Citation Nr: 18142371 Decision Date: 10/15/18 Archive Date: 10/15/18 DOCKET NO. 15-40 491 DATE: October 15, 2018 ORDER Entitlement to a waiver of an overpayment debt in the amount of $40,238.00 is granted. FINDINGS OF FACT 1. The portion of the overpayment debt incurred from February 2009 to January 31, 2010 income is valid. 2. The portion of the overpayment debt incurred from February 2010 to February 2014 is invalid. 3. Collection of the overpayment debt incurred from February 2009 to January 31, 2010 would be against equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery an overpayment debt in the amount of $40,238.00 have been met. 38 U.S.C. § 5302, 5112 (2012); 38 C.F.R. §§ 1.962, 1.965 (2018). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran testified at a June 2018 Board video conference hearing. The hearing transcript is of record. Entitlement to a waiver of an overpayment debt in the amount of $40,238.00, to include the validity of the debt 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. § 5302; 38 C.F.R. § 1.962. A claimant has the right to dispute the existence and amount of the debt. 38 U.S.C. § 501 (2012); 38 C.F.R. § 1.911 (c) (2018). In determining whether a waiver of overpayment is appropriate, the inquiry is focused on three distinct questions. First, VA must determine if the overpayment at issue was validly created. 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). Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation. If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963 (a), 1.965(b). Finally, if VA determines that the debt is valid and that fraud, misrepresentation, and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. 38 U.S.C. § 5302 (b); 38 C.F.R. §§ 1.962, 1.963, 1.965. The record shows that the overpayment at issue was created based on the termination of pension benefits in February 2009 based on unreported income identified in an Income Verification Match. The overpayment in the amount of $40,238 was created based on the termination of benefits which had been paid from February 2009 to February 2014. IVM information showed that in February 2009, the Veteran received income in 2009 from Met Life, Total Control Account. The Veteran reported in January 2013 that this was income received from an inheritance after the death of his mother. In December 2012 correspondence, the 2009 income was verified directly by the payor, Met Life, which showed that in February 2009, the Veteran was issued benefits in the amount of $26,257.00. Account information shows that the Veteran made withdrawals from the account in 2009 and 2010, and in December 2010, the account was closed with no remaining balance. IVM information from 2010 showed that the Veteran received unearned income from Trust Company of America in 2010, however, this income was listed as being received under multiple account numbers. The Veteran confirmed the amount received in 2009 in a January 2013 statement, but he has disputed that he received the amounts identified in 2010 from the Trust Company of America in lay statements and testimony. The record shows that confirmation from Met Life showed that the Veteran received $26,257.00 in 2009, but did not show that he received additional amounts in 2010. Tax documents submitted by the Veteran for the 2009 tax year show that he held an account with Trust Company of America with a sales price of $24,639.00 show and $2,797.00 in capital gains for the year. The Veteran submitted 2010 statements from Horizon Investments, LLC, Trust Company of America showing that his account under the Toohey Trust had an initial balance of $21,243.00 in October 2010. The Board finds that the $26,257.00 received from Met Life is countable as income for the annualized appeal period beginning February 1, 2009. While IVM information showed that the Veteran received additional amounts from the Trust Company of America in 2010, tax documents and account information submitted by the Veteran indicates that the information from the 2010 IVM was incorrect. Instead, tax documents indicate that the Veteran received $26,257.00 in 2009 trust. The Board finds that this income is also countable for the annualized appeal period beginning February 1, 2009. The amounts received from Met Life, Trust Company of America, and his SSA income in 2009 far exceeded the applicable MAPR rate for a single Veteran at the aid and attendance rate, which was $15,945.00 on February 1, 2009. Thus, the termination of benefits from February 1, 2009 to January 31, 2010 was proper, and the overpayment debt created during that period was valid. The Board finds that the additional amount received by the Trust Company of America identified as received in a 2010 IVM was not correct. Instead tax documents show that the Veteran had held the same account in 2009, with an initial balance and ending balance which was significantly lower than what was identified in the IVM. Account information from the Trust Company of America submitted by the Veteran also does not support the type of capital gains or distributions indicated in the IVM. Moreover, the inheritance income and life insurance income from 2009 was not recurring income, and should not have been counted beyond the annualized appeal period ending on January 31, 2010. For these reasons, the Board finds that the overpayment debt incurred from February 2010 to February 2014 is invalid, and that portion of the debt is waived. Because the Board has found that the portion of the debt incurred from February 2009 to January 2010 is valid, the Board will next need to determine if a waiver of the debt is warranted. The Board finds that the overpayment debt incurred from February 2009 to January 2010 was not the result of fraud, misrepresentation, or bad faith on the part of the Veteran. The Board finds that while the Veteran did not notify VA of the receipt of unearned income in the form of a life insurance payment and inheritance, he is credible in reporting that he did not realize that this had to be reported as income, and he submitted requested financial documents in support of his claim. Accordingly, the Board finds no fraud, misrepresentation or bad faith on the part of the Veteran in the creation of the overpayment. As the evidence does not establish fraud, misrepresentation, or bad faith on the part of the Veteran, the Board will next determine if a waiver of recovery of the VA indebtedness is warranted based on equity and good conscience under 38 U.S.C. § 5302 (a); 38 C.F.R. §§ 1.963 (a), 1.965(a) (2018). 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 U.S. Government. In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) Fault of debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing the fault of the debtor against the VA’s fault. (3) Undue hardship. Whether collection would deprive the debtor or his or her 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 an 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. 38 U.S.C. § 5302 (c); 38 C.F.R. § 1.965 (a). The Board finds that repayment of the Veteran’s indebtedness would violate principles of equity and good conscience. The first two elements for consideration under 38 C.F.R. § 1.965 (a) are the fault of the debtor, and balancing the fault of the debtor and VA. The Board finds that the Veteran was at fault in the creation of his indebtedness due to his failure to report the unearned income at issue. The Veteran had been given sufficient notice of the types of income which he needed to report in relation to receiving pension benefits, and notice letters specifically cited that income as including interest income and money or property you inherit. The Board finds that VA was not at fault in the creation of the overpayment debt which was incurred from February 1, 2009 to January 31, 2010 as this portion of the debt was properly created based on the non-report of income in 2009. The Board finds that that repayment of the debt would not deprive the Veteran of the basic necessities of life. As to the element of undue financial hardship, the regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or his or her family of the basic necessities. A January 2015 Financial Status Report shows that the Veteran had a monthly income of $1,050.00 from Social Security and monthly expenses totaling $1,066.00 which included food, utilities, living expenses, home and car insurance, and an internet, television, and phone plan. The Board notes that after taking care of basic necessities such as shelter and food, the Veteran is expected to accord a debt to VA the same regard given to any other debt. Thus, his student loan debt and cell phone bill were not calculated as part of his monthly expenses. The Board finds that the Veteran’s monthly expenses exceeded his income. An updated April 2015 Financial Status Report identified the addition of VA benefits to his income, but also indicated that he was paying significant amounts to his overpayment debt. He had a monthly income of $1,641.00. He had monthly expenses in the total amount of $1,290.00 which included rent or mortgage, food, utilities, insurance, gas, taxes, clothing, and an internet, television and phone plan. He also identified paying $360.00 a month toward his VA debt. The Board finds that the Veteran’s expenses and VA debt payment, totalling $1650.00, exceeded his income. Thus, the Board finds that the collection of the debt resulted in financial hardship for the Veteran. The Veteran has submitted more recent evidence indicating that his electric service was going to be shut off in 2018 for nonpayment, and he was late on his condominium association fees, putting him at risk of losing his housing. While the evidence of record indicates that the portion of the debt incurred from February 1, 2009 to January 31, 2009 has already been repaid by the Veteran, given his income and expense information, and evidence indicating continuing financial hardship, the Board finds that the collection of the overpayment debt would the Veteran of the basic necessities of life. Regarding the other elements pertaining to the principles of equity and good conscience as set forth by 38 C.F.R. § 1.965 (a), the Board finds that recovery of the overpayment would defeat the purpose for which benefits were intended. NSC pension is an income-dependent benefit, but financial need which is shown in this case. See 38 U.S.C. § 1521; 38 C.F.R. § 3.23. The failure of the Government to insist upon its right to repayment of the assessed overpayment would result in unjust enrichment of the Veteran as he was in receipt of a benefit to which he was not entitled. The evidence does not show that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits. Given the fact that the overpayment debt was not a result of fraud, balancing other factors discussed above, to include fault of the Veteran, the lack of fault of VA, the Veteran’s financial hardship, the purpose for which the dependent benefits were intended, unjust enrichment of the Veteran if the remaining debt were to be waived, the Board finds, resolving the benefit of the doubt in favor of the Veteran, that the recovery of the remaining overpayment amount incurred from February 1, 2009 to January 31, 2010 would be against the principles of equity and good conscience. Accordingly, waiver of recovery of an overpayment of pension benefits in the amount is granted. K. PARAKKAL Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD Christine C. Kung