Citation Nr: 1320905 Decision Date: 06/28/13 Archive Date: 07/05/13 DOCKET NO. 09-42 085 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Detroit, Michigan THE ISSUE Entitlement to waiver of recovery of an overpayment of disability compensation in the amount of $992.80. REPRESENTATION Veteran represented by: Disabled American Veterans ATTORNEY FOR THE BOARD S. Pflugner, Counsel INTRODUCTION The Veteran served on active duty from May 1968 to January 1973 and from February 1973 to February 1977. This appeal comes before the Board of Veterans' Appeals (Board) from a May 2009 determination by the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA) Regional Office in Milwaukee, Wisconsin, on behalf of the Regional Office in Detroit, Michigan (RO). FINDINGS OF FACT 1. Since September 1, 1994, the Veteran has been rated 20 percent for herniated nucleus pulpous, L5-S1, post-operative. 2. The Veteran was convicted of two felonies on April [redacted], 2008, and has been incarcerated by the Michigan Department of Corrections since then. 3. VA was not informed of the Veteran's incarceration until November [redacted], 2008. 4. In February 2009, VA reduced the Veteran's monthly compensation, effective after the 61st day of his incarceration, which was determined to be June [redacted], 2008. 5. From June [redacted], 2008 until the February 2009 reduction, the Veteran received full benefit of his monthly compensation award for his service-connected herniated nucleus pulpous, L5-S1, post-operative. 6. Under VA law, the Veteran received an overpayment of $992.80. 7. Recovery of the overpayment would not be against equity and good conscience. CONCLUSION OF LAW An overpayment of additional VA disability compensation benefits in the amount of $992.80 was properly created, and the Veteran is not entitled to waiver of recovery of the overpayment. 38 U.S.C.A. §§ 5302, 5313 (West 2002); 38 C.F.R. §§ 1.963, 1.965 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSION As an initial matter, VA has a duty to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126 (West 2002); 38 C.F.R. §§ 3.102, 3.156(a), 3.159, and 3.326(a) (2012). However, the Board notes that the notice and duty to assist provisions do not apply to claims for waiver of recovery of overpayments. See Barger v. Principi, 16 Vet. App. 132 (2002). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.962. 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. 38 C.F.R. § 1.956(a). The issue of the validity of a debt 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, 434 (1991). The Board understands the Veteran is not claiming the overpayment of $992.80 is an invalid debt, but instead only contends that a waiver should be granted. Nevertheless, after a review of the evidence, the Board finds the overpayment of $992.80, as detailed below, is valid. It is the responsibility of the recipient of VA benefits to notify VA of all circumstances which will affect entitlement to receive the rate of the benefit being paid, and such notice must be provided when the recipient acquires knowledge that his or her income or other circumstances which would affect the entitlement to receive, or the rate of, the benefit being paid, has changed. 38 C.F.R. § 3.660(a)(1). Since September 1, 1994, the Veteran has been rated 20 percent for herniated nucleus pulpous, L5-S1, post-operative. The evidence of record indicates that the Veteran was convicted of two felonies on April [redacted], 2008 and incarcerated, with the earliest release date of August [redacted], 2011, and a maximum discharge date of February [redacted], 2028. A Veteran who is incarcerated in a federal, state, or local penal institution in excess of 60 days for conviction of a felony committed after October 7, 1980, and is rated 20 percent or more shall be paid compensation at the rate of 10 percent beginning on the 61st day of incarceration. 38 U.S.C.A. §§ 1114, 5313; 38 C.F.R. § 3.665. The Veteran was previously convicted of a felony and incarcerated on October [redacted], 2004. Upon learning of the Veteran's incarceration, VA sought to recover overpayment of disability compensation from the Veteran, starting after the 61st day of his incarceration. He was notified of this action in a letter dated in June 2006. The Veteran disputed VA's articulation of his dates of incarceration, which were eventually amended in May 2007. Thereafter, the Veteran did not perfect an appeal. Based on the above, at the time of the April [redacted], 2008 convictions, the Board finds that the Veteran was aware that VA was required, by regulation, to reduce his benefits after his 61st day of incarceration. As discussed above, the Veteran is responsible for informing VA of any circumstances affecting his entitlement to benefits. Despite this knowledge and responsibility, the Veteran did not provide VA notice of his April 2008 incarceration. Based on this evidence, the Board finds that a valid debt or overpayment occurred and VA was entitled to seek recovery of the amount in question. After reviewing the available evidence, the Board finds that the overpayment in this case was not created solely as a result of VA administrative error, and therefore, the debt is held to have been properly created. In cases where there has been no finding of fraud, misrepresentation, or bad faith on the Veteran's part, repayment of the subject debt may be waived. 38 U.S.C.A. § 5302(a). Waiver will be granted when recovery of the indebtedness would be against equity and good conscience. 38 U.S.C.A. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a). Pursuant to the provisions contained in 38 U.S.C.A. § 5302 and 38 C.F.R. § 1.964(e), a request for a waiver of an overpayment must be made within 180 days of the date of notification of the indebtedness. In a December 2008 letter, VA informed the Veteran that it had learned of his incarceration and, thus, proposed to reduce his benefits, effective after the 61st day of his incarceration, which was June [redacted], 2008. In the December 2008 letter, VA also notified the Veteran that this action could result in a determination that he was paid more disability compensation than he was entitled to receive. If so, notice as to the exact amount would be provided to him. In February 2009, VA effectuated the proposed reduction. Before the Veteran received notice of the exact amount of the overpayment of disability compensation, he submitted a claim of entitlement to a waiver of recovery of an overpayment of disability compensation in March 2009. In May 2009, the Veteran's claim for waiver of overpayment of disability compensation was denied. Therein, he was provided notice that the total amount of overpayment was calculated to be $992.80. It was determined that there was no finding of fraud, misrepresentation, or bad faith on the part of the Veteran. Given that the Veteran preemptively requested a waiver of recovery of an overpayment of disability compensation, the Board finds that the Veteran's March 2009 request was timely. The Board will now address whether the recovery of the indebtedness would be against equity and good conscience. The standard of "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. 38 C.F.R. § 1.965(a). In deciding whether collection would be against equity and good conscience, the following factors are for consideration: (1) fault of debtor, where actions of the debtor contribute to creation of the debt; (2) balancing of faults, weighing fault of 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 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. These factors are not meant to be all-inclusive. 38 C.F.R. § 1.965(a). With respect to the fault of the Veteran (debtor), as discussed above, VA recovered overpaid disability compensation from the Veteran consequent to previous felony convictions and incarceration. Through the recovery process, the Veteran was provided notice that VA was required to reduce his disability compensation in the event that he was incarcerated for a felony conviction. Regulations require that the Veteran inform VA of any incarceration, as this would have on impact on the level of benefits to which he was entitled. Despite this previous experience and his regulatory responsibility, the Veteran did not inform VA of his April [redacted], 2008 felony convictions. Therefore, the Board finds that the Veteran is at fault and his failure to notify VA contributed to creation of the debt. Following the Veteran's period of incarceration for the prior felonies, the record included no evidence that VA mailed any notice, check, or other correspondence to the Veteran while he was incarcerated to an address, such as his prison address or a mailing with his inmate number, that would indicate VA knew he was incarcerated. The evidence of record demonstrated that VA was not made aware of the Veteran's April [redacted], 2008 convictions until November 10, 2008. VA sent the Veteran a letter the next month proposing to reduce his disability compensation due to his incarceration. The Board, therefore, finds no fault on the part of VA for the $992.80 overpayment of compensation benefits, and that the amount can be attributed only to the Veteran's inaction after he was incarcerated. As to financial hardship, the Veteran sent VA a letter in January 2009 in response to receiving the December 2008 notice of the proposed reduction. Therein, the Veteran stated that he "understood" that VA was reducing his disability compensation, but requested that VA continue to send him the reduced amount until his release. Upon his release, the Veteran proposed to repay the debt at a rate of $50.00 per month. The Veteran then stated that this was "the only way I can have some spending money while in prison." In his March 2009 claim, the Veteran again proposed to repay the debt at a rate of $50.00 per month upon his release from prison, at which time his Social Security disability compensation would be reinstated. The Veteran also stated that his spouse received Social Security disability compensation at a rate of "a little over $700" per month. The Veteran stated that his spouse used that money to provide financial assistance to their daughter, to purchase medications, and to pay for a medically necessary scooter. In April 2009, the Veteran stated that he was in prison and that he needed the waiver because "that [is] the only way I have money for the basic stuff and a few snacks." The Veteran also indicated that "she" (presumably his spouse) needed money for "basic things" as well. An April 2009 Financial Status Report demonstrated that the Veteran had not worked since 1989, at which time he began receiving disability compensation from the Social Security Administration. The report also demonstrated that the Veteran was receiving $883.00 per month of disability compensation from the Social Security Administration, but that this payment was suspended upon his incarceration. According to the report, the Veteran's spouse was receiving $786.00 per month of disability compensation from the Social Security Administration. The Veteran then indicated that he and his spouse's monthly expenses totaled $657.00, which in included rent/mortgage, food, and monthly payments on a scooter for his spouse. With respect to assets, the Veteran indicated that he had none. In his July 2009 notice of disagreement, the Veteran contended that he needed the waiver of overpayment in order to afford the "basic daily needs within the Michigan Department of Corrections," such as personal hygiene products. The Veteran stated that he was provided only a $10.00 per month indigent loan from the Department of Corrections that he was required to spend on personal hygiene products, which he described as inadequate. Further, beyond his VA disability compensation, he stated that he did not have any other source of income. In his October 2009 substantive appeal, the Veteran requested that VA consider not only the effects of denying the waiver on him, but also on his spouse's ability to pay their bills, utilities, rent, and satisfy debts that were outstanding. The Veteran requested that, if he were not granted the waiver, he be allowed to pay the debt back at a later date. In addition to the itemized bills described by the Veteran's spouse immediately below, the Veteran also asserted that VA should take into consideration that he is required to $5.00 per visit to the prison health care clinic. In October 2009, contemporaneous to the submission of the Veteran's substantive appeal, his spouse submitted a rough itemization of her monthly expenses, which included rent, medication, insurance, cable television, a newspaper subscription, and "miscellaneous." She then asserted that she incurred hospital bills of $1,925.00, and indicated that additional medical bills were forthcoming. The Veteran's spouse then stated the following: What money [the Veteran] get[s] from VA helps me send him money for his needs and also help[s] me to pay for whatever comes up that I didn't plan on. In December 2009, the Veteran's spouse submitted another statement wherein she asserted that the Veteran's VA disability compensation "helped [her] get by" and helped her to "send [the Veteran] money so he [can] get what he needs." She then stated that she was on a fixed income, and further stated that she had moved into her daughter's residence. Moreover, the Veteran's spouse stated that she no longer owned a car as she could not afford one and that she was not able to afford to repay the debt associated with her hospital visits. She then provided an itemized list of her monthly costs, including rent, food, medications, insurance, miscellaneous, and emergency. She asserted that if there were any emergencies, this is where the Veteran's disability compensation has helped her. She also claimed that the Veteran's VA disability compensation helped her afford additional medications that she required following her hospital visits. At the conclusion of her letter, the Veteran's spouse indicated that she would like to be able to afford to live on her own home and to own a car, but that she was unable to do so based on her income. The Veteran and his spouse have submitted evidence that indicates that they experience financial difficulties, which the Board does not doubt. However, neither the Veteran nor his spouse submitted evidence of how VA's recovery of the overpaid disability compensation would result in undue hardship, such as the deprivation of basic necessities. With respect to the Veteran, his basic needs are provided for by the Michigan Department of Corrections. Although he is apparently required to purchase personal hygiene products, the funds to purchase these products are loaned to the Veteran through an assistance program offered to indigent prisoners. Significantly, during the pendency of this appeal, the Veteran asserted that he needed the waiver in order to (1) have spending money while incarcerated; (2) for "basic stuff," without further elaboration; and (3) for "snacks." With respect to the Veteran's spouse, she submitted statements detailing her monthly expenses, including rent, utilities, food, and medications. Although she indicated that she was no longer able to live on her own and needed to move in with her daughter, there was no indication that she would be deprived of a place to live, food, the ability to pay her utility bills, or medications if VA recovered the overpaid disability compensation. During the pendency of this appeal, she also indicated that her monthly expenses included cable television and a newspaper subscription, which are not basic necessities, but that she was still able to afford. The Veteran's spouse further indicated that the Veteran's VA disability compensation was used to help her with emergencies and/or unexpected costs should any occur. She did not state that an emergency had occurred or that she incurred any unexpected costs, only that she needed the Veteran's VA disability compensation in the event that either event occurred. However, the Board's analysis is not focused on the possibility that the Veteran's spouse may need the Veteran's VA disability compensation in the future, but whether, at present, recovery of the indebtedness would cause undue hardship. The Veteran's spouse did not explain how she would be deprived of any specific basic need due to VA's recovery of the overpaid disability benefits. Indeed, she indicated that she wanted to use the Veteran's VA disability compensation to secure a place of her own to live and to obtain a car. Again, the evidence and assertions submitted by the Veteran and his spouse demonstrate that they experience financial difficulties, but do not demonstrate that either or both of them would experience undue hardship, such the deprivation of basic needs, consequent to VA's recovery of the overpaid disability compensation as issue herein. Another factor to be considered is whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. The Veteran was entitled to disability compensation for his herniated nucleus pulpous, L5-S1, post-operative. Disability ratings are intended to compensate, as far as can practicably be determined, the average impairment of earning capacity resulting from service-connected diseases and injuries and their residual conditions in civilian occupations. 38 U.S.C.A. § 1155 (West 2002); 38 C.F.R. § 4.1 (2012). The Veteran was incarcerated during the period in question and, thus, had no earning capacity, but was still entitled to receive a reduced portion of his disability compensation. Further, the law provides that veterans who are incarcerated felons are not entitled to the same amount of disability compensation as all other veterans. 38 U.S.C.A. § 5313. Therefore, the Board finds that recovery of overpayment would not defeat the purpose for which the benefits were intended. The Board also finds that failure to make restitution would result in unfair gain to the Veteran because he received benefits to which he had no entitlement. He received the full amount of his disability compensation despite being incarcerated, which is counter to the regulations. Finally, the Board must consider whether reliance on benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that he had relinquished a valuable right or incurred a legal obligation in reliance on the level of VA benefits he was receiving at the time of the April 2008 incarceration for felony convictions. In sum, the Board concludes that the facts of this case, when weighed against the various elements to be considered, demonstrate that recovery of the overpayment of benefits would not be against equity and good conscience. Although the Veteran did not deceive VA, he is at fault in the creation of the debt, particularly when compared with VA. Failure to repay the debt would result in unfair gain to him. Also, recovery of the overpayment would not defeat the purpose for which the benefits are intended, and he had not relinquished a valuable right or incurred a legal obligation in reliance on his level of VA benefits. As to the question of undue hardship, persuasive evidence has not been presented to show that the Government's right to full restitution should be moderated. Based on the above, the Board finds that the preponderance of the evidence is against the claim for waiver and, thus, the benefit of the doubt rule does not apply. Accordingly, the claim must be denied. 38 U.S.C.A. § 5107(b). ORDER Entitlement to waiver of recovery of an overpayment of disability compensation benefits in the amount of $992.80 is denied. ____________________________________________ U. R. POWELL Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs