collection would be against equity and good conscience and not in the best interest of the Government. As determined by GAO (see 4 CFR 91.5(c)), collection will be against equity and good conscience and not in the best interest of the Government when it is determined that the erroneous payment occurred through administrative error and that there is no indication of fraud, misrepresentation, fault or lack of good faith on the part of the debtor or any other person having an interest in obtaining waiver of a debt. Generally, waiver is precluded when an employee or another person having an interest in obtaining the waiver receives a significant unexplained increase in pay or allowances, or otherwise knew, or reasonably should have known, that an erroneous payment occurred, and failed to make inquiries or bring the matter to the attention of the appropriate officials. Waiver under this standard must depend upon the facts existing in the particular case. The facts upon which the waiver is based are to be recorded in detail in either the Committee's decision or its recommendation. Hardship or detriment caused by collection is never considered in a waiver of erroneous pay or allowances.

e. A Committee decision on a request for waiver of erroneous payment of pay or allowances will be in the narrative format (see par. 8D.Olc(2)(b)) and not on VA Form 4-1837.

f. The denial of a request for waiver of an erroneous payment of pay or allowances by either a Committee or GAO cannot be appealed to the BVA (jurisdictional questions are decided by BVA itself and the question of whether BVA has jurisdiction is an appealable issue (38 CFR 20.101(c)). However, the employee will be advised by the Chief of the Fiscal activity at the station responsible for collection of the debt of the right to appeal such a denial to GAO. The debtor's letter requesting an appeal, together with the decision denying waiver and all other pertinent information, will be forwarded by the Chief of the Fiscal activity at the station responsible for collection of the debt to the Office of Financial Management (047G) for referral to GAO.

g. In accordance with 38 CFR 1.955(d), if the debt is $20,000 or less, exclusive of interest and other late payment charges, a single panel member may consider the waiver request and his/her signature alone to the decision or recommendation to GAO will be sufficient.

h. Committee jurisdiction in contractual obligations arising from such agreements as payment of physician and dentist special pay or from authorization of a recruitment or relocation bonus is limited to a waiver of erroneous payments made to administer the agreement. Once the agreement itself is breached (e.g., by separation from employment or changed position before the expiration of the agreement), any refunds required because the agreement was breached may only be waived as specified in applicable policy. For example, only the Chief Medical Director may approve waivers of special pay refunds due as a result of a breached career agreement. See MP-5, Part II, Chapter 3, Section B for policies on physician and dentist special pay and MP-5, Part I, Chapter 575 for policies on recruitment and relocation bonuses.

i. A written record of each case considered for waiver by the Committee shall be maintained by the Chief of the Fiscal activity at the station where the Committee of jurisdiction is located. This record will be created in the name of the debtor and will consist of a copy of the Committee decision or recommendation, the report of investigation and other pertinent information on which the Committee based its decision, as well as any documentation concerning GAO consideration of the case. In accordance with 4 CFR 92.7, this record shall be retained for 6 years and 3 months.

j. (1) Pub. L. 99-224 (Dec. 28, 1985) amended 5 USC 5584 by expanding waiver authority to include the authority to waive erroneous payments of travel, transportation, and relocation expenses and allowances (including erroneous payments of Relocation Income Tax (RIT) allowance and temporary quarters subsistence allowance). See also 38 CFR 1.963a(b). This expanded authority applies only to overpayments or erroneous payments made on or after December 28, 1985.

(2) Any bill of collection issued for an overpayment or erroneous payment of travel, transportation, and relocation expenses and allowances must be accompanied by a notice of the employee's right to request a waiver of collection of the debt.

(3) An erroneous travel advance is also appropriate for waiver but only to the extent that the advance was made to cover expenses erroneously authorized, the employee relied on the authorization as proper, and the employee actually spent the advance on the duly authorized but erroneous travel orders. In addition, waiver is only appropriate to the extent that an employee is indebted to the Government for repayment of the amount advanced after the advance has been applied to legitimate expenses. For example, if an employee has legitimate expenses, the travel advance must first be applied against the legitimate expenses. Any outstanding amount of the advance left after such application to legitimate expenses can be considered for waiver. Therefore, notice of the right to request waiver will be sent to those employees who still have a net outstanding travel advance after such advance has been applied to legitimate expenses. However, this situation should rarely arise because under current procedures only 45 percent of per diem is payable in advance.

(4) Debts arising because VA has to pay commercial carrier excess charges on a government bill of lading (GBL) are normally not subject to waiver consideration. These excess charges usually arise because the employee exceeded his or her authorized weight allowance or because the employee obtained extra services or insurance from the carrier. The employee's resulting debt to VA does not arise out of an erroneous payment and therefore is not subject to waiver consideration under Section 5584. However, waiver consideration may be appropriate in those cases where there was some government error involved, such as erroneous orders.

(5) Requests for waiver of erroneous payments of travel, transportation, and relocation expenses and allowances will be considered in the same manner described in this paragraph for waiver requests of erroneous payments of pay or allowances, including referrals to GAO. Also see MP-4, Part VIII,
para. 3.07.

8A.18 BREACHED CAREER RESIDENCY AND TRAINING CONTRACTS

a. Ordinarily, when a participant in the career residency or training program breaches the contract, restitution in full, according to the terms of the contract, is required of the participant. Repayment is usually made through a monthly installment plan. Care should be taken to see that monthly installments are adequate in amount and frequency to liquidate the indebtedness within a reasonable time. When the debtor does not make full payment within 2 years, as agreed to in the contract, settlement may be arranged in installment payments beyond the 2-year period with an interest rate of 6 percent per annum to be charged on any unpaid monthly balances. Efforts should be made to obtain a promissory note containing an agreement for judgment whenever extensions are granted.

b. A compromise settlement in these cases should be a rarity.

c. Where an extension of time in which to make payments is sought or a compromise offer is made, the matter will be referred to the Committee on Waivers and Compromises for final disposition. Cases submitted to the Committee under this paragraph should contain a financial status report (VA Form 4-5655), as well as a statement by the debtor setting forth the reasons for requesting settlement or compromise of the contract. The standards set forth in section E of this chapter should be followed when the Committee considers a compromise offer. In considering a request for an extension of the contractual repayment time period, the Committee should base its decision, after a thorough review of the VA Form 4-5655, on the debtor's ability to repay his/her contractual obligation. Since the debtor voluntarily entered into a contractual agreement with VA, the Committee should be reluctant to provide an extension of the repayment period. In those cases where the debtor's financial status report indicates financial hardship, the Committee can consider an extension of 6 months. An extension beyond 6 months should be extremely rare and based only on the most difficult of financial circumstances. The Committee's decision on a request for extension should be written in the narrative format shown in paragraph 8D.Olc(2)(b). An attempt to obtain a promissory note as discussed in subparagraph a. above should be done in conjunction with the District Counsel.

d. Refer to MP-4, Part VIII for collection procedure.

e. There is no right of appeal to the Board of Veterans Appeals from a Committee's compromise or settlement decision concerning debts from breached career residency contracts. However, jurisdictional questions are decided by BVA itself and the question of whether BVA has jurisdiction is an appealable issue (38 CFR 20.101(c)).

f. A written record of each of the cases considered by the Committee shall be maintained by the Chief of the Fiscal activity at the station where the Committee of jurisdiction is located. The record will be maintained under the name of the participant in the career residency program and will consist of a copy of the Committee's decision and other pertinent information on which the Committee based its decision.

8A.19 JURISDICTION

Action pursuant to applicable regulations in waiver, compromise, and settlement cases will be taken by Committees in the regional offices, medical and regional office centers, or medical centers, as follows (Procedures for waiver hearings are set forth in paragraph 8A.12):

a. Home Loan Program. Waiver actions will be processed where the loan folder is maintained. Compromise actions will be processed where the claims folder is located.

b. Compensation, Pension, Education and Insurance. Where the claims folder is located, except as noted below.

c. Medical Care/Services or Settlement Cases. Where the regional office, medical and regional office center, or medical center is located, having jurisdiction over the VA facility in which the debt arose or the breach occurred.

d. Erroneous Pay and Allowances. A request for waiver by a VA employee will be within the jurisdiction of the regional office, medical and regional office center, or center normally having jurisdiction of employee-veteran's records, as provided in M23-1, Part 1, Par. 13.07. This jurisdiction applies to all VA personnel, including nonveteran employees.

e. REPS. All waiver requests (including Notices of Disagreement) or compromise offers on overpayments or erroneous payments of REPS (Restored Entitlement Program for Survivors) benefits under 38 CFR 3.812 are the exclusive jurisdiction of the St. Louis Regional Office Committee on Waivers and Compromises.

f. Chapter 30. All waiver requests (including Notices of Disagreement) or compromise offers on overpayments or erroneous payments of benefits under Chapter 30 of Title 38 of the U.S. Code are the exclusive jurisdiction of the Committees on Waivers and Compromises located at the St. Louis, Atlanta, Muskogee, and Buffalo Regional Offices, whichever has jurisdiction of the individual Chapter 30 claim at issue.

g. Notice of Disagreement. A Notice of Disagreement (NOD) filed by a debtor whose waiver request has been denied will normally be considered by the same Committee that made the original or initial waiver decision. However, the Chairperson must assign an NOD to panel members who did not participate in the Committee's original decision. Except in a case where this manual chapter specifically provides to the contrary, if the claims folder is permanently transferred to another station after the initial decision is made, the Committee at the station where the claims folder is now located has the responsibility to consider the NOD. Also see Paragraph 8D.03e.

h. CARS Cases. A request for waiver will always be referred by the Debt Management Center (DMC) to the Committee at the station where the debtor's claims folder or loan docket is permanently located for consideration. A compromise offer on a CARS account can be considered by a special Committee panel located at the DMC. A copy of any decision by this special panel on a compromise offer will be forwarded to the station where the debtor's claims folder or loan docket is located for insertion in that folder.

i. Hearings. Except in cases involving a home loan program debt, the Committee that conducts a hearing in conjunction with a debtor's request for waiver must render the decision on that request. See Paragraph 8A.12b(1) for further details.

SECTION B. EQUITY AND GOOD CONSCIENCE

8B.01 SCOPE

The phrase "equity and good conscience" (38 U.S.C. 5302(a) and (b)), like other equitable rules, is not capable of exact definition. It is applied when there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons interested in obtaining a waiver

(38 U.S.C. 5302(c) and paragraph 8B.02 below). Its application to individual cases will result in many variations and exceptions. It is an elastic term applied in determining the rights of parties. The phrase "equity and good conscience" is descriptive of the consideration given in determining whether recovery of an indebtedness should be waived. To demand payment when it would be unfair, unconscionable, or unjust would be against equity and good conscience. The principles of equity and good conscience are applied between parties when a legal obligation of one to the other may be overcome by consideration that such obligation should not be insisted upon. In other words, equity will not necessarily enforce a legal right, if to do so would be unfair.

8B.02 ELEMENTS PRECLUDING WAIVER

In connection with a claim or request for waiver, an indication of any one of the following elements will automatically preclude the granting of waiver in accordance with 38 U.S.C. 5302(c) and 38 CFR 1.965:

a. Fraud and Misrepresentation. Although these are listed as separate elements in Section 5302(c), they both contain common characteristics and should be considered as a single element. In order to establish fraud or misrepresentation, a Committee must determine that there was a willful misrepresentation of a material fact, or the willful failure to disclose a material fact, with the intent of obtaining or retaining, or assisting an individual to obtain or retain, eligibility for VA benefits. A Committee must show that the willful intent to either misrepresent or fail to disclose was done with the veteran's knowledge that such misrepresentation or failure would result in the erroneous or improper award or erroneous retention of VA benefits.

b. Bad Faith. This term generally describes unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government.

c. Committee members should note that fraud, misrepresentation, or bad faith may exist in connection with the application for waiver rather than in the creation of the debt. For example, the debtor may submit a financial status report that is so inaccurate that a Committee may determine that an indication of fraud, misrepresentation, or bad faith exists.

8B.03. ELEMENTS FOR CONSIDERATION

a. As stated in Paragraph 8B.01, the phrase "equity and good conscience" is not capable of an

exact definition. In general, to demand payment when it would be unfair, unconscionable, or unjust would be against equity and good conscience. Thus, after determining that a debtor who is requesting

waiver is free of fraud, misrepresentation, and bad faith, a Committee must next apply the standard of equity and good conscience to determine whether the waiver request should be granted. For the purpose of such a determination, a Committee must consider all of the elements listed in 38 CFR 1.965: the debtor's (and also VA's) degree of fault in the creation of the debt, any unjust enrichment to the debtor as a result of the debt, as well as the detriment that the collection of the debt will cause the debtor (undue hardship/defeat the purpose of the benefit program) or the detriment already incurred by the debtor (changed position) in reliance on the VA erroneous payment or overpayment or erroneous advice. The first step in applying this standard of equity and good conscience is to define the elements that must be considered. Listed below are those elements and their definitions:

(1) Fault. The commission or omission of an act that directly results in the creation of the debt. In reaching this determination, a Committee must consider the age, intelligence, education, and physical and mental condition of the debtor.

a Where a debt is the result of an erroneous payment or overpayment of a benefit
(e.g., compensation, pension, and education), fault would exist if the debtor reasonably should have known that he or she received an erroneous payment or an overpayment. Fault can occur when the debtor provides an incorrect statement or information to VA, and he or she reasonably should have known that such information or statement was incorrect. Similarly, fault can exist if the debtor fails to provide VA with pertinent information which he or she should have known was essential in determining the payment of benefits. In both instances described here, fault can exist without a willful intent to deceive or defraud.

b In cases involving loan guaranty debts, as well as education loans and certain work-study debts, a Committee must determine the debtor's fault in terms of a breach of a contractual obligation. Fault would exist in such cases when the debtor had some degree of control over the circumstances leading to default or the breach of the contractual obligation, and the debtor's actions were not those expected of a person exercising a reasonable degree of care, with due regard for the debtor's contractual responsibility to the government. In loan guaranty debt cases caused by a transferee's default, an absence-of-fault finding would be appropriate where the veteran had no reasonable choice other than to sell the property (e.g., a veteran on active duty being ordered to change duty station), unless he or she had been notified by VA prior to the sale that the transferee was not qualified to assume the loan. The determination of fault in terms of a breach of a contractual obligation is also applicable when the breach is that of a promissory note executed as part of either a deed in lieu of foreclosure or a pre-foreclosure waiver or compromise ( 38 U.S.C. 3720). In this instance, the debtor's degree of fault is determined by his/her actions at the time of the breach of the promissory note. The debtor's actions during the events leading up to the deed in lieu of foreclosure are normally not considered in determining the degree of fault as to the breach of the subsequent promissory note.

c Education loans, under 38 U.S.C. 3698, are distinguishable from most forms of assistance covered under 38 U.S.C. 5302(a). Most notably, they are loans which must be repaid, with interest, under the terms of statutorily required promissory notes. The debt that arises from an education loan default is not characterized by the typical mistaken benefit overpayment. Congress has never excluded education loans from the Department's general waiver authority and the General Counsel has determined that the language of Section 5302(a) is so comprehensive as to reasonably encompass education loans. However, since the contractual agreement aspect of education loans more closely resembles the agreement situations in the home loan program, it is more appropriate for Committees to apply the specific loan guaranty program definition of fault rather than the definition used in the benefit payment program cases.

d Certain work-study allowance debts (38 U.S.C. 3485) resemble debts that arise as the result of an education loan default. Those debts that pertain to allowances advanced to a veteran prior to actual work performance must be considered under the loan guaranty definition of fault in the same manner that the definition is applied to education loan debts. However, the other than loan guaranty definition of fault will be applied to debts that relate to work-study allowances mistakenly paid to the veteran after or during, rather than in advance of, the actual work performance.

(2) Unjust Enrichment. Failure to make restitution would result in unfair gain to the debtor. It would not be equitable for the debtor to retain money, property, or services that have been obtained by the debtor at the expense of the government. In such a circumstance, a duty is imposed upon the debtor to repay the money or to pay compensation to VA for property and services received in order to prevent unjust enrichment. Consideration of whether collection of such a debt will either create a financial hardship or defeat the purpose of the benefits may be relevant to a waiver decision if unjust enrichment exists. In cases where it is determined that the debtor was unjustly enriched, Committees should consider the option of a partial waiver for that portion of the erroneous payment or overpayment that the debtor has already spent.

(3) Undue financial hardship. Collection will seriously impair the debtor's ability to discharge the responsibility to provide himself/herself and his/her family with the basic necessities of life. The debtor will be expected to accord a Government debt the same regard given any other debt. In determining whether collection of the debt would prevent the debtor from meeting necessities or the essential subsistence expenses, the following factors should be considered by the Committee members:

a income from all sources of the debtor, spouse, and dependents within the debtor's household;

b the extent to which the assets of the debtor, spouse, and dependents are available to meet both collection and essential subsistence expenses. For example, a married veteran, with spouse and children, is receiving increased pension for aid and attendance. The veteran is admitted for hospitalization for several months and overpaid the increased pension for three months. It is determined that income from all sources barely meets the family needs. Depending on the debtor's degree of fault, the Committee may grant waiver in the exercise of equity and good conscience;

c whether the essential subsistence expenses of the debtor and his/her family have been minimized to the greatest extent possible; and

d the extent to which the debtor, spouse, and dependents have other exceptional expenses and debts that should be taken into account and whether these expenses and debts have been minimized.

In applying this element of undue financial hardship, Committees will look not only at the debtor's current financial situation, but also at the debtor's potential future financial situation for the next three to five years.

e Analyzing Financial Information

1. Committee members should analyze the entire financial status report (VA Form 4-5655), or equivalent, submitted by the debtor. An analysis should not concentrate on only one part of the status report, such as monthly income and monthly payments. While a debtor's monthly payments may exceed monthly income, his/her list of assets may indicate that the overall net worth is sufficient to enable the debtor to repay the indebtedness. In other words, a review of a limited portion of the financial status report may reveal apparent financial problems, but a complete analysis of all aspects of the report may reveal that collection of the debt would not cause a financial hardship. In cases involving debts for which the regional office is responsible, a completed financial status report should be requested from each debtor who either requests waiver or makes a compromise offer before Committee members begin deliberation. (In CARS cases, a financial status report will have already been requested prior to referral of the cases to the local station.) Even if the debtor's claims folder already contains some financial status information, such as in a case involving a pension recipient, the Committee should still request a new financial status report. When a financial status report is requested and not provided by the debtor, the Committee has no other alternative but to find that collection of the debt will not create a financial hardship, unless other available evidence indicates such hardship. In all cases where a financial status report is requested and not received, the Committee must specifically state this fact in the written decision.

2. To make a determination concerning financial hardship, it will be necessary to develop a careful and complete analysis of the veteran's present and anticipated income and expenses, assets and liabilities, shelter and necessary household expenses, overall financial picture, employment, and ability to pay now and in the foreseeable future. In this connection, it should be recognized, for example, that although a veteran's overall condition is such that the payment of $100 a month might cause an undue hardship, the payment of a smaller amount each month might not have the same result. Likewise, a veteran may be heavily obligated at present, yet income potential may be such that in the foreseeable future the veteran will be in a position to start liquidating the indebtedness to the Government. Also, limited or complete lack of income, due to unemployment, temporary layoffs, or strikes may indicate a present undue hardship. However, it does not necessarily follow that the veteran will not again be gainfully employed. It is necessary to consider all the facts and circumstances in a particular case. This includes the age of the veteran, qualifications and employability, the income of both the veteran and spouse, and nature of employment. The possibility of re-employment must also be explored, if unemployed, to determine whether it is reasonable to assume that the present employment situation will improve appreciably in the foreseeable future so that future collection would not work an undue hardship upon the veteran or family.

f Recouped Indebtedness. Committee members are required to consider the entire amount of an indebtedness for waiver regardless of whether a portion of that indebtedness may have been recouped, even if recouped prior to a waiver request. In cases where part of the debt has already been recouped, an analysis of possible financial hardship must include not only the ability to repay the debt in the present and future but also the effect of the recoupment upon the debtor's financial status. It cannot be assumed that financial hardship existed at the time of the recoupment simply because the Committee now determines that financial hardship exists in the present and future. Rather, a Committee must perform an additional analysis of the debtor's financial status at the time of the recoupment, if such information is available, in order to establish financial hardship for that period. With this type of analysis, it may be that a partial waiver is more appropriate than granting or denying waiver of the entire amount of the debt.

g Debtor's Obligations. The fact that the veteran is heavily obligated would not, in itself, warrant a determination of undue hardship resulting from present and future collection. VA recognizes that a veteran's income should first be used for shelter and necessary household expenses. After these payments are made, the least VA can expect is that the veteran's obligations to the Government be given the same consideration which the veteran gives in meeting other obligations.

h Veteran and Spouse. In those waiver cases where the veteran and spouse were joint obligors on a loan obtained or guaranteed under chapter 37 of title 38 of the United States Code, the income of both husband and wife will be considered even though one of them may not be liable for the debt. For example:

1. A female veteran is unemployed, and she and her nonveteran husband obtain a GI loan using her entitlement. The loan was approved based on the husband's income. Due to local State law,
e.g., State Anti-deficiency statute, neither party is liable for a deficiency and thus no right of subrogation exists. The wife, nevertheless, is liable to VA based on the Secretary's right of indemnity. In such a case, the husband's income would be taken into account in considering the wife's request for waiver of her debt, and whether the collection of the indebtedness would work an undue hardship on the veteran and her family.

2. Another example is that of the veteran who may have received a discharge of his/her debt to VA in bankruptcy and the spouse who is still liable. In considering a request for waiver from the spouse who is still liable, the income of both veteran and spouse will be considered. This should be the procedure whether the veteran is the husband or wife.

3. In those cases where the husband and wife are divorced (this does not include separations), only the income of the spouse requesting waiver need be considered. If the parties have been separated for a long time, although not divorced, and reconciliation appears unlikely, the income only of the spouse requesting waiver may be considered.

i Resale. Whether a property acquired by VA is later sold at a profit or a loss does not in any way affect a debtor's indebtedness to the Government, and therefore, will not be considered as a basis for granting or denying a waiver, in whole or in part, by the Committee. The fact that VA may sell a property for an amount in excess of the amount credited to the indebtedness on account of the sale is not an indication that VA realized a profit on the resale of the property, since the costs of necessary repairs to bring the property into resaleable condition, plus local real estate taxes and assessments, sales commission and management fees, etc., increase the Government's interest in the property. In this connection, Loan Guaranty procedures require an analysis to be made after the sale of a property to ascertain the net loss to the Government. This procedure is designed to assure that the indebtedness established against an obligor is equitable, and where it is appropriate to do so, an administrative adjustment will be made to reduce the indebtedness.

(4) Defeat the purpose of the benefits. The element of "defeat the purpose" is very similar to the element of undue financial hardship. The purpose of some VA benefit payments is to afford a supplemental income for a beneficiary and family. If these benefits are a principal means of support, then collection would defeat the purpose of the benefits. Normally, this situation will arise where the debtor is in receipt of compensation, pension, or education benefits. However, a Committee member should never conclude, without a detailed examination of the financial status report, that the purpose of the benefits will be defeated by collection of the debt. Likewise, a Committee member should never conclude that the receipt of a benefit payment, such as pension, is in itself sufficient evidence of financial hardship. If a financial status report is requested and not received, a Committee may conclude that collection of the debt will not defeat the purpose of the benefit payments, unless other available evidence indicates the purpose of the benefits will be defeated.

(5) Changed position. Detriment to the debtor may exist as a result of an overpayment and justifiable reliance on the overpayment as proper.

a In compensation or pension cases, the debtor may have relinquished a valuable or irretrievable right or given up some opportunity, such as a new job, which he or she would not have done but for reliance on the overpayment or erroneous payment of benefits. The debtor may have relinquished additional income sources or incurred increased legal obligations in reliance on the erroneous payment or overpayment.

b A student may have relied on erroneous payments of educational benefits as being proper because the training was certified by the school and accepted by VA as proper. For example, the student reasonably believed that the number of class sessions that he/she attended per week were sufficient for full-time measurement purposes because the course was so approved by the State Approving Agency (SAA) and was certified by the school. If a subsequent survey, however, reveals that there was insufficient contact time and the class should never have been certified at the number of credit hours that it was, the veteran should not be penalized for his/her unwitting change of position in reliance upon the school's certification. Thus, the student's worsened position of being a debtor to VA through absolutely no fault of the student's may be sufficient detriment to make repayment of the debt inequitable in light of his/her assumption that benefit payments were proper.

b. In considering home loan guaranty program debts for waiver, the elements of "changed position" and "defeat the purpose of the benefits" are not normally applicable. The element of "unjust enrichment" will only occasionally be applicable when loan guaranty debts are considered. Although all of the elements discussed in this paragraph must be considered in each and every waiver request, for all practical purposes, only "fault" and "undue financial hardship" will be relevant to loan guaranty cases. Thus, a finding of no fault in a loan guaranty situation could, in the absence of other elements, outweigh a finding that collection of the debt would not impose undue financial hardship and could support a waiver of the indebtedness. This compelling weight given to a finding of no fault is peculiar to home loan guaranty debts.

8B.04 DECISIONS

a. The Committee should thoroughly review the facts in a particular case by examining all evidence of record, including the claims folder and/or loan docket and any other material submitted by the debtor as part of the request for waiver. The Committee should next apply the definitions provided in Paragraphs 8B.02 and 8B.03 above to the facts of the case in order to determine which of these elements exist. Once the Committee determines which of the elements exist, it is then in a position to determine whether to grant the waiver request. If the Committee determines that there is an indication of fraud, misrepresentation, or bad faith, then the waiver request must be denied as stated in Paragraph 8B.02. If no such indication exists, then the Committee must make a decision to grant or deny waiver based upon the principle of equity and good conscience. There is no set formula or guideline for the Committee's application of the principle of equity and good conscience, other than paragraph 8B.03. However, under no circumstances in the consideration of that principle may a Committee deny waiver solely because the debtor was at fault in whole or part for the creation of the debt. The Committee must specifically state the factual basis for each decision as to application of the principle of equity and good conscience, whether waiver is granted or denied.

b. In the loan guaranty program, the elements of "changed position" and "defeat the purpose of the benefits" are not normally applicable; "unjust enrichment" will only occasionally be applicable. Although all the elements must be considered in each individual waiver request, for practical purposes, only "fault" and "undue financial hardship" will be relevant to most loan guaranty cases. Moreover, a finding of no fault could outweigh a finding that collection of the debt would not impose undue financial hardship (in the absence of other elements) and could support a waiver of the indebtedness. This compelling weight given to the debtor's lack of fault is peculiar to loan guaranty debts. The difference in approach to debts in other VA program areas exists because of the difference in origination of the debts, i.e., monies paid out in a benefit program differ from the indirect benefit supplied by the loan guaranty in the home loan program.

c. In reaching a decision, a Committee must always remember that each case in which an individual waiver is requested is different and unique. Each case must be decided on its own merits and any reasonable doubt must be resolved in the debtor's favor. Finally, a Committee should always consider the possibility of granting a partial waiver before denying waiver of collection of the full amount of the indebtedness.

d. Group Waiver Decisions in School Cases. There are instances, though infrequent, in educational benefit programs where overpayments are created against a group (usually involving ten or more student beneficiaries) based on a common set of facts which, on their face, do not indicate the existence of fraud, misrepresentation, bad faith, or even fault by the individuals in the creation of the debt. In such cases, since recovery of the indebtedness from a group member would be contrary to equity and good conscience, group waiver consideration would be appropriate. For example, a school erroneously certifies veterans for a course that was approved by the State approving agency (SAA) in error. The veterans are completely unaware that they are receiving benefits for pursuit of an unapproved course and cannot possibly be expected to have known this. In addition, the veterans have changed position to their detriment because they are now in the worsened position of being debtors to VA as a result of their justifiable reliance on actions of the school, SAA, and VA consistent with proper approval of the course pursued. Consequently, there is authority for Committees to consider a group waiver for such student beneficiaries. This group waiver authority is to be used sparingly and solely in the type of circumstances described above. The station must submit a written request for Central Office concurrence to the Deputy Under Secretary for Benefits (201/047G7), before beginning the group waiver procedure. This written request should contain a statement as to why group waiver is deemed appropriate, along with a summary of all pertinent facts and an estimate of the total amount of the overpayments. The following procedures should then be followed in group waiver situations:

(1) Adjudication should prepare dummy award actions for those cases identified as possibly deserving of group waiver consideration. Each dummy award action should be clearly annotated - NOT FOR INPUT, GROUP WAIVER CONSIDERATION. The Adjudication Officer should then forward the cases to the Chief of the Fiscal activity. School liability procedures should also be initiated at this time, if appropriate.

(2) The Chief of the Fiscal activity will calculate the overpayments and then forward the cases, along with the group waiver request, to the Committee for consideration.

(3) When considering a group waiver, the Committee must assure that each individual student beneficiary within the group has not engaged in fraud, misrepresentation, bad faith, or fault in the creation of the debt. However, a single waiver decision may be used, with a listing of all applicable individual cases attached.

(4) The Chief of the Fiscal activity will dispatch a letter which explains both the creation and waiver of the overpayment to each individual of the group granted the waiver. For those individual cases excluded from group waiver determination, the dummy award actions must be converted to routine award actions and will be processed for input with resulting overpayment creation, including the dispatch of an initial demand letter containing notice of full appellate and waiver rights.

e. Notice of Denial Letters. Since the decisionmaker's reason(s) for waiver denial is incorporated verbatim into the letter notifying the debtor of waiver denial, it is the responsibility of the decisionmaker to provide debtors with clear and concise reasoning as to why waiver is denied. In this connection it is vital that the Committee decision reasoning be responsive and sympathetic to the debtor's individual situation, so that the subject denial letter is as informative and compassionate as possible to the debtor.

f. Decisionmakers. The daily work of the decisionmaker has a direct personal effect on many veterans and other beneficiaries. The decisionmaker writes a denial or rejection decision which goes, verbatim, directly to the concerned debtor, and evokes from him or her either elation, or depression. This is so chiefly because the Committee decision is directly affecting his or her pocketbook, which affects his or her feelings and attitude towards VA. Stated differently, the Committee decision bears substantially on whether debtor feels VA is serving him or her, or providing him or her with disservice. If the Committee decision is sound and well written, regardless of the holding, veterans and other beneficiaries are more inclined to feel served by VA, and satisfied that VA afforded him or her every possible consideration under the law. On the other hand, anything less than a sound and well-written decision, particularly one entirely unfavorable to the debtor, can result in very adverse feelings toward VA. Such beneficiary dissatisfaction can and does cause an unmerited filing of an appeal, resulting in substantial extra cost to VA that often could be avoided by providing the debtor with a better prepared decision, i.e., a decision with all the facts and applicable law conscientiously explained and written with the reader-debtor in mind.

g. Finality of Decisions. A decision rendered on a request for waiver by a Committee on Waivers and Compromises will stand as the final agency decision unless reversed or modified by BVA, an appellate court, or on review by the Committee under authority of 38 CFR 1.969(a). A Chairperson should resubmit a case to a Committee under section 1.969(a) only when the Chairperson believes that there exists new and material evidence, fraud, a change in law or interpretation of law specifically stated in a VA issue, or a clear and unmistakable error shown by evidence in the file at the time the prior decision was rendered. New and material evidence is generally defined as evidence in existence at the time of the original decision but which is unknown or unavailable to the Committee. A clear and unmistakable error exists when the original decision is based on a factor or evidence which is subsequently shown to be incorrect or when a Committee member ignores or fails to take into consideration a specific and pertinent factor or evidence which is present in the record before the Committee. Under no circumstances will a case be resubmitted under section 1.969(a) simply because the Committee's original decision is disliked or unpopular. A resubmission under section 1.969(a) must always be accompanied by a specific allegation, supported by evidence, of a clear and unmistakable error, new and material evidence, fraud, or change in law or its interpretation. When the Chairperson properly resubmits a case under authority of section 1.969(a), the Committee should review the original decision in terms of the evidence submitted by the Chairperson and either affirm, reverse, or modify the original decision. If the original decision is affirmed, the reporting member of the Committee should prepare a memorandum for the other members' signatures which states the reasons under section 1.969(a) for which the case was resubmitted and why the original decision is affirmed. If the original decision is reversed or modified, the reporting member will prepare a new VA Form 4-1837, Decision on Waiver of Indebtedness, which will contain a complete explanation as to why the original decision is being changed.

8B.05 WHO MAY APPLY FOR WAIVER

a. Other than Loan Guaranty. Any payee or beneficiary, including a fiduciary.

b. Loan Guaranty. A veteran-borrower, veteran-transferee, veteran-purchaser on a vendee account, spouse, former spouse, widow or widower of a veteran.

c. Representatives

(1) General. Committees may consider waiver requests from representatives acting in behalf of a debtor and not themselves. The representatives requesting waiver should normally be an interested party having the debtor's best interests in mind such as a spouse, parent, or sibling. The representation should be obvious and need not be formally reflected in the claims folder. If a debtor provides formal, written notification of representation (e.g., private attorney, service organization), VA will write directly to the debtor, with copies sent to the representative. However, in his/her declaration of representation, a private attorney may direct that all communications with the attorney's client be sent directly to the attorney and that VA is not to communicate with the client. This request must be honored.

(2) Death Cases.

a Committees may consider a waiver request from a spouse, parent, sibling, or the representative of the estate of a deceased payee charged with an overpayment. Since the diminution of a payee's estate by collection of the overpayment affects living individuals, such as heirs, assignees or creditors, the representative may request waiver in behalf of the estate in an attempt to preserve the assets for the disposition as intended by the payee. In such cases, the elements for consideration in a waiver decision set forth in 38 CFR 1.965, will be applied to the extent possible in the same manner as in any other waiver decision. However, it may be that more than one individual should be examined with respect to these elements. For example, the actions of both a deceased veteran and a surviving spouse might be examined as to the creation of the debt (i.e., examine all actions of both which had any bearing on the improper cashing of the overpayment check(s)), and this surviving spouse's financial situation might also be analyzed with respect to determining the element of undue financial hardship. However, the financial status and the actions of the surviving spouse will be examined only when he or she bears some responsibility for the creation of the debt or is also responsible for its repayment.

b A Committee will consider a waiver request on behalf of the estate of a deceased payee or beneficiary made by the surviving spouse or the representative of the estate regardless of whether the debt in question was charged against the payee or beneficiary prior to death or the debt is the result of an overpayment or erroneous payment made prior to death but not charged until after death. A Committee should also continue to consider a waiver request or notice of disagreement and reach a decision in such cases, even if the debtor dies during the decisionmaking process. If there is any question as to the propriety of continuing consideration after notification of the death of the debtor, the Chief of the Fiscal activity should immediately contact the surviving spouse or representative of the estate and request confirmation for continued consideration. Under no circumstances will a Committee cease consideration of a waiver request or notice of disagreement solely because the debtor has died.

8B.06 DEBTS SUBJECT TO WAIVER

a. Except as stated in paragraph 8B.07 below, debts, overpayments or erroneous payments made to designated living payees or beneficiaries (38 CFR 1.962) arising out of programs administered

by VBA, or resulting from medical care/services erroneously furnished (38 CFR 17.62a), or claims for erroneous payment of pay and allowances to employees (5 U.S.C. 5584), are subject to consideration for waiver (38 CFR 1.956).

b. 38 CFR 1.962 states that the term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. This regulation limits a Committee's authority to consider waiver only to those debts that arise because of an overpayment or erroneous payment of benefits to a designated payee or beneficiary who was alive at the time such an overpayment or erroneous payment was made. Thus, a Committee has no specific authority to consider waiver for a debt that results from a benefit payment to a designated payee or beneficiary who was deceased at the time such payment was made.

c. The entire amount of an indebtedness (original amount of debt, interest, and other late payment charges), must be considered for waiver, including any amounts of the indebtedness which may have been recouped either before or after the waiver request. Thus, a Committee will consider the original amount of the indebtedness for waiver, even if that amount has subsequently been reduced by offset or other recoupment. The only time that a Committee will consider a reduced amount of indebtedness, and not the entire original amount, is when the reduction in the amount of the indebtedness is the result of a subsequent award action which amended the original award action that created the indebtedness. The dollar amount of an indebtedness actually has little bearing upon a Committee's deliberations. The Committee's sole concern should be whether collection of the debt would be against equity and good conscience, as previously defined.

8B.07 DEBTS EXCLUDED FROM WAIVER

A waiver request on a debt which is excluded from Committee consideration must still be reviewed by the Committee (including those where the debtor failed to file a waiver request within the statutory and regulatory time limit). Even though the Committee may not have jurisdiction to consider a particular waiver request, only the Committee has authority to decide whether a waiver request is within its jurisdiction. The fact that a waiver request is rejected because it is not within a Committee's jurisdiction is the equivalent of a denial of waiver. Thus, the Committee at least must review such a request and render a decision on VA Form 4-1837. The Chief of the Fiscal activity has no authority to inform a debtor that his/her waiver request cannot be considered because it is not within the Committee's jurisdiction without first obtaining a written decision from the Committee to that effect. In addition, because the outcome is the same as a waiver denial, the debtor must be informed by means of VA Form 4-326 that the waiver request cannot be considered because there is either no specific authority for waiver consideration or that waiver consideration is specifically precluded by statute or regulation (the debtor will be provided with a citation to such statute or regulation) and that he/she has the right to file a Notice of Disagreement with the decision. The following are some examples of debts that are excluded from waiver consideration:

a. The indebtedness of a nonveteran obligor (other than spouse of the veteran) under the home loan program (38 U.S.C. 5302(b), 38 CFR 1.964).

b. The indebtedness of an educational institution found liable under

38 U.S.C. 3685. 38 CFR 1.967(b) specifically precludes waiver of such a debt. NOTE: There is no need to render a formal decision on VA Form 4-1837 or provide appellate rights in such a case because the request has been made by an institution rather than an individual beneficiary.

c. An overpayment to an insured from an insurance contract which is secured by an active NSLI (National Service Life Insurance) or USGLI (United States Government Life Insurance) policy. However, if the indebtedness can be recovered from any VA benefit payments other than insurance payments, then the indebtedness may be considered for waiver (38 CFR 1.966(b)(2)(i) & M29-1, Part I, Chapter 9).

d. Debts resulting from services furnished in a medical emergency (38 CFR 17.62(b)), settlement of a breached career residency contract, and other claims arising in connection with VHA business transactions.

e. Erroneous benefit payments received by third parties who are neither payees, beneficiaries, nor fiduciaries (38 CFR 1.962).

f. Interest, administrative costs, and penalties when the principal of the debt is not also waived (38 CFR 1.919(f)(1)).

g. Overpayments or erroneous payments made under the Survivor Benefit Plan (SBP)(10 U.S.C. 1447-1455) and the Retired Serviceman's Family Protection Plan (RSFPP). SBP and RSFPP are Department of Defense benefit programs, rather than VA benefit programs, and therefore there is no authority in 38 U.S.C. 5302 to consider any of these overpayments for waiver.

h. Refunds of physician and dentist special pay required as a result of a breach of a special pay agreement (38 U.S.C. 7432).

i. Refunds of payments or service obligations derived from authorizations.

8B.08 TIME LIMIT TO APPLY

a. Other Than Loan Program. A request for waiver of an indebtedness under this subparagraph shall only be considered:

(1) If made within 2 years following the date of a notice of indebtedness issued on or before March 31, 1983, by VA to the debtor, or

(2) Except as otherwise provided herein, if made within 180 days following the date of a notice of indebtedness issued on or after April 1, 1983, by VA to the debtor. The 180-day period may be extended if the individual requesting waiver demonstrates to the Chairperson of the Committee on Waivers and Compromises that, as a result of an error by either VA or the postal authorities, or due to other circumstances beyond the debtor's control, there was a delay in such individual's receipt of the notification of indebtedness beyond the time customarily required for mailing (including forwarding). If the requester does substantiate that there was such a delay in the receipt of the notice of indebtedness, the Chairperson shall direct that the 180-day period be computed from the date of the requester's actual receipt of the notice of indebtedness. For example, a veteran moves after completing work on a college degree. He/she is under no obligation to inform VA of the change in address, since educational benefit payments are no longer being made. An overpayment is discovered and a notice of indebtedness is sent to the veteran's last known address. A delay of a couple of months occurs before the veteran receives the notice of indebtedness. In this case, the 180-day period should not begin to run until the date of receipt of the notice of indebtedness.

b. Loan Program. A request for waiver of an indebtedness under this section shall be made within one year after the date on which the debtor receives, by Certified Mail-Return Receipt Requested, written notice of the indebtedness from VA. If written notice of indebtedness is sent by means other than Certified Mail-Return Receipt Requested, then there is no time limit for filing a request for waiver of indebtedness under this section.

c. Erroneous Pay and Allowances. An application for waiver must be submitted within 3 years following the date on which the erroneous payment of pay was discovered.

d. Reapplication Barred. Except for those instances provided for in 38 CFR 1.969 where waiver denials may be reconsidered, there is no authority under the law to reapply for waiver, where a prior request for waiver was denied, except on evidence germane to the creation of the debt, but not available at the time of the original request. Subsequent events, for example, worsened financial condition, increased costs of living, change in marital, health or family status, etc., while possibly affecting collection, do not relate to the cause of the debt, and therefore, cannot form a basis for a new request for wavier.

8B.09 FORM OF DECISION

VA Form 4-1837, Decision on Waiver of Indebtedness, is to be used in all cases except those involving claims for erroneous payment of pay and allowances to employees where a narrative format of waiver decision will be utilized. (See Appendix B).

8B.10 INDICATION OF FRAUD OR MISREPRESENTATION

a. In any case where there is an indication of fraud or misrepresentation of a material fact on the part of the debtor or any other party having an interest in the waiver or compromise of the claim, the Committee must refer the case immediately to either the District Counsel or the Office of Inspector General (38 CFR 1.962(b)). Action on the request for waiver or compromise offer will be deferred until the Committee receives instructions on the disposition of the case from either the District Counsel, Office of Inspector General, or the Department of Justice. The Committee can only resume consideration of the request or offer when the District Counsel or Office of Inspector General determines that prosecution is not indicated or the Department of Justice (DOJ) notifies VA either that the alleged fraud or misrepresentation does not warrant action by DOJ or that VA is specifically authorized to act on the request or offer.

b. The Committee must consult with the District Counsel whenever a waiver request or compromise offer is received in a case which has already been referred to the District Counsel, IG, U.S. Attorney, or DOJ for prosecution or in which a judgment has been obtained (either criminal or civil), or if bankruptcy proceedings are involved. Although a waiver request or compromise offer can be considered in cases which are being prosecuted or in which a civil judgment has been obtained by VA, the case is to be referred to the District Counsel for review to avoid a Committee decision which may be in conflict with either a court order or an agreement already reached by the District Counsel or the U.S. Attorney for the resolution of the case. In addition, any action by the Committee shall be in compliance with the procedures set forth in 38 CFR Part 42, if applicable.

SECTION C. HOME LOAN PROGRAM

8C.01 PURPOSE

The purpose of this section is to implement the policies and procedures set forth in the regulations with respect to the waiver of the indebtedness of a veteran or spouse resulting from (a) the payment of a claim under the guaranty or insurance of loans, (b) the liquidation of direct loans, (c) the liquidation of loans acquired under 38 CFR 36.4318 and (d) liquidation of vendee accounts. The phrase "veteran or spouse" used in this section includes a veteran-borrower, veteran-transferee, veteran-purchaser on a vendee account, and a former spouse or surviving spouse of a veteran.

8C.02 COMMITTEE AUTHORITY

a. A Committee is authorized to consider a request for waiver of collection of any indebtedness described in the paragraph above. A spouse, former spouse, or surviving spouse of a veteran can request a waiver of collection of a debt in connection with a loan that is either guaranteed, insured, made to, or acquired by the veteran under Chapter 37 of Title 38 of the U.S. Code when such spouse was a coobligor with the veteran who is indebted to VA. A spouse can request a waiver in his or her own right, even if the veteran has already requested a waiver and been denied. In accordance with paragraph 8B.03, the income of both co-obligors must be considered in determining whether collection of the debt will create a financial hardship, except where the co-obligors are divorced or separated and maintaining separate residences. However, if the party requesting waiver has remarried, then their current spouse's income must be considered.

b. The Committee has no authority to consider questions or appeals by the debtor concerning the creation or validity of the debt that is the subject of the waiver request, or transferee cases which involve questions of retroactive release of liability. In the case of Schaper v. Derwinski (1 Vet. 430), the U.S. Court of Veterans Appeals (the Court) stated that, where the validity of a debt is challenged, VA is required to make a determination on the validity of the asserted debt which determination is reviewable by the Court. The making of a determination on the validity of a home loan guaranty debt is implicit in making a determination on a waiver request under the standard of whether collection of the debt would be against equity and good conscience. The Court went on to say that when a veteran raises the issue of the validity of the debt as part of a waiver request, it is arbitrary, capricious, and an abuse of discretion to adjudicate the waiver request without first deciding the veteran's challenge to the validity of the debt. Such matters (e.g. the debtor contends that he/she never received notice of default and foreclosure proceedings or that the foreclosure proceedings did not comply with applicable state law) should be referred immediately by either the Chief of the Fiscal activity or the Chairperson to the Loan Guaranty Officer (LGO). It is the responsibility of the LGO to resolve the issue raised by the veteran. If the issue cannot be resolved, then the veteran is entitled to pursue the issue of the validity of the debt before BVA and the Court. The LGO is responsible for the preparation of any Statement of the Case (SOC), Supplemental Statement of the Case (SSOC), and the LGO will review the file to determine if notice has been provided or attempted, or that the foreclosure proceedings complied with applicable state law, and then forward a written report of his or her findings to the finance activity. In waiver cases referred to the LGO, VA Form 4-8424a or the local automated system will be annotated in accordance with paragraph 8F.02e to indicate that the case has been disposed of by referral to the LGO. If the LGO refers the case back to the finance activity with a written report that VA made reasonable efforts to provide notice, the case will be treated as a new waiver request.

c. Veterans who give a voluntary deed in lieu of foreclosure in connection with a defaulted VA guaranteed loan, and who also sign a promissory note to VA for the difference between the outstanding debt and the value of the security at the time of the deed, do not by virtue of signing such a note give up the right to seek waiver of a debt created as the result of a breach of such note.

8C.03 EXCLUSIONS FROM WAIVER

In addition to the exclusions stated in paragraph 8B.07, waiver will not be considered in the following instances and the debtor's request will be processed in the manner described in paragraph 8B.07:

a. Redemption Cases

(1) If the property is redeemed by the veteran or spouse, or their assignee.

(2) If the veteran or spouse is the successful bidder at the foreclosure sale.

b. Installment Payments, Security Not Liquidated. This includes current or past-due installments on direct loans, acquired loans or vendee accounts when the security has not been liquidated (Adm. DEC. 607, 805, 825, and 887).

8C.04 DEFERRED ACTION

In those States where there is a right of redemption, a request for waiver cannot be granted until the expiration of the redemption period. The decision shall state the expiration date of the right of redemption. In this connection, if collection of the debt would be waived except for the bar established by the redemption period, a diary will be maintained for the day after expiration of the redemption period. If there is no basis for waiver, a decision denying the request will be made, so that normal collection action can be resumed.

8C.05 POLICY

A veteran, including a spouse if obligated, who obtained, acquired or assumed a loan made under 38 U.S.C. Ch. 37, becomes indebted to the United States when there is a default on the obligation which causes the Secretary to suffer a loss. There is a difference, however, between the veteran who neglected or disregarded his or her obligations unduly, and the veteran whose indebtedness came into being despite reasonable and prudent acts on his or her part. In the first instance, the default was, in a sense voluntary, primarily of the veteran's own making, and the direct result of his or her conduct; in the latter, although legally liable, the veteran demonstrated good faith and, in equity and good conscience, may not be held accountable for the resultant debt. The "equity and good conscience" concept in the present law affords the necessary latitude to accomplish fairness between the Government and the obligor. Consequently, irrespective of the cause of the default, the fact remains that the indebtedness of the veteran or spouse comes into being and, under the law, steps will be taken for accomplishing its collection. It is the Committee's responsibility to determine whether collection of a debt shall be waived. The benefit of any waiver granted in favor of the veteran shall inure to the spouse, unless the obligation of the spouse is specifically excepted. However, the waiver of the indebtedness of the veteran's spouse shall not inure to the benefit of the veteran unless specifically so determined by the Committee.

8C.06 STANDARD

a. In accordance with 38 U.S.C. 5302(b) and 38 CFR 1.964(a), the indebtedness of a veteran or the indebtedness of the spouse may be waived only when both of the following factors are found:

(1) Following default there was a loss of the property which constituted security for the loan guaranteed, insured, or made under 38 U.S.C. Ch. 37; and

(2) Collection of such indebtedness would be against equity and good conscience.

b. Loss of Property. Regarding home loans, there will be no "loss of the property" in those cases where the veteran or spouse has a legal or equitable interest in the property and continues to occupy the property as a home. "Loss of the property" generally will be deemed to exist where the veteran or spouse has lost all right, title, and interest in the property through foreclosure, voluntary deed (e.g., deed in lieu of foreclosure), or other liquidation of the security.

SECTION D. PROCESSING A REQUEST FOR WAIVER

8D.01 COMMITTEE ACTION ON REQUEST FOR WAIVER

a. Assignment of Panel

(1) Upon receipt of a request for waiver, the Chairperson shall designate a one member panel if the debt is $20,000 or less, exclusive of interest and administrative costs, or a two member panel if the debt is in excess of $20,000. If a Committee panel consists of more than one member, then one of those members must have special competence in the subject matter area in which the debt arose. A decision on the request for waiver by the panel, regardless of the number of members that constitute the panel, shall be the decision of the Committee on Waivers and Compromises.

(2) The case may be assigned immediately by the Chairperson to a Committee panel for review, even if the case is not accompanied by a financial status report. If the debtor has not requested a hearing, the panel may begin its review and may render its decision without the need to refer to a financial status report. This situation might occur when, for example, the Committee determines that bad faith exists in the creation of the debt. However, if the debtor is initially determined not to have acted in bad faith, the Committee must delay further review until the financial status report is received or the time expires for receipt of the form.

(3) Correspondence from the debtor should be thoroughly examined to insure that the debtor is actually requesting waiver. If the debtor simply states his or her refusal to pay the debt or only comments on the validity of the debt itself, then the correspondence should not automatically be considered a request for waiver. On the other hand, the correspondence does not necessarily have to contain the actual word "waiver" in order for it to be considered a request for waiver. At the very least, a request for waiver should contain some indication that the debtor does not consider himself/herself culpable for the creation of the debt or that collection of the debt would be unfair or will create a financial hardship. The Chairperson should be aware that some correspondence referred to a Committee for waiver consideration is in fact a dispute or appeal of the debt itself. Waiver consideration is not appropriate in such a situation because the debtor has put the validity of the debt in question by appealing or disputing the debt. A request for waiver technically acknowledges the validity of the debt but seeks forbearance of collection of the debt for equitable reasons. Only after the dispute or appeal is resolved will the case be referred again to the Committee if the debtor still desires waiver consideration.

(4) When a debtor simultaneously disputes the debt and requests a waiver, the Fiscal activity should immediately prepare an accounting of the debt or request that the Loan Guaranty Officer prepare such an accounting when dealing with a loan program debt. At the time the debtor is provided with an accounting, he/she should also be notified that the case will be referred to the Committee for waiver consideration unless he/she notifies VA within 20 days that the debtor wishes to continue to dispute the existence or amount of the debt. He/she should be advised that waiver will be deferred in that case until final disposition of the dispute of the debt. If the accounting verifies the validity of the debt to the debtor's satisfaction, or no reply has been received within the 20-day period, the Chief of the Fiscal activity should refer the case immediately to the Committee for consideration of the waiver request. However, if the debtor still indicates that he/she believes the debt is incorrect, his original dispute shall be considered a notice of disagreement, and the Chief of the Fiscal activity should refer the case to the appropriate division or service (e.g., Adjudication Officer (AO), Loan Guaranty Officer (LGO), the Chief of the Medical Administration Service (MAS) or District Counsel) for consideration of that correspondence as a notice of disagreement. Those cases referred to such a division or service as a notice of disagreement should not be referred simultaneously to the Committee. VA Form 4-8424a or the local automated system will be annotated in accordance with paragraph 8F.02e to indicate that the case has been referred out of the Fiscal activity because the debt is in dispute. If the case is subsequently referred back to the Fiscal activity, the case will be treated as a new waiver request for lapsed time purposes. In CARS dispute/waiver cases, the procedures described above will also be followed. Whenever it is necessary to refer such a case for resolution of a dispute of the debt after an accounting has been prepared, the Chief of the Fiscal activity will notify the Debt Management Center (DMC). If it is subsequently determined that a valid debt exists and the debtor elects not to pursue his/her dispute as an appeal to BVA, the Chief of the Fiscal activity will refer the case to the Committee for consideration and simultaneously notify the DMC of such referral.

b. Decision.

(1) A Committee may deny waiver or grant waiver, in whole or in part, on the facts before it.

(2) A decision by a panel composed of a single member or a unanimous decision by a two member panel shall be the Committee decision. If the two member panel cannot reach a unanimous decision, the disagreement will be indicated on the decision, VA Form 4-1837, by a signature and the word "Disagree." "No Decision-Referred to Three Member Panel" will be stamped or written across the form. The Chairperson will assign a third member to the panel or assign a new three member panel and the majority decision or unanimous decision will then be the Committee decision. The original VA Form 4-1837 signed by the two member panel will be attached to the VA Form 4-1837 signed by the three member panel.

c. Record of Decision

(1) Preparation and Signature. The Reporting Member will be responsible for preparation of the formal record of the decision. It will be signed by the participating members.

(2) Decision

(a) Form Decision. Waiver decisions except those in erroneous payment of pay and allowances cases will be recorded on VA Form 4-1837, Decision on Waiver of Indebtedness. Each completed decision will reflect a determination in item 14, of the elements considered forming the basis for the decision (38 CFR 1.965). Should the obligor allege fault on the part of VA, the issue must be met and disposed of in item 14.

(b) Narrative Decision. When the decision requires a lengthy discussion of the facts, or involves a case of erroneous payment of pay or allowances, a narrative format similar to the format used for a Statement of the Case may be used. See Appendix B.

d. Disposition. Unanimous panel decisions will be signed only by panel members. The Chairperson will record the Committee decision and release it to the Fiscal activity to notify the debtor and representative, if any. If waiver is granted, the debtor should be informed of any resulting charges to entitlement.

e. Representative. The name of the representative (accredited service organization, attorney, agent if any, or other person authorized to represent the debtor before the agency) should be recorded in the appropriate folder upon receipt of a request for waiver. It is necessary to furnish the representative with copies of letters and notification of each action taken relating to the request for waiver and appeal. However, in his/her declaration of representation, a private attorney may direct that all communications with the attorney's client be sent directly to the attorney and that VA is not to communicate with the client. This request must be honored.

8D.02 COMMITTEE ACTION ON NOTICE OF DISAGREEMENT

a. Notice of Disagreement. An appeal to the Board of Veterans Appeals is initiated by a "Notice of Disagreement" (38 U.S.C. 7105; 38 CFR 20.200 & 20.201). A written statement from a debtor or representative expressing dissatisfaction or disagreement with a determination on waiver will be accepted as a Notice of Disagreement. The notice should be in terms which can be reasonably construed as evidencing a desire for review of that determination. It need not be couched in specific language nor are particular allegations of error of fact or law required. Such notice will, in most instances, state or imply a belief that the waiver application was improperly disallowed, in part or in full, by reason of erroneous finding of fact or conclusion of law. A complaint letter should not automatically be considered a Notice of Disagreement. A mere inquiry or general complaint, in most cases, can be disposed of by a letter of explanation. Such a letter should conclude with advice that the time provided for filing a Notice of Disagreement is not extended. However, should a claimant indicate a desire for appellate review, the claimant must be furnished a copy of the Statement of the Case. It is not material that contentions may appear to have no merit. Also, when a Notice of Disagreement is filed, a determination should be made as to any indicated development, and this should be accomplished promptly by the Committee.

b. Manner of Disposition.

(1) If the debtor submits a statement indicating disagreement with the waiver decision, the Chairperson will assign the matter to a new panel with different member(s) than the one that considered the original waiver request. This new panel may affirm, modify, or reverse the initial determination made by the original panel. Where a one member panel initially denied the original request for waiver, the Chairperson will assign the disagreement to a different one member panel. Likewise, where a panel of more than one Committee member denied the original request, the Chairperson will assign the disagreement to an equal numbered panel of new members. These assigned panel members will also conduct any hearings the debtor requests with the Notice of Disagreement, unless a hearing before BVA is requested.

(2) The record of decision on review of a Notice of Disagreement will be either a new VA Form 4-1837, when the previous decision is either reversed or modified, or a memorandum of affirmation of the previous decision. A memorandum of affirmation, which is required by BVA, will be a memorandum from the panel member(s) who reviewed the Notice of Disagreement to the Chairperson of the Committee. The memorandum will be signed by the panel member(s) and contain the statement, "I/We have reviewed and affirm the attached decision of the Committee on Waivers and Compromises." The memorandum will be placed in the debtor's claims folder and also in the loan docket, if applicable. The Reporting Member will then prepare a Statement of the Case, as described in the next paragraph.

c. Statement of the Case. When the decision on reconsideration remains denial of waiver, the Reporting Member will prepare the Statement of the Case in narrative form in accordance with 38 CFR 19.26 & 19.29, and procedures thereunder. The first page of the Statement of the Case is prepared on FL 1-25a, and subsequent pages on plain white paper, using bond for the original and white carbon tissue for the additional copies. FL 1-25a is a snapout form designed for an original and three copies, so that a copy of the Statement of the Case will be available for the representative and a Member of Congress, when needed. Any copies of the Statement of the Case not needed should be destroyed as duplicate and unnecessary material. Only the original of the Statement of the Case will be signed. The signatures of the Reporting Member and the Chairperson, as the approving official, will be placed on the last page immediately following "Reasons for Decision." The original of the Statement of the Case will be filed in the claims folder; in loan cases, an additional copy will be filed in the loan folder. The Finance activity will be notified by the Chairperson of the date of issuance of the Statement of the Case. Other copies of the Statement of the Case will be forwarded to the debtor and representative, if any, by the Chairperson who will sign the letter of transmittal, FL 1-25. With the Statement of the Case, VA will furnish the debtor with information on the right and time limit to file a substantive appeal. VA Form 9 (formerly VA Form 1-9), Appeal to Board of Veterans Appeals, will also be enclosed.

(1) Purpose and Form. The purpose of the Statement of the Case is to give the claimant and representatives notice of the facts pertinent to the waiver issue and the basis for the decision, to permit proper exercise of the right to appeal and assist the claimant in developing and presenting the appeal. It is important that the Statement of the Case be complete and contain all pertinent facts relating to the issue(s) being appealed, together with the applicable law, regulations, or other criteria and adequate reasons for the decision. This will enable the claimant to proceed with the appeal on an informed basis. VA Form 4-1837 will not be used as a modified Statement of the Case. A Statement of the Case and Supplemental Statement of the Case will be in narrative format similar to the sample in Appendix B.

(2) Preparation of Statement of the Case

(a) Summary of Evidence. All available relevant information and evidence pertinent to the issue(s) raised by claimants and their representatives should be included in the narrative Statement of the Case. Quotations may be used for clarity and accuracy, as indicated. VA Form 4-5655, Financial Status Report, may be incorporated by reference.

(b) Prohibited Matter. Words and phrases which are contrary to public interest or which may be detrimental to the claimant's health, such as mental deficiency, paranoid, etc., should be avoided. Care should be taken to omit identifying, by name or otherwise, sources from which information is obtained that is adverse to the claimant. Such phrases as "It is shown that" or "The evidence discloses" should be used.

(c) Pertinent Law, Regulations and Other Applicable Criteria. There should be included the appropriate provisions of the United States Code, regulations and other applicable criteria, with appropriate citation of "U.S.C.," "CFR," etc.

(d) Decision. The decision should succinctly report the conclusion reached by the Committee upon which the Notice of Disagreement is based. The decision should not interject any new matter. Any comments as to the reasons behind the decision will be included in the Reasons for Decision.

(e) Reasons for Decision. This is the area in which we can be the most help to the appellant and to the Government. An analysis and explanation of the governing criteria as they relate to the evidence and issues in disagreement should be reduced to simple terms so that the appellant and representative will understand the basis for the decision. All substantive arguments advanced by the claimant should be adequately answered. A statement to the effect that "the veteran does not meet the requirements of the applicable regulation governing waiver determinations cited above" adds nothing to the "Decision" part of the statement of the Case, or to the knowledge of the appellant or representative as to why waiver was denied, and therefore, should be avoided. In short, well-explained "Reasons" may satisfy the claimant to the degree that the claimant does not prosecute the appeal any further, but if he or she does, issues are better defined for clear-cut appellate resolution. Either result will improve public relations.

(f) If a compromise offer is received while the appeal is being considered, the Committee on Waivers and Compromises should consider the offer since it indicates a change in the debtor's thinking. If the Committee accepts the offer, the debtor will be notified of the acceptance and discontinuance of further appellate action. If the offer is rejected by the Committee, the appeal will be processed.

8D.03 COMMITTEE ACTION ON APPEAL

If appellate review by the Board of Veterans Appeals is still desired after receiving a Statement of the Case, the appeal is completed by filing a substantive appeal (VA Form 9, or equivalent in correspondence). See 38 CFR 20.302 for information on the time limit for filing a substantive appeal. Upon receipt by the Chairperson of the formal appeal, procedures similar to the Notice of Disagreement process (supra) will be followed. However, the Chairperson may assign the substantive appeal and any subsequent Supplemental Statement of the Case to the same Committee member(s) that considered the Notice of Disagreement and prepared the Statement of the Case.

a. Supplemental Statement of the Case. A narrative Supplemental Statement of the Case, so designated, will be prepared and furnished to the claimant and representative, if any, when subsequent actions are taken, new evidence is received, a material defect is discovered, or when any other reasons exist such that the original statement is inadequate to effect the letter and intent of the law. These will be limited to the essential changes or additions to sections of the original statement that will be adequate to give complete information to the appellant. The prior statement need not be repeated in its entirety. The first page of the Supplemental Statement of the Case should be prepared on FL 1-28a. Plain white paper should be used for subsequent pages, using bond for the original and white carbon tissue for any additional copies required. FL 1-28 signed by the Chairperson will be used to transmit the Supplemental Statement of the Case to the appellant and representative. A Supplemental Statement of the Case need not be furnished, however, to advise an appellant of evidence submitted by him or her after the Statement of the Case was forwarded. The requirement in the law that the appellant must be advised of the "reasons" for the denial can be met by a simple letter notifying him or her of the action taken on the evidence. In most instances, this can be accomplished by adding a sentence to FL 1-26, Notice to Claimant of Transmittal of Appeal to BVA, explaining why waiver continues to be denied. Of course, when additional evidence is received from sources other than appellant after a Statement of the Case has been furnished, a Supplemental Statement of the Case is required.

b. Substantive Appeal. For consideration as a substantive appeal, the receipt of VA Form 9, Appeal to the Board of Veterans Appeals, adequately executed, or its equivalent in correspondence, is required. Allegations as to error of fact or law should be construed in a liberal manner. It should be remembered that the vast majority of appellants are not familiar with technicalities of the law, and that it is practically impossible for many of them to make a statement of "mistake of fact or error of law." In the absence of unusual circumstances, any appeal which is otherwise ready for certification to the board should not be held up because of what might be regarded as an unsatisfactory statement of error of law or mistake of fact. Where the appellant has failed to make any answer to this question, in apparent ignorance of the proper answer to make, certification should not be delayed if the appellant's belief as to mistake of fact or error of law is expressed or implied in some form in the correspondence or other records. The Chairpers