Citation Nr: 1333111 Decision Date: 10/22/13 Archive Date: 10/24/13 DOCKET NO. 10-17 618 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Milwaukee, Wisconsin THE ISSUE Entitlement to a waiver of recovery of an overpayment of VA benefit in the amount of $41,000. REPRESENTATION Appellant represented by: Alabama Department of Veterans Affairs ATTORNEY FOR THE BOARD M.H. Stubbs, Counsel INTRODUCTION The Veteran served on active duty from April 1975 to December 1976. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a December 2009 decision of the Debt Management Center (DMC) of the Department of Veterans Affairs (VA) in Fort Snelling, Minnesota which denied the Veteran's request for a waiver of $41,000.00 indebtedness resulting from an overpayment of VA benefits, on the basis that a timely request for a waiver of overpayment of nonservice-connected pension benefits was not submitted. This appeal was previously before the Board in June 2011 and December 2012. In December 2012, the Board found that the Veteran filed a timely request for waiver of the overpayment, and remanded for adjudication of the waiver request. In February 2013, the DMC denied a waiver of overpayment. FINDINGS OF FACT 1. In a January 2004 rating decision, the Veteran was awarded nonservice-connected pension, effective July 8, 2003. 2. A January 2004 VA disability pension notification letter stated that the Veteran's annual income of $1,200.00 ($100.00 monthly gifts from family) was the only countable income factored into the calculation of his award of nonservice-connected pension. 3. The Veteran is not shown to have committed fraud, misrepresentation or bad faith in the creation of the overpayment. 4. The overpayment was created by the appellant's failure to promptly and correctly report the receipt of Social Security Administration income, despite having been advised to fully disclose all sources of countable income to VA and that an overpayment would likely result from failure to report the income. VA was not at fault in the creation of the overpayment. 5. The Veteran was unjustly enriched by his receipt of non-service-connected VA pension income while concurrently receiving SSA benefits. 6. The Veteran's income consists solely of Social Security and VA benefits, and does not exceed his expenses. 7. The Veteran has repaid $23,874.30 of his debt, as of February 2013, and in a January 2013 Financial Status Report, indicated that he had no other debts. 8. The Veteran did not change positions to his detriment in reliance on a VA benefit. 9. Allowing a waiver on the repaid $23,874.30 would result in unjust enrichment, and did not cause undue hardship. 10. Recovery of the balance of the debt in the amount of $17,125.70 would cause the Veteran undue hardship. CONCLUSION OF LAW The requirements are not met for waiver of recovery of the full amount of the calculated indebtedness, only instead for a partial waiver of $17,125.70 of this outstanding debt; the balance of $23,874.30 has already been collected. 38 U.S.C.A. §§ 1521, 5302 (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.962, 1.963, 1.965, 3.23 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA) describes VA's duties to notify and assist a claimant in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a). However, in Barger v. Principi, 16 Vet. App. 132 (2002), the U. S. Court of Appeals for Veterans Claims (Court/CAVC) held that the VCAA does not apply to waiver-of-overpayment claims, noting that the statute at issue in these type cases is found in Chapter 53, Title 38, of the United States Code, and that the provisions of the VCAA apply to a different Chapter (i.e., Chapter 51). Laws and Regulations 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. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation (DIC), 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). Recovery of overpayments shall be waived if (1) there is no indication of fraud, misrepresentation, or bad faith on part of the person having an interest in obtaining the waiver and (2) recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C.A. § 5302(a), (c); 38 C.F.R. § 1.963. The Court has defined bad faith as "a willful intention to seek an unfair advantage." Richards v. Brown, 9 Vet. App. 255, 257-58 (1996). The provisions of 38 C.F.R. § 1.965(b)(2) define bad faith as an 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. 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. 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 the debtor -where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults-weighing fault of the debtor against Department of Veterans Affairs 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 Department of Veterans Affairs benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a). The Board notes that 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. Analysis The Board's review of the record in this case reflects that the RO did not find that the Veteran's actions represented intentional behavior to obtain government benefits to which he was not entitled, which is necessary for a finding of fraud, misrepresentation, or bad faith. The Veteran has contended that his daughter receives his mail, and that his representative did not inform him that he needed to report a change in his financial status. As the Veteran is the beneficiary, he is responsible for the notifications sent to his mailing address. The January 2004 letter, which informed the Veteran of his grant of pension benefits, also informed him that he was required to inform the VA of any changes in his financial status. Thus, although the overpayment was made due to the Veteran's failure to inform the VA of his receipt of SSA benefits, the Board concurs with the RO's finding that there was no fraud, misrepresentation, or bad faith in the creation of the overpayment at issue in this case. As there is no statutory bar to waiver of recovery, the critical inquiry then is whether the evidence establishes that recovery of the 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(a), 1.965. If warranted, the Board may waive only a portion of the debt. Jordan v. Brown, 10 Vet. App. 171 (1997). As noted, concerning the fault of the indebtedness, the Veteran is at fault for the overpayment by failure to inform the VA of his change in financial status when he was awarded SSA benefits, effective January 1, 2004. In October 2003, he indicated he received $100.00 a month from family, which the VA considered as $1,200.00 annual income when calculating his pension award. In July 2004, the Veteran provided an improved pension eligibility verification report, and he indicated he had no income or assets. In April 2004, the Veteran requested additional benefits via the addition of his children to his award. In July 2004, his dependent child was added to his award and the Veteran was again reminded to inform the VA of any changes in his financial status. When questioned about the change in annual income (because the July 2004 financial report did not include the $100.00 monthly family contributions), the Veteran indicated that the $1,200.00 annual income he reported on his initial pension claim was incorrect. In August 2004, the VA searched the SSA inquiry to see if the Veteran was receiving benefits, and the inquiry came back negative. In 2008, after receiving two separate claims for apportionment of benefits for the Veteran's children, the VA determined that the Veteran was receiving SSA benefits. In June 2008, the Veteran was informed of VA's proposal to withhold $100.00 monthly in apportionment benefits, and reducing his VA payments effective March 1, 2004. As SSA benefits were noted to be effective January 1, 2004, the VA assumed he received his first payment in February 2004. On a financial status report, signed in November 2008, but received by the VA in February 2010, the Veteran indicated he received $813.00 in SSA benefits, and $530.00 in VA benefits (net $1,343.00). He reported average monthly expenses of $600.00 for rent and $600.00 "for my dependents." He indicated he could pay $50.00 a month toward his debt. The Board notes that the Veteran did not provide any information regarding any support payments or contributions to his dependents when requested by the June 2008 apportionment proposal. However, based on the Veteran's provided financial information in February 2010, his income exceeded his expenses by $143.00 per month. In a November 2008 statement, the Veteran reported he cared for his dependents with $600.00 per month and used the rest of his VA and SSA benefits to "survive." He stated that repayment would cause hardship for him and his dependents. Another financial status report, this one signed in December 2009, but received by VA in February 2010, included a VA and SSA income of $1396.00 combined. The Veteran reported no additional income. He reported monthly expenses of $750.00 for rent, $300.00 for food, $130.00 for utilities, and $250.00 for additional expenses. He added a VA debt of $522.00 to his expenses, and noted net monthly expenses of $1927.00. As his VA debt is subtracted from his monthly benefit, this is not an additional expense, but is reflected in the lower VA benefit paid. Not including his VA debt, his monthly expenses are $1180.00. Thus, with the information provided in the "December 2009" financial status report, his income exceeded his expenses by $216.00 a month. Notably, the Veteran's "November 2008" report of $600.00 a month for the care of dependents was not included in the "December 2009" financial report. A February 2010 statement to the Committee on Waivers, on behalf of the Veteran, noted that he was "incurring extreme hardship and was on the verge of homelessness." He was noted to have moved several times due to financial hardship. On his substantive appeal in April 2010, the Veteran reported that he could "not afford to live like this" and would "soon be out on the street." He stated he could not afford to pay back the debt. Mostly recently, in January 2013, the Veteran provided an updated financial status report. He reported VA and SSA benefits totaling $1151.90. He reported monthly expenses of: $725.00 for rent, $250.00 for food, $225.00 for utilities and heat, $200.00 for car insurance and cell phone bill, $150.00 in child support (apportionment) and clothing, and $300.00 in debt payment. He did not fill out the section detailing his debt payment obligation, but as he previously did not report any debt other than VA overpayment debt, the Board will assume that the reported $300.00 is VA overpayment debt. Again, the Board notes that the Veteran's overpayment debt, and also his apportionment for dependents, is subtracted from his monthly VA benefits, and so is not an additional expense as it is reflected in the lowered VA benefits provided per month. Subtracting the VA overpayment expense and the dependents apportionment expense ($100.000), the Veteran's monthly expenses total $1, 450.00. Thus, his expenses exceed his income by $298.10 per month according to the most recent financial information. The February 2013 Supplemental Statement of the Case (SSOC) noted that the Veteran's debt balance was $17,125.70. As noted above, the Board may waive only a portion of the debt. Jordan v. Brown, 10 Vet. App. 171 (1997). With respect to other elements of equity and good conscience, such as whether he would be subjected to undue hardship if the debt were recovered, the Board notes that at least $23,874.30 has already been paid by the Veteran. All of his financial status reports have denied additional debts. Thus, the Veteran has been able to repay $23,874.30 without incurring additional debts. His financial status reports, filled out in 2008 and 2009, revealed that his income exceeded his expenses. On his 2008 report, he indicated he could pay $50.00 a month to repay his debt. So in reviewing these figures, the Board does not find that he would suffer undue hardship if required to repay this lesser portion of the overpayment as he still will be able to afford basic necessities. On his most recent financial status report from 2013, the Veteran's expenses exceed his monthly income. Thus, after weighing all of the factors discussed, the Board finds that recovery of the entire overpayment would violate the principles of equity and good conscience. The Veteran was at full fault for the creation of the debt, and was initially unjustly enriched by the overpayment. He has repaid $23,874.30 of his debt thus far, and did not change position to his detriment based on reliance on VA benefits. He has indicated that repayment of the full debt would result in undue hardship. The Board finds that waiver of a portion of the debt would promote the purpose of the compensation benefits program without resulting in further unjust enrichment due to his current financial hardship (as reported in 2013). Accordingly, the Board determines that partial waiver of recovery of the overpayment in the amount of $17,125.70, is warranted. This amount has been selected because it represents the debt balance as of the February 2013 SSOC. Although he was at fault for creating the entire overpayment, the balance of the factors considered in equity and good conscience include undue hardship beginning in January 2013. ORDER A partial waiver of recover of overpayment in the amount of $17,125.70 is granted, leaving him responsible for repayment of the remaining $23,874.30 (which has already been repaid). ____________________________________________ DAVID L. WIGHT Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs