Citation Nr: 1339730 Decision Date: 12/03/13 Archive Date: 12/18/13 DOCKET NO. 10-39 413 ) DATE ) ) On appeal from the Department of Veterans Affairs Education Center in Muskogee, Oklahoma THE ISSUE Entitlement to waiver of the recovery of an overpayment of education benefits in the original calculated amount of $3,000.00. ATTORNEY FOR THE BOARD C. J. Houbeck, Counsel INTRODUCTION The appellant is a veteran who served on active duty from August 1983 to August 1993. This matter is before the Board of Veterans' Appeals (Board) on appeal from a May 2010 decision by the Department of Veterans Affairs (VA) Regional Office (RO) in Muskogee, Oklahoma. The matter was remanded by the Board in June 2011 for additional development. The requested development having been completed, the matter again is before the Board. The Board has not only reviewed the Veteran's physical claims file but also the electronic records maintained in the Virtual VA and Veteran's Benefits Management System (VBMS) paperless claims processing systems to ensure a total review of the evidence. FINDINGS OF FACT 1. A valid overpayment in the amount of $3,000.00 was created due to the receipt of an advance payment for education benefits in October 2009. 2. The Veteran was at fault in the debt's creation, as she obtained an advance payment for education benefits to which she was not entitled. 3. The recovery of the VA benefits would not nullify the objective for which the benefits were intended. 4. The evidence does not demonstrate that the Veteran changed her position to her detriment, and there was no reliance on these VA education benefits that resulted in relinquishment of a valuable right or incurrence of a legal obligation. 5. The above notwithstanding, undue financial hardship has been demonstrated. CONCLUSIONS OF LAW 1. The overpayment of education benefits in the amount of $3,000.00 was properly created. 38 U.S.C.A. §§ 1521, 5112 (West 2002); 38 C.F.R. §§ 3.23, 3.271, 3.272 (2013). 2. The recovery of the overpayment of VA education benefits in the amount of $3,000.00 would be against equity and good conscience and, therefore, is waived. 38 U.S.C.A. §§ 5107, 5302(a) (West 2002); 38 C.F.R. §§ 1.962, 1.963, 1.965, 3.501 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), codified in part at 38 U.S.C.A. §§ 5103, 5103A, and implemented in part at 38 C.F.R § 3.159, amended VA's duties to notify and to assist a claimant in developing information and evidence necessary to substantiate a claim. However, the VCAA duties to notify and to assist do not apply to the claim for relief under Chapter 53 of Title 38 of the United States Code, pertaining to the waiver of recovery of overpayments. See Schaper v. Derwinski, 1 Vet. App. 430 (1991) (challenging validity of debt); see Reyes v. Nicholson, 21 Vet. App. 370 (2007) (the notice provisions of 38 U.S.C. § 5103(a) do not apply to chapter 53 proceedings (special provisions for the waiver of recovery of overpayments), citing Barger v. Principi, 16 Vet. App. 132 (2002)). In any case, as the Veteran's claim is granted herein, any error in the duties to notify and assist were not prejudicial to the Veteran. Waiver of Overpayment In August 2009, the Veteran applied for VA education benefits. Therein, the Veteran indicated that she elected to receive Chapter 33 - Post-9/11 GI Bill benefits and revoked any further benefits under Chapter 30 - Montgomery GI Bill Educational Assistance Program (MGIB). The application indicated that the Veteran was not eligible for more than 48 months of benefits under two or more programs, but that if she had completely exhausted benefits under Chapter 30 before the effective date of the Chapter 33 benefits election, she could receive up to an additional 12 months of benefits under Chapter 33. In September 2009, she received a letter from her school notifying her that VA was experiencing an unusually high volume of claims for education benefits that had resulted in a delay in providing education benefits to eligible students. As such, VA was preparing to release checks of up to $3,000.00 to eligible students who have not yet received benefits. In October 2009, the Veteran completed a certification acknowledging a check in the amount of $3,000.00 and indicated understanding that the check was an advance on her education benefits and that receipt of the check could result in a duplicate payment or overpayment for which the Veteran would be responsible for repaying. She stated that she believed she was eligible for the education benefits under the Post-9/11 GI Bill. In November 2009, VA notified the Veteran that she was denied Post-9/11 GI Bill benefits because she did not have active service after September 10, 2001. VA records indicated at that time that the Veteran had used 28 months and 9 days of her Chapter 30 education benefits eligibility and that 7 months and 21 days of eligibility had not been used. VA records indicate that the Veteran was sent a letter in February 2010 notifying her that an overpayment had been created. In March 2010, the Veteran requested a waiver of the overpayment. She stated that recovery of the debt "would be inequitable to me and will cause me undue hardship, as I am currently unemployed and buried in debt. My unemployment benefits to include all Federal and State extensions have been exhausted. My last unemployment check ended in October of 2009 and I have exhausted all of my savings and all funds from my last VSI annuity payment." In a May 2010 determination, a Decision on Waiver of Indebtedness denied waiver of the overpayment. The decision indicated that there was no evidence that the Veteran was enrolled for the period of time for which the education benefits were paid and, therefore, the Veteran's receipt of education benefits represented bad faith because she should have known that she was not entitled to benefits. In a June 2010 Notice of Disagreement (NOD), the Veteran stated that she believed she had not exhausted her benefits under the Montgomery GI Bill (Chapter 30) and had received several emails that she believed discussed VA authorization to transfer her benefits from Chapter 30 to Chapter 33 benefits. She also submitted proof that she had been enrolled in two college classes for the time period for which VA education benefits had been requested. The information also indicated that the final day for a tuition refund for dropping the classes was August 31, 2009 or September 23, 2009, depending on the class. (The Board observes that records subsequently submitted demonstrate that the Veteran completed these classes and received an "A" in each class.) In a July 2010 Statement of the Case (SOC), VA continued to deny the waiver on the basis that the Veteran's conduct evidenced bad faith. The Veteran submitted a timely substantive appeal. In a June 2011 determination, the Board concluded that the Veteran's mistaken belief that she was eligible for additional VA education benefits was not an appropriate basis for a bad faith determination and remanded the claim to consider whether recovery of the overpayment would be against equity and good conscience. In an August 2011 Supplemental Statement of the Case (SSOC), the RO referenced an August 2011 Decision on Waiver of Indebtedness that concluded that allowing the Veteran to keep the $3,000.00 advance payment would result in her unjust enrichment at the expense of the government. The SSOC adopted the rationale of the above Decision. In response, the Veteran submitted a September 2011 statement in which she argued that VA had been at fault to some degree in that had they processed the benefits application in a more timely manner they would have realized sooner that the Veteran was not eligible and the debt would not have been created. More importantly, the Veteran stated that recovery of the debt would deprive her of basic necessities and reiterated evidence contained in a previously submitted financial status report. Namely, the Veteran indicated that her annual income was $9,356.00 and that her monthly expenses significantly exceeded her income. Forced repayment of the debt would endanger her health, well being, and safety, as it would hinder her ability to pay rent and for other basic necessities. Thus, the Veteran is not challenging the validity of the overpayment in the amount of $3,000.00, but, instead, is seeking a waiver of recovery of that overpayment. The purposes of Chapter 30 educational assistance (also known as the Montgomery GI Bill) are: (1) to provide a new educational assistance program to assist in the readjustment of members of the Armed Forces to civilian life after their separation from military service; (2) to extend the benefits of a higher education to qualifying men and women who might not otherwise be able to afford such an education; (3) to provide for vocational readjustment and to restore lost educational opportunities to those service men and women who served on active duty after June 30, 1985; (4) to promote and assist the All-Volunteer Force program and the Total Force Concept of the Armed Forces by establishing a new program of educational assistance based upon service on active duty or a combination of service on active duty and in the Selected Reserve (including the National Guard) to aid in the recruitment and retention of highly qualified personnel for both the active and reserve components of the Armed Forces; (5) to give special emphasis to providing educational assistance benefits to aid in the retention of personnel in the Armed Forces; and (6) to enhance our Nation's competitiveness through the development of a more highly educated and productive work force. 38 U.S.C.A. § 3001 (West 2002). The law provides that VA will approve and will authorize payment of educational assistance for an individual's enrollment in any course or subject which a State approving agency has approved and which forms a part of a program of education as defined by 38 C.F.R. § 21.7020(b)(23). 38 U.S.C.A. § 3002(3) (West 2002); 38 C.F.R. § 21.7120 (2013). A program of education, in pertinent part, is any unit course or subject or combination of courses or subjects, which is pursued at an educational institution. 38 C.F.R. § 21.7020(b)(23). The Post-9/11 GI Bill was enacted by Congress in June 2008 and codified at Title 38 U.S.C.A. Chapter 33. See Pub. L. No. 110-252, Title V, §§ 5001-5003, 122 Stat. 2357 (2008). In March 2009 VA promulgated new regulations to implement the change in law and the regulations are currently codified at 38 C.F.R. §§ 21.9500- 21.9770. The Veteran concedes that she is not now nor has ever been eligible for benefits under Chapter 33, as she had no active service after September 10, 2001. For VA purposes, 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 (West 2002); 38 C.F.R. § 1.962 (2013). 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) (2013). VA regulations provide that, when an indebtedness is assessed, the debtor has the right to: informally dispute the existence or amount of the debt, appeal the VA decision underlying the debt, and request waiver of collection of the debt. 38 C.F.R. § 1.911(c) (2013). These rights can be exercised separately or simultaneously. See Schaper v. Derwinski, 1 Vet. App. 430, 434 (1991). As noted, the Veteran is not challenging the validity of the underlying debt, but is only requesting that VA waive recovery of the overpayment. As the validity of the $3,000.00 debt has been conceded by the Veteran, the Board will consider only whether recovery of that debt (or overpayment) should be waived. Recovery of an overpayment of VA benefits may be waived if recovery of the indebtedness would be against equity and good conscience. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.963(a). 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 various elements which are not intended to be all-inclusive. The elements are the fault of the debtor where such actions contribute to creation of the debt, balancing of faults where VA fault is also involved, whether collection of the debt would cause the debtor undue financial hardship by depriving him of basic necessities, whether collection would defeat the purpose of the VA benefit, whether failure to make restitution would result in unjust enrichment, and whether reliance on VA benefits resulted in relinquishment of a valuable right (i.e., changing position to one's detriment). 38 C.F.R. § 1.965(a). Where fraud, misrepresentation, or bad faith on the part of the Veteran is shown, denial of waiver of recovery of an overpayment may be made without regard to factors considered in applying the equity and good conscience standard. 38 U.S.C.A. § 5302. Bad faith 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 a VA benefit/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. 38 C.F.R. § 1.965(b)(2). In order to establish misrepresentation, the VA must show 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 eligibility for VA benefits. In order to determine whether misrepresentation exists, VA must prove a willful intent on the part of the debtor. The burden of proof lies solely with VA. 38 C.F.R. §§ 1.962(b), 1.965(b)(1). As discussed above, the Board's June 2011 determination concluded that the Veteran's conduct did not amount to fraud, misrepresentation, or bad faith. Specifically, the Board found that the Veteran's mistaken belief that she was eligible for additional VA education benefits was not an appropriate basis for a bad faith determination. Thus, there is no basis for denying the Veteran's claim on the basis of fraud, misrepresentation, or bad faith. The remaining consideration is whether recovery of the indebtedness would be against equity and good conscience. As noted above, when considering whether recovery of the debt would be against equity and good conscious consideration is given to the following six elements: (1) fault of debtor, (2) balancing of fault, (3) undue hardship, (4) defeat the purpose of the debt, (5) unjust enrichment, and (6) changing position to one's detriment. See 38 C.F.R. § 1.965(a). After review of the evidence of record, there are elements both in favor and against granting a waiver of the validly created overpayment. The Board agrees with the Committee on Waivers that the Veteran's receipt of VA educational benefits constituted unjust enrichment; valid entitlement to the educational benefits never existed, yet she received $3,000.00 in advance payments towards tuition and related expenses. However, it would be against equity and good conscience to require this particular Veteran to repay the amount of the overpayment. There is no evidence or contention that the Veteran changed her position to her detriment in reliance on the monies erroneously paid (i.e., the $3,000.00 overpayment) or that the Veteran enrolled in college classes only as a result of the monies received from VA. There also is no evidence that the Veteran incurred any legal obligation in reliance on this erroneously paid money. Nor would recovery of the overpayment defeat the purpose of the debt. The Veteran was awarded education benefits to assist her in completing undergraduate classes with the intention of pursuing an MBA. However, as noted above, there is no evidence or suggestion that the Veteran would not have taken those classes but for the advanced education payment of $3,000.00. Moreover, recovery of the overpayment would not prevent the Veteran from continuing her studies, as the evidence fails to indicate that the Veteran is currently in classes or intends to enroll in classes in the near future. As to the fault of the Veteran and the relative fault of the Veteran and VA in creating the debt, the Veteran concedes that she was at fault in the creation of the debt. She also attributes some level of fault to VA, as had they reviewed her claim earlier they would have discovered that she was not entitled to the $3,000.00 payment and no debt would have been incurred. The Board does not find this argument persuasive, however, as the clear evidence of record demonstrates that VA notified the Veteran that there would be a delay in processing her claim and that while she could accept an advanced payment of $3,000.00 that such payment could result in an overpayment for which she would be responsible to repay. VA clearly put the Veteran on notice that acceptance of any advanced payment could result in an overpayment, as happened in this case. The failure to make restitution clearly would result in an unfair gain to the Veteran. The overpayment debt was validly created when she received an advanced payment of $3,000.00 to which she was not entitled. The above notwithstanding, the Board's determination in this case hinges on the undue hardship that would be created by the recovery of the debt. The Veteran has submitted a financial status report and other statements that indicate that her expenses significantly exceed her income and no evidence indicates that another source of income is foreseen. In light of the clear evidence that recovery of the debt would create significant financial hardship on the Veteran and inhibit her ability to maintain rent payments and obtaining other basic necessities, the Board finds that while the overpayment resulted in unjust enrichment of the Veteran, denying her request for a waiver would result in undue hardship. Accordingly, waiver of the validly created overpayment in the amount of $3,000.00 is warranted ORDER Entitlement to waiver of the recovery of an overpayment of education benefits in the amount of $3,000.00 is granted. ____________________________________________ A. C. MACKENZIE Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs