Citation Nr: 1758023 Decision Date: 12/14/17 Archive Date: 12/28/17 DOCKET NO. 14-27 297 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Atlanta, Georgia THE ISSUE Entitlement to a waiver of recovery of an overpayment of Chapter 33 educational assistance benefits in the amount of $4,322.56. REPRESENTATION Appellant represented by: The American Legion ATTORNEY FOR THE BOARD D.S. Lee, Counsel INTRODUCTION The Veteran served on active duty from November 2002 through January 2005. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a May 2014 decision issued by the Department of Veterans Affairs (VA) Debt Management Center in St. Paul, Minnesota, which denied the Veteran's request for waiver of overpayment in the amount of $4,322.56. In May 2016, the Board determined that the debt at issue was created validly, however, remanded the issue of the Veteran's entitlement to a waiver of that debt so that the Veteran could have the opportunity to provide more detailed information as to her financial status. That development has been performed. The matter returns to the Board for de novo review. This appeal has been advanced on the Board's docket pursuant to 38 C.F.R. § 20.900(c) (2017). 38 U.S.C.A. § 7107(a)(2) (2012). FINDING OF FACT Recovery of the calculated overpayment of $4,322.56 would violate equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery of the overpayment of Chapter 33 educational assistance benefits in the amount of $4,322.56 are met. 38 U.S.C.A. § 5302 (2012); 38 C.F.R. §§ 1.911, 1.962, 1.963, 1.965 (2017). REASONS AND BASES FOR FINDING AND CONCLUSION A claimant has the right to dispute the existence and amount of debt owed to VA. 38 U.S.C.A. § 501 (2012); 38 C.F.R. § 1.911 (c) (2017). In determining whether a waiver of overpayment can be granted, VA's analysis centers around three distinct questions. First, VA must determine if the overpayment at issue was created validly. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided); see also VAOPGCPREC 6-98 (interpreting that, where the validity of the debt is challenged, that issue must be developed before the issue of waiver of the debt can be considered). As noted, that question was disposed by the Board in its May 2016 decision and remand and will not be revisited here. Second, if the debt is determined valid, VA must determine whether fraud, misrepresentation, or bad faith played a role in its creation. If VA determines that such factors had a role in the debt's creation, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C.A. § 5302(a) (2012); 38 C.F.R. §§ 1.963 (a), 1.965(b) (2017); see also Ridings v. Brown, 6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate). The Board finds no evidence of fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the debt. As discussed in full in the previous May 2016 decision and remand, the debt at issue centers around Chapter 33 educational assistance benefits that were paid to the Veteran, totaling $4,322.56 to be used for tuition, fees, books, supplies, and housing during enrollment in cosmetology school from November 2013 through January 2015. Although the Veteran needed to attend 22 clock hours in order to receive full-time payment, she did not meet that requirement and ultimately withdrew from enrollment in December 2013 without attending the term. The Veteran asserted that she had been misinformed by a VA representative, who advised her that she was eligible for the maximum rate of 100 percent benefits, and hence, that her entire tuition would be covered. She stated that she would not have enrolled for school had she known that she did not have enough benefits to cover her tuition. As discussed by the Board in the May 2016 decision and remand, the Veteran was notified properly by VA as to the terms of her eligibility to Chapter 33 benefits prior to her enrollment into the cosmetology program. Still additional periodic notice regarding the terms of her eligibility and her responsibility of notifying VA of any changes in her enrollment status were also provided to the Veteran. Nonetheless, although the Board has determined previously that the Veteran had actual notice of her responsibilities, and hence, that the debt at issue was created by her own actions, the Board also determines that the Veteran did not act in any bad faith or with any intent to deceive or defraud VA. In that regard, the Veteran appears to have been simply negligent. Having determined that the Veteran did not act with bad faith, the Board turns to the final prong of its analysis. If VA determines that the debt is valid and neither fraud nor misrepresentation, nor bad faith had a part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. See 38 U.S.C.A. § 5302 (b); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2017). The controlling legal criteria provide that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965 (a). 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 United States Government. In making this determination, consideration may be given to factors which may include the following: (1) fault of the debtor (i.e., instances where the debtor's actions contribute to the creation of the debt); (2) balancing of faults (i.e., weighing the fault on the part of the debtor against any fault attributable to VA); (3) undue hardship (i.e., whether recoupment of the debt would deprive the debtor or his or her family of basic necessities); (4) contrary to the purpose of the benefit (i.e., whether withholding of benefits or recovery would nullify the objective for which the paid benefits were intended; (5) unjust enrichment (i.e., consideration of whether failure to make restitution would result in an unfair gain to the debtor); (6) change of position to the claimant's detriment (i.e., consideration of whether the claimant relayed on receipt of VA benefits in relinquishing a valuable right or incurring a legal obligation). 38 U.S.C.A. § 5302 (c) (2012); 38 C.F.R. § 1.965 (a) (2017). A financial status report provided by the Veteran in August 2016 states that the Veteran has total monthly expenses that nearly equal her monthly income, which consists solely of VA benefits. The Veteran's reported expenses and debts do not appear to be lavish or extravagant, but rather, reflect basic expenses such as shelter, food, and heat. Moreover, the evidence shows that the Veteran's financial circumstances have caused her to declare bankruptcy and that she currently remains subject to the terms of her bankruptcy plan. The evidence suggests that recovery of the debt at issue would result in undue hardship to the Veteran. Although the evidence shows that the debt at issue was created in large part due to the fault of the Veteran, principles of equity and good conscience lead the Board to conclude that such fault is outweighed by the Veteran's financial circumstances and the undue hardship that would result to the Veteran if the debt is recovered. For these reasons, the Board grants waiver of recovery of overpayment of Chapter 33 educational assistance benefits in the amount of $4,322.56. ORDER A waiver of recovery of an overpayment of Chapter 33 educational assistance benefits in the amount of $4,322.56 is granted. ____________________________________________ MICHAEL LANE Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs