Citation Nr: 18149134 Decision Date: 11/08/18 Archive Date: 11/08/18 DOCKET NO. 10-30 542 DATE: November 8, 2018 REMANDED Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits, to include the question of whether the overpayment was properly created is remanded. REASONS FOR REMAND The Veteran served in the Marine Corps from March 1988 to June 1989 and from November 1991, to December 1992. Due to a finding by the Regional Office (RO) that the Veteran was a fugitive felon, the RO suspended his VA compensation benefits effective November 3, 2006. As a result, the Veteran was notified that a debt of $1,089.14 was created. Thereafter, the Veteran was informed that VA proposed to suspend his benefits effective March 22, 2007 due to an outstanding warrant for his arrest. The Veteran was then arrested as of July 22, 2008, and his VA compensation benefits were resumed, but at the reduced rate due to incarceration (as of the 61st day of incarceration) which was the amount payable for a disability evaluated as 10 percent disabling since the Veteran had a combined disability evaluation of over 10 percent. 38 C.F.R. § 3.655. A February 2009 letter, indicated that due to an incarceration, the Veteran’s benefits were again reduced to the applicable rate as of November 23, 2008, due to a felony incarceration. According to the statement of the case, when the Veteran’s benefits were stopped effective March 22, 2007, this action created a debt of $6,219.93. When his benefits were reinstated effective July 22, 2008, the debt was reduced to $5,504.93. Thereafter, three months (December, January, and February) of payment were applied to the debt which reduced the amount to $3,792.93. Then, when the Veteran’s benefits were again reduced due to incarceration, effective November 15, 2008, an additional debt of $1,023.93, was created. The January 2010 waiver decision denied a waiver of the recovery of the $1,023.93 debt. A March 2010 letter told the Veteran that the amount of the debt was $4,816.86. This amount is $3,792.93 combined with $1,023.93. The Veteran has indicated that he disputes the amount of the debt and that he also seeks a waiver the entire debt. The Veteran’s waiver claim must be deferred pending formal adjudication of his challenge to the validity of the debt. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991) (“when a Veteran raises the validity of the debt as part of a waiver application... it is arbitrary and capricious and an abuse of discretion to adjudicate the waiver application without first deciding a veteran’s challenge to the lawfulness of the debt asserted against him or her”); VAOPGCPREC 6-98 (July 24, 1998) (holding that when a veteran challenges the validity of the debt and seeks waiver of the debt, the [Regional Office] must first fully review the debt’s validity and, if the office believes the debt to be valid, prepare a written decision fully justifying the validity of the debt before referring the waiver request to the Committee on Waivers and Compromises). A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. 38 C.F.R. § 1.911 (c)(1). Resolution of the creation issue must precede consideration of the waiver issue. The matter is REMANDED for the following action: 1. Prepare a paid and due audit of the Veteran’s VA compensation benefits. 2. Adjudicate the issue of whether the overpayment was properly created. 3. If the claim continues to be denied, obtain a complete and current financial status report. 4. Thereafter, issue the Veteran an appropriate supplemental statement of the case (SSOC) which addresses both the creation and waiver issues and afford them the opportunity to respond. S. L. Kennedy Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD J. Connolly, Counsel