Citation Nr: 18155380 Decision Date: 12/04/18 Archive Date: 12/04/18 DOCKET NO. 16-13 194 DATE: December 4, 2018 ORDER Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $20,000.00 is denied. FINDINGS OF FACT 1. This overpayment was not due to the Veteran’s fraud, misrepresentation or bad faith. 2. The Veteran received full compensation benefits after 61 days of incarceration following conviction of a felony, with no fault on his part due to timely notification of his incarceration. 3. There is financial hardship; however, the preponderance of the evidence weighs against a finding that such financial strain rises to the level of undue hardship. Consideration of the evidence of record, to include future prospects, does not demonstrate that collection of the overpayment debt would deprive debtor of basic necessities. 4. The recovery of the overpayment would in part defeat the purpose for which the benefits were intended, namely, adequate compensation for loss of working time reflective of the average impairment in earning capacity resulting from service-connected diseases and injuries and their residual conditions in civil occupations. 5. Waiver of recovery of the overpayment would constitute an unjust enrichment to the Veteran by paying full disability compensation benefits for an individual that was incarcerated after conviction of a felony. 6. The evidence does not show that the Veteran incurred a legal obligation or changed his position to his detriment in reliance upon the receipt of VA benefits. CONCLUSION OF LAW Recovery of the overpayment of VA compensation benefits in the amount of $20,000.00 would not be against equity and good conscience and, therefore, may not be waived. 38 U.S.C. §§ 5107, 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from January 1988 to March 1989. The Veteran’s overpayment debt is due to the retroactive adjustment of his disability compensation benefits from June 28, 2014, which was the 61st day following confinement following conviction of a felony in April 2014. See 38 C.F.R. § 3.665 (explaining that benefits are subject to a reduction beginning on the 61st day of incarceration for conviction of a felony committed after October 7, 1980). Historically, the Veteran has been in receipt of disability compensation benefits for various service-connected disabilities at a 100 percent disability rating due to individual unemployability. As documented in a June 5, 2014, report of general information, the Veteran’s spouse notified VA that the Veteran was incarcerated on April 28, 2014. Subsequently, a VA and Social Security (SSA) prisoner computer match indicated the Veteran was incarcerated since May 2014 and the Veteran confirmed he was incarcerated following conviction on April 28, 2014, but was moved to his current location on May 6, 2014. A July 2015 Debt Management Center (DMC) first demand letter assessed a debt of $42,800.25. In August 2015, the Veteran requested a waiver of the debt and returned a VA Form 5655, Financial Status Report, that showed income of about $4,000.00 from VA and SSA with monthly expenses of about $3,400.00, which included living expenses for his spouse and three dependent children as well as monthly payments on outstanding debts of about $50,000.00. He also explained that the reduction of his sole income from VA to $113.00 a month resulted in hardship and collection of the debt would cause undue hardship while he was incarcerated and after he was released; he indicated that he already lost his home and stated that he would be willing to pay $500.00 per month toward the debt once his full benefit award was restored following his release. A September 2015 decision on waiver of indebtedness from the Committee on Waivers and Compromises (COWC) granted a partial waiver in the amount of $22,800.25, and denied waiver on the remaining $20,000.00. In making this determination, the COWC did not find fraud, misrepresentation, or bad faith on the Veteran’s part. The Board agrees with this determination. The COWC further found that the Veteran was not at fault for creation of the overpayment debt because his spouse notified VA prior to the 61st day of incarceration. The COWC also found repayment would not impair his ability to provide for necessities as his reported income was greater than his expenses and failure to repay the debt would result in unjust enrichment at the government’s expense. COWC determined partial denial of waiver of repayment of the debt was warranted because it would not defeat the purpose of the VA compensation benefits and the decision put heavy weight on lack of financial hardship and resulting unjust enrichment. The partial grant of waiver was due to no fault on the part of the Veteran for the creation of the debt. In cases where there is no fraud, misrepresentation, or bad faith on the Veteran’s part with respect to the creation of the overpayment at issue, waiver is not precluded pursuant to 38 U.S.C. § 5302(a). Rather, the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). The standard of “equity and good conscience” will be applied when the facts and circumstances indicate a need for reasonableness and moderation in the exercise of the Government’s rights. 38 C.F.R. § 1.965(a) (outlining the elements of equity and good conscience as: (1) fault of debtor, where actions of the debtor contribute to creation of the debt; (2) balancing of faults, weighing fault of debtor against VA 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 VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation.). The first and second elements pertain to the fault of the debtor versus the fault of VA. The Board finds that these factors weigh in the Veteran’s favor and agrees with the findings of COWC that the Veteran is not at fault for creation of the debt as his spouse affirmatively and timely notified VA of his incarceration. VA bears fault for delayed processing of the adjustment to his compensation benefits. See 38 C.F.R. § 3.665. The Board notes that COWC has already allowed a partial waiver of the total overpayment debt due to the lack of fault in the amount of $22,800.25. With regard to the third element, the Board finds the evidence does not support a finding that recoupment of the overpayment debt would result in undue hardship when viewing the Veteran’s financial history since the July 2015 DMC first demand letter and in consideration of his future prospects. See Stone v. Derwinski, 2 Vet. App. 56, 58 (1992) (explaining that undue hardship exists where collection, in installments if necessary, would seriously impair the veteran’s ability to provide himself with the necessities of life, including food, clothing, shelter, and medical attention, through examination of his current financial status with attention to his future prospects). A longitudinal review of the Veteran’s financial history since the debt was assessed in 2015 indicates that even though he reported greater monthly income than expenses at the time of the demand letter, due to incarceration he was not receiving the full monthly VA compensation benefits or SSA benefits. At the same time, due to his incarceration, all of his necessities of life were provided for by the State. During the Veteran’s incarceration, claims for apportionment requesting support for the Veteran’s spouse were denied because she failed to show need and a claim for apportionment submitted by the guardian of his dependent children was denied due to lack of evidence. There is conflicting evidence on the status of his dependent children throughout the pertinent appeal period, however, the evidence indicates the Veteran was responsible for child support in the amount of $1019.04 per month during his incarceration and he reported that the children’s legal guardian took some of his property and money during his incarceration. The Veteran reported monthly child support payments accrued during his incarceration and submitted statements relaying an outstanding balance of about $6,800.00 in December 2016; however, the record also reflects that the Veteran subsequently relinquished parental rights and divorced his spouse. The Veteran was released in August 2017 and he contended that he was homeless for an undetermined amount of time directly thereafter. By November 2017, the Veteran submitted a marriage certificate reporting that he remarried. A December 2017 VA notification letter indicated that his compensation benefits were resumed, effective the date of his release, and included additional benefits for his spouse. In February 2018, the Veteran returned another VA Form 5655 that documented monthly income from VA of about $4,000.00 and monthly expenses totaling about $2,700.00. The Veteran also indicated monthly payments on contracts and other debts totaled an additional $1,850.00. Based on his expenses and debts, he contended that his total monthly expenses exceeded income. He also listed assets of two vehicles and reported that he recently purchased a home. He explained that recoupment of his overpayment debt would cause hardship because the VA compensation benefits were his family’s only source of income and contended that he did not personally receive any of the compensation benefits while he was incarcerated that are now subject to collection. Initially, the Board notes that the Veteran requested a payment plan if waiver could not be granted in his February 2018 Financial Status Report and directs him to contact the Debt Management Center (DMC) to address such requests. When viewing the Veteran’s entire financial history, with specific emphasis on his current status, the Board finds collection of the overpayment would not deprive the debtor of basic necessities based on the Veteran’s statements and self-reported VA Form 5655 submissions. Although the Veteran’s financial hardships have fluctuated since the debt was assessed in 2015, to include a potential period of homelessness shortly after his release in November 2017, the Board finds the Veteran’s ability to purchase a home and procure new assets such as two vehicles to be highly probative evidence that recoupment of the overpayment debt does not (and will not) result in undue hardship. Rather, the Veteran’s ability to acquire assets supports a conclusion that his future prospects are not so limited that he would be unable to provide for necessities of life while repaying his debt. Further, the Board notes that the Veteran reported his monthly expenses outweighed his income, in part, due to about $1,800.00 in payments for other outstanding debts but notes that his debts to other creditors do not supersede any responsibility to repay debt to VA. Moreover, the Board rejects the Veteran’s contentions that he did not personally receive any of the compensation benefits that are the basis of this overpayment debt as he reported his disability benefits were used to pay his mortgage and other bills to his benefit. The Board acknowledges the Veteran’s statements that some of his compensation benefits were taken by a third party, which is unfortunate, but notes that does not change the fact that he received money from the government which he was not entitled to and should have known he was not entitled to. In any event, during the time period in question, the Veteran was incarcerated and his needs were taken care of by the State. Additionally, the Board notes that the Veteran has consistently indicated a willingness to pay the overpayment debt, although he requested a postponement of his payments until he was released; he stated in his VA Form 9 that he was not disagreeing with the repayment of the $20,000.00. Further, the Board finds the remaining elements do not weigh in the Veteran’s favor. With regard to the fourth element, the recovery of the debt does in part defeat the underlying objective of the benefit (adequate compensation for loss of working time reflective of the average impairment in earning capacity) as any reduction of disability compensation benefits would. However, when considering the fifth element, the Board finds waiver of recovery of the overpayment would constitute an unjust enrichment to the Veteran because he would be allowed to retain funds to which he was not legally entitled. Finally, with regard to the sixth element, there is no indication that he incurred a legal obligation or changed his position to his detriment in reliance upon the receipt of VA disability compensation benefits. Based on the above, the Board finds the weight of the elements of equity and good conscience are not in the Veteran’s favor. Specifically, the Board finds the lack of undue hardship and resulting unjust enrichment to be highly probative evidence against waiver of the remaining overpayment debt. Stone, 2 Vet. App. at 58 (explaining that the primary consideration in applying the standard of equity and good conscience is whether collection of indebtedness would constitute undue hardship). Although there is no evidence of fault on the part of the Veteran and recovery of the debt does in part defeat the underlying objective of the benefit, he also did not rely on the benefit to his detriment. Overall, the elements in favor of collection outweigh the elements supporting waiver of recovery of the debt, particularly the lack of undue hardship and unjust enrichment. (Continued on the next page) Accordingly, the standard of equity and good conscience may not be applied and waiver of recovery of the remaining overpayment debt in the amount of $20,000.00 is not warranted. The claim is denied. Nathan Kroes Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD A. Odya-Weis, Counsel