Citation Nr: 0809726	
Decision Date: 03/24/08    Archive Date: 04/09/08

DOCKET NO.  05-40 369	)	DATE
	)
	)

On appeal from the
Department of Veterans Affairs Medical and Regional Office 
Center in Fargo, North Dakota


THE ISSUE

Entitlement to a waiver of recovery of an overpayment of 
service-connected compensation benefits in the calculated 
amount of $4,173.00.  


REPRESENTATION

Appellant represented by:	North Dakota Department of 
Veterans Affairs


ATTORNEY FOR THE BOARD

Michael A. Pappas, Counsel





INTRODUCTION

The veteran-appellant served on active duty from April 1986 
to December 1989.

This matter comes before the Board of Veterans' Appeals (the 
Board) on appeal of a September 2005 decision of the 
Committee on Waivers and Compromises (Committee) of the 
Department of Veterans Affairs (VA) Fargo, North Dakota, 
Regional Office (RO) that denied the veteran's request for a 
waiver of an overpayment of VA disability compensation 
benefits in the amount of $4,173.00.


FINDINGS OF FACT

1.  In June 1990, the veteran was awarded VA service-
connected disability compensation benefits at the 20 percent 
rate based upon a January 1990 application for such benefits.  
There is no indication that VA notified the veteran in that 
award, or at any time thereafter, of the obligation to notify 
VA immediately of any incarceration, or that his compensation 
benefits would be reduced to 10 percent if he were 
incarcerated for more than 60 days as the result of 
conviction of a felony.  

2.  In March 2005, VA conducted a prisoner computer match 
with the Social Security Administration (SSA) thereby 
discovering that the veteran had been convicted of a felony 
and had been incarcerated since October [redacted], 2001.  Based upon 
this information, VA proposed to reduce the veteran's VA 
disability compensation to 10 percent, effective from 
December 15, 2001.  

3.  In May 2005, the veteran's disability compensation 
benefits were reduced to 10 percent effective from December 
15, 2001, based on his incarceration.  This action created an 
overpayment of $4,173.00.

4.  There was no fraud, misrepresentation, or bad faith on 
the part of the veteran.

5.  The veteran was at fault in the creation of the 
overpayment of compensation benefits because of his failure 
to timely notify VA of his incarceration, but his fault was 
substantially mitigated by the fact that he had no actual 
notice of his obligation to report the incarceration.  

6.  VA was not without fault in the creation of the 
overpayment by their failure to provide prior notification to 
the veteran of his obligations to report any incarceration, 
and their failure to timely discover such incarceration.  

7.  The veteran's assets and income, with consideration of 
the costs of life's basic necessities, is not sufficient to 
permit repayment of the overpayment indebtedness of $4,173.00 
without resulting in undue hardship to the veteran's 
dependent children, and the collection of that indebtedness 
would defeat the purpose of the compensation benefit program, 
and otherwise be inequitable.

8.  Because the veteran is obligated to pay the full amount 
of the overpayment towards his child-support obligations, he 
would not be unjustly enriched as a result of the receipt of 
the overpayment.  


CONCLUSION OF LAW

Recovery of the overpayment of compensation benefits in the 
amount of $4,173.00, would be against equity and good 
conscience.  38 U.S.C.A. §§ 5107, 5302 (West 2002); 38 C.F.R. 
§§ 1.963, 1.965 (2007).


REASONS AND BASES FOR FINDINGS AND CONCLUSION

Preliminary Matters

Initially, the Board notes that the Veterans Claims 
Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 
2096 (2000), is not applicable to cases involving waiver of 
indebtedness.  Barger v. Principi, 16 Vet. App. 132 (2002).  
Notwithstanding the fact that the VCAA is not controlling in 
these matters, the Board has reviewed the case for purposes 
of ascertaining that the appellant has had a fair opportunity 
to present arguments and evidence in support of his request 
for a waiver.  In short, the Board concludes from that review 
that the requirements for the fair development of the waiver 
request have been met in this case.  

Every possible avenue of assistance has been explored, and 
the appellant has had ample notice of what might be required 
or helpful to his case.  VA has satisfied its duties to 
inform and assist the appellant in this case.  Moreover, 
given that this decision represents a full grant of the 
benefit sought, further development and further expending of 
VA's resources is not warranted.  

The Board also notes that the appellant has not challenged 
the validity of the indebtedness; nor does there appear to be 
any reason to believe that the debt was improperly created.  
As such, that question need not be examined further.  See 
Schaper v. Derwinski, 1 Vet. App. 430 (1991).

The appellant is seeking entitlement to a waiver of recovery 
of an overpayment of improved compensation benefits in the 
amount of $4,173.00.  The Committee found that there was no 
indication of bad faith on the part of the veteran in the 
creation of the overpayment, a finding that allowed the 
consideration of whether the collection of the overpayment 
from the veteran would be against the principles or equity 
and good conscience.  See 38 C.F.R. §§ 1.963, 1.965 (2007).  

In the interest of clarity, the Board will initially present 
a factual background.  Thereafter, the Board will analyze the 
appellant's claim and render a decision. 

Factual Background

The evidence in the claims file supports the following 
factual summary:  

In June 1990, the veteran was awarded VA service-connected 
disability compensation benefits at the 20 percent rate based 
upon a January 1990 application for such benefits.  In 
conjunction with the formal notice of the award to the 
veteran, the RO enclosed two VA Form documents (VA Form 1-
4107 and 29-4364) and VA Pamphlet 29-9.  None of these 
documents provided the veteran with information regarding his 
obligation to notify VA immediately of any incarceration, or 
that his compensation benefits would be reduced to 10 percent 
if he were incarcerated for more than 60 days as the result 
of conviction of a felony.  There is no indication that the 
veteran was provided with a copy of VA Form 21-8764, the 
document that is normally used by VA for such disclosure 
purposes.  Further, there is no indication that the veteran 
was ever notified by VA at any time thereafter of the 
obligation to notify VA immediately of any incarceration, or 
that his compensation benefits would be reduced as the result 
of conviction of a felony.  

In March 2005, VA conducted a prisoner computer match with 
the Social Security Administration (SSA) thereby discovering 
that the veteran had been convicted of a felony and had been 
incarcerated since October [redacted], 2001, and that he would not be 
released until September 2012.  Based upon this information, 
VA proposed to reduce the veteran's VA disability 
compensation to 10 percent, effective from December 15, 2001.  

In May 2005, the veteran's disability compensation benefits 
were reduced to 10 percent effective from December 15, 2001, 
based on his incarceration.  This action created an 
overpayment of $4,173.00.

In September 2005, the veteran requested a waiver of that 
overpayment.  In making the request, he stated that he had no 
idea that his incarceration would lead to the reduction of 
his VA compensation benefits, and that those benefits are his 
only source of income, representing the only money he has to 
provide child support to his ex-spouse for the support of his 
two minor children.  The veteran indicated that he gave all 
of his benefits to his ex-spouse based upon a Court-ordered 
child-support plan, and argued that the full recovery of the 
overpayment by VA would allow no support for his children and 
result in an undue hardship to them and his ex-spouse.  

Pursuant to his request for a waiver, the veteran has 
submitted two financial status reports, one in September 
2005, and the other in December 2005.  In those reports, he 
stated that his only monthly income was his VA compensation 
benefits of $108, representing the amount provided by the 
reduced 10 percent disability rating.  He reported monthly 
expenses of $199 for child support for his two minor 
children, ages 11 and 12, leaving him a monthly deficit of 
$92.  He reported no assets and no debts.  

In the September 2005 waiver decision, the veteran was denied 
a waiver of his overpayment debt.  The decision was based 
upon a finding that the granting of a waiver would be against 
the principles of equity and good conscience.  The Committee 
explained that the veteran was at fault because VA had 
informed him at the time that he received the compensation 
award of the requirement to immediately report any change of 
his status including his incarceration of his failure to 
inform VA of his incarceration.  The Committee also found 
that failure to make restitution would result in an unfair 
gain and unjust enrichment to the veteran because he would 
retain money at the expense of the government while he was 
being maintained at the expense of the government.  

In his notice of disagreement filed in September 2005, the 
veteran reiterated that he was never informed that his 
compensation would be reduced upon his incarceration, and 
that he has Court-ordered child support payments that he must 
make in the amount of $200 per month.  In arguing that denial 
of a waiver would result in undue hardship to his ex-spouse 
and children, the veteran stated that none of his VA 
disability compensation is used by him.  He provided the 
phone number of his ex-spouse and invited VA to contact her 
to verify his allegations.  

In his December 2005 substantive appeal, the veteran alleged 
that the Court Order that awarded his ex-spouse child-support 
in the amount of $199 expressly stated that it was because of 
his receipt of VA compensation benefits in the amount of 
$206.  The veteran provided specific information relating to 
the location of that Court Order.  He continued to argue that 
denial of a waiver would result in undue hardship to his ex-
spouse and children.  

Analysis

The veteran requests a waiver of the recovery of the 
overpayment of VA service-connected compensation benefits in 
the amount of $4,173.00.  

The law precludes waiver of recovery of an overpayment or 
waiver of collection of any indebtedness where any one of the 
following elements is found to exist:  (1) Fraud, (2) 
misrepresentation, (3) bad faith.  38 U.S.C.A. § 5302 (West 
2002).  The Board's review of the record reflects that in its 
September 2005 waiver decision, the Committee determined that 
there was no indication of fraud, misrepresentation or bad 
faith on the part of the veteran in this case, and the Board 
concurs with that preliminary finding.  Given that 
preliminary finding, the dispositive question before the 
Board for review is the issue of whether the evidence 
establishes that recovery of the overpayment indebtedness 
would be against equity and good conscience, in which case 
recovery of that overpayment may be waived.  38 U.S.C.A. § 
5302; 38 C.F.R. §§ 1.963, 1.965.  The following is pertinent 
to this matter:

The standard "equity and good conscience" will be applied 
when the facts and circumstances in a particular case 
indicate a need for reasonableness and moderation in the 
exercise of the Government's rights.  The decision reached 
should not be unduly favorable or adverse to either side.  
The phrase "equity and good conscience" means arriving at a 
fair decision between the obligor and the Government.  In 
making this determination, consideration will be given to the 
following elements, which are not intended to be all-
inclusive:

1.  Fault of debtor.  Where actions of the debtor contribute 
to creation of the debt.

2.  Balancing of faults.  Weighing fault of the debtor 
against VA fault.

3.  Undue hardship.  Whether collection would deprive debtor 
or family of basic necessities.

4.  Defeat the purpose.  Whether withholding of benefits or 
recovery would nullify the objective for which the VA 
benefits were intended.

5.  Unjust enrichment.  Failure to make restitution would 
result in unfair gain to the debtor.

6.  Changing position to one's detriment.  Reliance on VA 
benefits results in relinquishment of a valuable right or 
incurrence of a legal obligation.
38 C.F.R. § 1.965(a).

The veteran an his representative contend that the principles 
of equity and good conscience would support his request for a 
waiver, since according to them, he was not at fault in the 
creation of the overpayment and its collection would impose 
an undue hardship.  In general, they argue that the veteran 
was not at fault since he was never provided with adequate 
notice of the obligation to notify VA immediately of any 
incarceration, or that his compensation benefits would be 
reduced to 10 percent if he were incarcerated for more than 
60 days as the result of conviction of a felony.  They also 
contend that insistence by VA upon repayment would impose an 
undue hardship, not upon the veteran, but upon the veteran's 
ex-spouse and his two minor children who are relying upon the 
child-support payments from the veteran whose sole source of 
income is his VA disability compensation benefits.  

In the evaluation of whether equity and good conscience 
necessitates a favorable waiver decision, the Board must and 
has considered all of these specifically enumerated elements.  
However, the Board finds that the issues of fault, unjust 
enrichment, undue hardship, and whether there would be a 
defeat of the purpose of an existing benefit to the veteran 
are more significant to the case before the Board.  

VA's working definition of "fault" is "The commission or 
omission of an act that directly results in the creation of 
the debt"  (Veteran's Benefits Administration Circular 20-90-
5, February 12, 1990).  Fault should initially be considered 
relative to the degree of control the veteran had over the 
circumstances leading to the overpayment.  If control is 
established, even to a minor degree, the secondary 
determination is whether the debtor's actions were those 
expected of a person exercising a high degree of care, with 
due regard for the debtor's contractual responsibility to the 
Government.  The age, financial experience, and education of 
the debtor should also be considered in these determinations.  

The Board has carefully reviewed the entire record, in light 
of the veteran's contentions and the applicable law and 
regulations.  Essentially, in terms of fault, the veteran 
alleges that he was not at fault because he was not provided 
notice of his obligation to inform VA of his obligation to 
notify them of his incarceration.  The evidence of record, 
particularly, the June 1990 VA disability compensation award 
letter to the veteran supports this allegation.  There is no 
indication that VA notified the veteran in that initial 
compensation award letter, or at any time thereafter, of the 
obligation to notify VA immediately of any incarceration, or 
that his compensation benefits would be reduced to 10 percent 
if he were incarcerated for a felony.  Significantly, there 
is no indication that VA Form 21-8764, the form used for such 
purposes by VA, was ever sent to the veteran.  

Although the veteran is technically considered at fault by 
virtue of the simple failure to properly notify VA of his 
incarceration, after consideration of the record, the Board 
finds that the veteran was not knowingly at fault in the 
creation of the overpayment.  He had not been properly 
advised of his obligations, and as such his fault was 
substantially mitigated.  

Conversely, based upon VA's failure to adequately notify the 
veteran of his obligations to report his change of status at 
the time of the award of compensation benefits, compounded by 
their failure to timely discover the veteran's incarceration 
after a five year period, the Board further finds that VA was 
not without fault in the creation of the overpayment.  By the 
same token, however, the veteran is technically presumed to 
know the law, including his obligations to report any change 
of status.  Thus, with regard to the balancing of faults 
between the veteran and VA, neither the veteran nor VA can be 
considered wholly at fault.  

The Board has also considered whether recovery of the 
overpayment would defeat the original purpose of the benefit 
by nullifying the object for which it was intended.  
Compensation is intended to provide a replacement level of 
support for veterans with service-connected disabilities.  
Recovery of those amounts to which the veteran was not 
entitled in view of the fact that he had exhausted the 
compensation in question solely for the support of his 
children would defeat the purpose of the benefit.  

By the same token, since the veteran is not considered wholly 
at fault, and since his payments have gone wholly to his 
dependent children, the failure of the Government to insist 
upon its right to repayment of the debt would not result in 
an unjust enrichment to the veteran at the expense of the 
Government.  The veteran in this case did not, according to 
the available record, change his position due to his 
detriment and as a result of the award of compensation.

Finally, the Board must analyze whether recovery of the 
overpayment from the veteran would result in undue financial 
hardship.  In evaluating the evidence and rendering a 
decision on the merits, the Board is required to assess the 
credibility, and therefore the probative value, of proffered 
evidence in the context of the record as a whole.  See Madden 
v. Gober, 125 F.3d 1477, 1481 (Fed. Cir. 1997).  In this 
case, there is written evidence from the veteran asserting 
that all of his service-connected disability compensation has 
been and will be used toward court-enforced child support 
payments to his ex-spouse for the support of his two minor 
children.  The veteran has also asserted that they will be 
faced with an undue hardship if he does not make these 
payments in full.  Significantly, the veteran is found to be 
credible in making these statements.  See Cartright v. 
Derwinski, 2 Vet. App. 24, 25 (1991) [VA cannot ignore a 
veteran's testimony simply because the veteran is an 
interested party; personal interest may, however, affect the 
credibility of the evidence].  In this case, the veteran was 
consistent in his statements; he offered explicit details; 
and he provided the means of credible verification that his 
compensation was being used for the support of his children.  
Further, the explanation of the veteran was quite plausible, 
particularly given his circumstances an the resulting 
circumstances of his dependent children.  

Thus, the Board concludes that the veteran's assets and 
income, with consideration of the costs of life's basic 
necessities, is not sufficient to permit repayment of the 
overpayment indebtedness of $4,173.00 without resulting in 
undue hardship to the veteran's dependent children, and the 
collection of that indebtedness would defeat the purpose of 
the compensation benefit program, and otherwise be 
inequitable.

Based on the record in this case, the Board is persuaded that 
recovery of the overpayment at issue would be unjust.  This 
is so because the finding of no intentional fault on the part 
of the veteran and the potential for imposed hardship must be 
accorded significantly greater weight than other elements in 
this analysis.  

The Board finds, therefore, that under the principles of 
equity and good conscience, taking into consideration all of 
the specifically enumerated elements of 38 C.F.R. § 1.965(a), 
it would be unfair to recover the veteran's service-connected 
disability compensation overpayment indebtedness in the 
amount of $4,173.00.  The end result would not be unduly 
favorable or adverse to either the Government or the veteran.  
38 U.S.C.A. § 5107(b).  Accordingly, the veteran's request 
for a waiver of his overpayment debt is granted. 


ORDER

Entitlement to a waiver of recovery of an overpayment of 
service-connected compensation benefits, in the calculated 
amount of $4,173.00, is granted.




____________________________________________
M. E. LARKIN
Veterans Law Judge, Board of Veterans' Appeals




 Department of Veterans Affairs