Citation Nr: 1124669 Decision Date: 06/29/11 Archive Date: 07/06/11 DOCKET NO. 10-39 996 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Muskogee, Oklahoma THE ISSUE Entitlement to waiver of recovery of an advanced payment of $3,000.00 for the purpose of educational assistance pursuant to Title 38, Chapter 33 of the U.S. Code. ATTORNEY FOR THE BOARD M. Scott Walker, Counsel INTRODUCTION The Veteran served on active duty from September 2001 to July 2005. This matter comes to the Board of Veterans' Appeals (Board) on appeal from a May 2010 decision on Waiver of Indebtedness by the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA), Regional Office (RO) in Muskogee, Oklahoma, which denied entitlement to a waiver of the recovery of an advanced payment for VA education benefits in the amount of $3,000.00. FINDINGS OF FACT 1. The Veteran's indebtedness in the amount of $3,000.00 was validly created. 2. The Veteran is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment. 3. VA provided an advanced payment for education benefits in the amount of $3,000 for which the Veteran was not entitled to receive; any VA fault in the creation of this debt is outweighed by the fault of the Veteran. 4. A waiver of repayment of this debt would result in unfair enrichment to the Veteran; recovery of this overpayment will not subject him to undue hardship sufficient to warrant a waiver of the debt. 5. Recovery of the amount of the debt in the amount of $3,000.00 would not be against equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery of the $3,000.00 advanced payment have not been met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.956, 1.962, 1.963, 1.965 (2010). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I. Veterans Claims Assistance Act of 2000 (VCAA) In November 2000, the Veterans Claims Assistance Act of 2000 (VCAA) was signed into law. See 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126 (West 2002 & Supp. 2010); 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326 (2010). The VCAA and its implementing regulations include, upon the submission of a substantially complete application for benefits, an enhanced duty on the part of VA to notify a claimant of the information and evidence needed to substantiate a claim, as well as the duty to notify the claimant of what evidence will be obtained by whom. 38 U.S.C.A. § 5103(a); 38 C.F.R. § 3.159(b). In addition, they define the obligation of VA with respect to its duty to assist a claimant in obtaining evidence. 38 U.S.C.A. § 5103A; 38 C.F.R. § 3.159(c). Notably, the VCAA does not apply to the issue at hand. See Barger v. Principi, 16 Vet. App. 132 (2002); see generally Smith (Claudus) v. Gober, 14 Vet. App. 227, 230 (2000). The statute governing waiver claims has its own notice provisions. 38 U.S.C.A. § 5302 (West 2002). In a waiver of overpayment claim, the payee must be notified of his right to dispute the debt and request a waiver of the debt with a description of the procedures for submitting the application. The appellant was sent proper notice of the overpayment debt in April 2010, and he requested a waiver of this debt in May 2010. Accordingly, the notice provisions with regard to this appeal have been met. II. Waiver of Overpayment Validity of the Debt The preliminary issue of the validity of a debt (whether the overpayment was properly created) is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C.A. § 5302; 38 C.F.R. § 1.962 (2010). An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956(a) (2010). In this case, the Veteran was in receipt of an advance payment for Chapter 33 education benefits in the amount of $3,000.00. This advance was available to veterans who were enrolled in a program of education for the Fall 2009 term. See Letter, May 22, 2010. According to a statement from the Veteran, he was forced to withdraw from classes in the Fall 2009 term at Tidewater Community College, as his wife received orders on October 22, 2009, to report to New Haven, Connecticut. He stated that he subsequently withdrew from all three classes for which he was registered, that the classes were not offered online, and that he would not receive credit for the classes. See Statement, received July 1, 2010. In May 2010, the Committee determined that the amount owed by the Veteran was $3,000.00, the amount of the advance payment. The Committee found that he was never entitled to receive the advance in the first instance, as he was not registered for Fall 2009 when he submitted his application for the advance payment. Accordingly, the Board concludes the overpayment in question is a valid debt. It was properly created because the Veteran did receive benefits to which, by his own admission, he was not entitled due to his withdrawal from class. See 38 U.S.C.A. § 5112(b)(2); 38 C.F.R. §§ 3.501, 3.652(a) (2010). Instead, the Veteran has asserted that he was unaware the advance would have to be repaid, and that to do so would create a financial hardship. Waiver of Overpayment The appellant seeks waiver of recovery of the advancement of Chapter 33 education benefits in the amount of $3,000.00. The Veteran asserts that collection of this debt would result in undue hardship. While the Board has determined that the debt in question was properly created, there shall be no recovery of overpayment of VA benefits if it is determined that recovery would be against equity and good conscience. See 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.962. 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 appellant and the Government. The Veteran completed a January 2010 Financial Status Report (FSR) in which he indicated that he and his spouse received a combined gross monthly income of $3,539.29 with monthly expenses of $3,815.00. He indicated that his assets consisted of his home in Virginia, valued at $199,000, which is rented for $1370.00 per month (though not reported as income on the FSR), as well as a 2010 Jeep Wrangler worth $31,000. As noted in the preceding section, the Veteran's request for a waiver of the overpayment was referred to the Committee. In May 2010, the Committee considered the Veteran's claim for a waiver. The Committee made a specific determination that there the Veteran had acted in bad faith resulting in the creation of the overpayment at issue, as it was determined that the Veteran had withdrawn from class prior to his application for the advanced payment of Chapter 33 education benefits. The Committee relied upon VA Form 1999b in support of this determination, which purportedly demonstrated that the Veteran applied for the advance payment after he withdrew from the corresponding program of education. Here, the Board notes that VA Form 1999b, relied upon by the Committee in their May 2010 finding of bad faith, is not currently associated with the claim file. In support of his claim, the Veteran has submitted several statements in which he disagrees with that determination, claiming that he was enrolled in class when he applied for the advance. As it is unclear as to whether the Veteran applied for Chapter 33 benefits while enrolled, the $3,000 advance payment of those benefits, or both, the Board is unable to determine that the Veteran acted in bad faith in this case, as the evidence on which the Committee relied upon is not of record. In cases where fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue has not been demonstrated, and, therefore, waiver is not precluded pursuant to 38 U.S.C.A. § 5302(a), the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C.A. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a) (2010). In making this determination, consideration is given to the following elements, which are not intended to be all-inclusive: (1) fault of debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue hardship (whether collection would deprive the debtor or family of basic necessities); (4) defeat the purpose (whether withholding of benefits or recovery would nullify the objective for which benefits were intended); (5) unjust enrichment (failure to make restitution would result in unfair gain to the debtor); and (6) changing position to one's detriment (reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation). See 38 C.F.R. § 1.965(a). In the evaluation of whether equity and good conscience necessitates a favorable waiver decision, the Board must consider all the specifically enumerated elements applicable to a particular case. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994); Cullen v. Brown, 5 Vet. App. 510, 512 (1993). If warranted, the Board may waive a portion of the debt. See Jordan v. Brown, 10 Vet. App. 171 (1997). When, in fully weighing and balancing each equitable factor, there is an approximate balance of positive and negative evidence as to any material issue, VA shall give the appellant the benefit of the doubt. See 38 U.S.C.A. § 5107(b). See also Dela Cruz v. Principi, 15 Vet. App. 143, 148-49 (2001). As noted above, the Veteran received an advance payment for Chapter 33 education benefits in the sum of $3,000.00 for which he admits that he was never entitled, as according to the Veteran's own reports, he withdrew from the program of education of which the advance was attached. To date, VA has not received any documentation from the appellant to suggest that he completed that program of education. The first and second elements to be addressed pertain to the fault of the debtor versus the fault of VA. The responsibility in the creation of the overpayment of benefits rests with the Veteran, inasmuch as it was due to his failure to complete his program of education for which the advance was intended. In a statement received in June 2010, the Veteran insisted that he was forced to withdraw from class because his spouse was transferred to a different state. Further, the Veteran argued that he was never informed that he would have to repay the advance, and if he had known he never would have applied. See VA Form 9, August 23, 2010. However, this is not the crux of the issue. The Veteran received an advance for education benefits for which he did not qualify. His awareness of repayment requirements is irrelevant, as his lack of completion of the program of education at issue is not in dispute. In any event, the Veteran does not contend that he was misled by VA into believing he would not have to repay the advance, and the Board finds it rather unreasonable for the Veteran to assume he could request an advance for education benefits, and not have to repay the advance if he withdrew from classes. The Veteran clearly bears primary fault in the creation of the overpayment at issue due to his failure to complete the program of education for which the advance was intended. With respect to the third element, whether the Veteran would be subjected to undue hardship if the debt were recovered, his FSR of record, dated January 2010, demonstrates a deficit of $275.71 per month, resulting from a combined income of $3,539.29, minus monthly expenses totaling $3,815.00. The January 2010 FSR also noted $435.00 per month that is owed on a car loan, as well as $180.00 in cell phone expenses. When the amount due monthly to this creditor, in addition to the cell phone provider, are not considered, the Veteran's net monthly income actually exceeds his monthly expenses by approximately $340. As the overpayment of education benefits is a valid debt to the U.S. Government, there is no reason that the Veteran should not accord the Government the same consideration that he accords his other creditors. The Board acknowledges the limited income of the Veteran. However, financial hardship alone is not sufficient to constitute undue hardship for VA purposes. Undue hardship is defined as depriving the debtor or his family of basic necessities. 38 C.F.R. § 1.965(a)(3). Basic necessities constitute food, clothing, and shelter. Ownership of an automobile is a convenience, not a basic necessity, and cell phone usage also fails to achieve the status of a basic necessity. Thus, even if payment of this debt were to require the Veteran to sell or forfeit his car (so as to cease car payments), or discontinue his use of a cell phone, it would not deprive him of basic necessities for VA purposes. Accordingly, while the Board is sympathetic to the financial hardships the Veteran will incur as a result of this debt, this factor alone is not sufficient to warrant a waiver of an otherwise valid debt. The fourth element of equity and good conscience also fails to support the waiver of overpayment in this case. Again, the fourth element to be addressed is whether recovery of the overpayment would defeat the purpose for which the benefits were intended. Here, VA awarded an advance for Chapter 33 education benefits in accordance with financial and enrollment information for the Fall 2009 term which the Veteran supplied. The overpayment reflects that the Veteran received this advance, to which he was not entitled once he dropped his course load, and the Veteran has failed to provide proof that he re-enrolled or completed that program of education for which Chapter 33 benefits, and the advance therefore, were intended. As the Veteran has not submitted any evidence to demonstrate that he completed the classes for which the advance payment was intended, the reduction of this benefit would not defeat the purpose for which the benefit was intended. Also for consideration is whether a waiver of overpayment would cause "unjust enrichment." Put another way, the Board must contemplate whether failure to make restitution would result in unfair gain. Here, the Veteran clearly received an advance payment for assistance to which he was not entitled. The Veteran received from VA an advance payment in the sum of $3,000.00 for Chapter 33 benefits of which, by his own admission, he did not qualify. In the absence of any evidence that the Veteran has actually met the criteria for Chapter 33 benefits in this instance, the Veteran would be unjustly enriched by waiver of the overpayment in this case. The sixth element to be considered is whether reliance on VA benefits resulted in the Veteran relinquishing a valuable right or incurring a legal obligation. The Veteran has not claimed that he relinquished any right or incurred any legal obligation or that he relied upon VA to his detriment, nor is there any evidence of such. Thus, this sixth element does not support the appellant's request for a waiver of overpayment. The record does not demonstrate any additional factors which should be considered in adjudicating the appellant's claim for a waiver of the indebtedness, nor has the appellant identified any such factors. After weighing all of the enumerated factors, the Board finds that total recovery of the overpayment does not violate the principles of equity and good conscience. As discussed above, the Veteran is significantly at fault for creating the overpayment. He applied for an advance for educational benefits pursuant to Chapter 33, to which he was only entitled if enrolled in that program of education. In balancing the fault based on the circumstances in this case, the Veteran's fault was clearly more significant. While the Veteran's FSR of record demonstrates little to no monthly expendable income, it has not been shown that recovery of the debt in reasonable monthly installments creates an undue hardship sufficient to warrant a waiver of the debt or defeats the purpose of his VA benefits. In addition, waiver of the debt would result in his unjust enrichment and there is no evidence of detrimental reliance on his part. In reaching the above conclusions, the Board has considered the Veteran's statements in support of his claim. However, the he has not established undue hardship or demonstrated fault on the part of VA with respect to the overpayment. Again, principles of equity and good conscience do not preclude recovery of the overpayment here. As the preponderance of the evidence is against the claim, the "benefit-of-the-doubt" rule does not apply and the claim must be denied. See 38 U.S.C.A. § 5107(b) (West 2002); 38 C.F.R. § 3.102; Gilbert v. Derwinski, 1 Vet. App. 49, 50 (1990). ORDER Entitlement to a waiver of recovery of an advanced payment of $3,000.00 for the purpose educational assistance pursuant to 38 U.S.C. Chapter 33 is denied. ____________________________________________ Thomas H. O'Shay Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs