Citation Nr: 18157673 Decision Date: 12/14/18 Archive Date: 12/13/18 DOCKET NO. 17-21 198 DATE: December 14, 2018 ORDER A declared debt in the amount of $1,560, resulting from the overpayment of VA compensation benefits, was not properly created. REMANDED The question of whether the declared debt and the subsequent apportionment were calculated correctly is remanded. FINDING OF FACT Because the Veteran’s compensation benefits were retroactively apportioned to his ex-wife for the support of his minor sons while he is in prison, no debt should have been created. CONCLUSION OF LAW A debt resulting from the overpayment of VA compensation benefits in the amount of $1,560, was not properly created. 38 U.S.C. §§ 5313, 5313B; 38 C.F.R. § 3.665. REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from December 1990 to February 1994. Service connection for residuals of bilateral knee injuries was granted effective upon his discharge from service and 10 percent disability ratings for each knee were assigned at that time. The Veteran has thus been awarded a combined 20 percent disability rating since March 1994. At issue is a debt declared in June 2015 in the amount of $1,560, resulting from overpayment of VA compensation benefits while the Veteran was incarcerated. Not on appeal here is a separate debt declared in June 2016 in the amount of $50. Governing law and regulation prohibits the payment of the full rate of VA compensation to a Veteran who is incarcerated in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony beginning the 61st day of incarceration. 38 U.S.C. §§5313, 5313B; 38 C.F.R. §3.665(a). The maximum rate of compensation which may be paid to a Veteran under these conditions is 10 percent. 38 U.S.C. § 1114(a); 38 C.F.R. § 3.665. However, recognizing that VA benefits often support entire families, the law allows for apportionment of these benefits to the Veteran’s spouse, child or children and dependent parents based on individual need. 38 C.F.R. §3.665(e). The Veteran was confined to prison for the commission of a felony in March 2014. The RO was notified of his incarceration in December 2014. In March 2015, the RO notified the Veteran of the legal requirement that his benefits must be reduced in light of his incarceration, and also of the possibility that the remainder of his benefits could be apportioned for the benefit of his family. The Veteran requested an apportionment of his compensation benefits in May 2015. The VA’s Debt Management Center calculated the overpayment in VA compensation benefits as $1,560, and notified the Veteran of his declared debt in a June 2015 letter. In June 2015, the RO informed the Veteran that VA was implementing the reduction of his compensation payments. The June 2015 letter is confusing, however, as it provides two different schedules for the implementation. In a table at the beginning of the letter it is indicated that the incarceration adjustment (essentially withholding one half of his monthly compensation payment) would be implemented effective in February 2014. However, in the text of the letter, the RO states that because the Veteran’s first full date of confinement following conviction was in March 2014, his compensation benefit reduction would be implemented in May 2014. As he was incarcerated in March 2014, the text of the letter appears to be accurate, rather than the information contained in tabular form. After developing additional evidence to support the Veteran’s request for an apportionment, in June 2016, the RO granted a special apportionment of the Veteran’s compensation benefits to benefit his two young sons. The letter informing the Veteran of this grant explained that the apportionment of the remainder of his VA compensation would be paid to his ex-wife, for the benefit of his sons. The letter further indicated that the apportionment would be back-dated to begin in May 2014 and would end when his younger son turned 18 years of age, or when the Veteran was released from incarceration, whichever event would occur earlier. Thus, withholding of part of the Veteran’s compensation due to his incarceration should have begun in May 2014. The apportionment should have been effective in May 2014 as well. In an ideal world, all of this would have happened within the first two months of the Veteran’s incarceration, so that the monetary adjustments would have occurred in May 2014. In the real world, in which VA compensation is administered, however, the process took more time, as the VA was notified of the Veteran’s incarceration in December 2014, the Veteran requested an apportionment in May 2015, and the VA approved the apportionment in June 2016. Therefore, all of these calculations occurred retroactively. The Veteran’s compensation was reduced effective either in February 2014 or May 2014, while the apportionment was not granted until June 2016. When it was granted, however, the apportionment was made effective in May 2014, meaning that the Veteran’s family should have received a retroactive payment representing at least twenty-five months of benefits. The intention of Congress in these cases is that a timely-filed request for apportionment upon incarceration will provide benefits to help support families of incarcerated Veterans. While it may seem like a mere bookkeeping technicality, these apportionments are necessary to fulfill the intention of Congress, which is to prevent VA compensation payments greater than 10 percent going to incarcerated Veterans, while still supporting the families of those same Veterans. In other words, although the debt declared by the Debt Management Center in June 2015 was valid at the time of declaration; it became invalid when the apportionment was granted. Based on the evidence of record, the Veteran’s reduction for incarceration should have gone into effect on the 61st day of his incarceration, in May 2014. The timely-filed apportionment should have gone into effect on the same day, which should nullify the declared debt. REASONS FOR REMAND The problem in this case was that the declaration of the debt was not coordinated with the apportionment grant. The debt was declared prior to the apportionment, and it does not appear that the part of the agency responsible for collecting the debt was coordinating adequately with those responsible for administering the apportionment. The Veteran continues to argue that the debt should have been voided. Because the Veteran filed a timely request for apportionment, immediately after having been notified of the reduction in his compensation payments, the apportionment paid on behalf of his sons should essentially equal the amount of the reduction of his compensation due to incarceration. As the two amounts should basically be equal, the declared debt should be null, or zero. The Veteran appears to be arguing that there is remaining debt or even that debt which was previously collected should be returned to his ex-wife for the support of his sons. As the record stands currently, it is impossible to tell whether the declared debt was erased by the grant of the apportionment. Therefore, upon remand the RO must determine exactly how much of the debt had been recouped, exactly how much money was due to the Veteran’s sons, and should double-check that the amount of the apportionment has been correctly calculated. If any portion of the now-invalid debt has in fact been recouped, and not repaid to the Veteran’s ex-wife for the benefit of his sons, then this must be straightened out. The total amount of money divided between the Veteran and his sons should equal the total amount of money which would have been paid to the Veteran if he were not incarcerated. Upon remand a thorough audit of the Veteran’s account should be accomplished. First it must be identified exactly when the Veteran’s compensation payments were in fact reduced, given the conflicting information in the June 2015 letter. If the Veteran did not receive his entire 20 percent payment for the months prior to May 2015, then this money should be paid to him. Second, it must be identified how much money was collected after the debt was declared. If this money was not paid as part of a retroactive apportionment lump sum payment, then it should be paid to the Veteran’s ex-wife. In addition to the things which are not adequately documented in the file, such as the amount of the lump sum retroactive apportionment payment, if any, there are several other confusing accounting notes in the Veteran’s file. For instance, two separate compensation and pension award forms dated in June 2016 seem to indicate that two separate debts had been declared and were being recouped; one of $1540 under one son’s name, and the second debt of $1590 under the other son’s name. This situation should be sorted out on remand also, as it indicates VA may be recouping twice the amount of the original debt. For this reason, a review of the exact amount of the original debt should be performed, and documented clearly, to facilitate understanding by the Veteran, his ex-wife, and the Board, if necessary. We hope that these basic accounting matters can simply be handled by better accounting and better communication, however, so that further Board review will not be necessary. The matter is REMANDED for the following action: The appropriate office within VA must review the calculation of the debt, to include determining exactly when the Veteran’s reduction was implemented, how the debt was originally calculated, how much money was due to the Veteran’s sons through the apportionment, and how much money was actually recouped. All discrepancies should be thoroughly investigated, to include whether debt is being recouped from both sons separately. Any additional money found to be due to the Veteran’s sons should be promptly paid. These calculations must be transparent and easily-reviewable by the Veteran, his ex-wife, and the Board. ROBERT C. SCHARNBERGER Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD Heather J. Harter