Citation Nr: 18109167 Decision Date: 06/07/18 Archive Date: 06/07/18 DOCKET NO. 11-24 885 DATE: June 7, 2018 ORDER An overpayment of Department of Veterans Affairs (VA) disability compensation benefits in the amount of $2,606.00, was properly created and waiver of the overpayment is denied. FINDING OF FACT The overpayment was properly created when the Veteran did not inform VA of her divorce, the Veteran was at fault in the creation of the overpayment, and collection of the debt would not constitute an undue hardship or be against the principles of equity and good conscience. CONCLUSION OF LAW The overpayment of VA compensation benefits based on removal of a former spouse as a dependent was properly created, and recovery of this debt would not be against equity and good conscience. 38 U.S.C. §§ 1115, 1135, 5112, 5302 (2012); 38 C.F.R. §§ 1.963, 1.965, 3.401, 3.500 (2017). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from January 1997 to July 1999. 1. Entitlement to waiver of overpayment in the amount of $2,606.00, to include whether the overpayment was properly created. The Veteran has challenged the validity of a debt that has been charged for overpayment of compensation resulting from her failure to timely notify VA of her divorce from her former spouse. She maintains that she never requested additional compensation due to a spouse and that she was already separated from her spouse when she was granted compensation benefits. She further asserts that she was never notified that she needed to inform VA of the status of her dependents. 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. The provisions of 38 U.S.C. § 1115 provide for additional compensation for dependents. The effective date of a reduction of pension or compensation by reason of marriage, annulment or divorce on or after October 1, 1982, or death of a dependent of a payee, shall be the last day of the month in which such marriage, annulment, divorce or death occurs. 38 U.S.C. § 5112(b)(2); 38 C.F.R. § 3.501(d)(2). 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) (2017). With respect to the removal of the former spouse, from the Veteran’s compensation award, VA regulations clearly state that upon a divorce, payment of additional compensation for a veteran’s dependent spouse will be reduced effective the last day of the month in which the divorce occurred. 38 C.F.R. § 3.501(d)(2). In this case, a June 2002 rating decision granted the Veteran service connection for three disabilities and assigned a combined rating of 30 percent, effective from December 21, 2001. In a June 2002 letter, the RO informed the Veteran that she had been awarded additional compensation based on her having a spouse, effective from the payment start date, January 1, 2002. This letter also informed the Veteran that she must let VA know right away if there was any change in the status of her dependents, such as a divorce, to avoid any overpayment. The Veteran did not inform VA of her divorce until August 11, 2010. On that date the RO received notice from the Veteran that she had divorced her spouse on November 29, 2005. Therefore, the Board finds that the removal of the Veteran’s ex-spouse as a dependent from the Veteran’s compensation award, effective December 1, 2005, was proper. The Veteran argues that she was already separated from her husband at the time she was awarded dependency benefits and that VA should never have awarded her additional compensation for a dependent spouse in the first place. The Board notes that regardless of whether she was living with her spouse at the time of the award of VA benefits, she was entitled to additional compensation because she was married. 38 U.S.C. § 1115. As noted above, the Veteran was informed of the award of additional compensation for a dependent spouse at the time the award was promulgated. She was also informed that she needed to report to VA in a timely fashion of any change in dependents, including due to divorce, to prevent an overpayment. The Veteran did not inform VA of her divorce for more than four years. The overpayment created is not shown to be the result of sole administrative error. In order for an overpayment to be the result of sole administrative error, and for the Veteran to consequently not be liable for the debt, the Veteran must not have known, or should not have known, that the benefits in issue were erroneous. A finding of sole administrative error requires not only error on the part of VA, but that the beneficiary be unaware that the payments are erroneous. 38 U.S.C. § 5112(b)(9), (10); 38 C.F.R. § 3.500(b)(2). In this case, the Veteran is shown to have received notice that she must immediately inform VA of any change in the status of her dependents. She is not shown to have notified VA of her divorce prior to August 2010. There is no argument that she was eligible to receive benefits based on a dependent spouse after November 2005. She should have known that, absent providing notice of her divorce to VA, her receipt of benefits based on that dependent spouse was erroneous. In view of the finding that the overpayment was not the result of sole administrative error on the part of VA, the Board finds that the RO’s decision to recoup the debt was proper, as the debt was a valid debt to VA. The earliest evidence that the Veteran notified VA of her divorce is dated in August 2010. The law clearly states that upon a divorce, a veteran’s payment of additional compensation for a dependent spouse will be reduced effective the last day of the month in which such divorce occurred. 38 C.F.R. § 3.501(d)(2). Thus, she should not have continued to receive additional compensation benefits for her dependent spouse after November 30, 2005, the last day of the month she was divorced. See 38 U.S.C. § 5112(b)(2); 38 C.F.R. § 3.501. The amount of the overpayment was determined to be $2,606.00, which was calculated on the amount of additional compensation benefits the Veteran received beginning December 1, 2005, the first day following the month of her divorce, in November 2005, in accordance with 38 C.F.R. § 3.501, and continuing through September 30, 2010. Therefore, the $2,606.00 overpayment was properly created. The Veteran has requested a waiver of the overpayment. In July 2011, VA issued a memorandum affirming the decision to deny the Veteran’s claim for a waiver. It noted that it would not be against the principle of equity and good conscience to require repayment of the debt. It further noted that the evidence indicated that the Veteran had the ability to repay the debt without undue financial hardship. Overpayments created by retroactive discontinuance of an award are subject to recovery if recovery is not waived. Waiver of repayment of indebtedness is statutorily precluded if there is any indication of fraud, misrepresentation of a material fact, or bad faith on the part of the person having an interest in obtaining a waiver. 38 U.S.C. § 5302(c); 38 C.F.R. § 1.965(b). In this case there is no indication of fraud, misrepresentation of a material fact, or bad faith on the part of the Veteran. If the debtor’s conduct is deemed not to have constituted fraud, misrepresentation of a material fact, or bad faith, the request for waiver will be evaluated pursuant to the principles of equity and good conscience found in 38 C.F.R. § 1.965(a). In applying the equity and good conscience standard to a case, the factors to be considered by the adjudicator are: (1) whether actions of the debtor contributed to the creation of the debt, (2) whether collection would deprive the debtor or the debtor’s family of basic necessities, (3) whether recovery of the debt would nullify the objective for which benefits were intended, (4) whether failure to make restitution would result in unfair gain to the debtor, and (5) whether the debtor has changed position to his detriment due to his reliance upon receipt of VA benefits. Additionally, the adjudicator must conduct a “balancing of the faults,” weighing the fault of the debtor against any fault attributable to the VA. 38 C.F.R § 1.965(a). Based on a review of the claims file and having considered the contentions of the Veteran, it is clear that the Veteran was at fault in the creation of the debt because of her failure to notify VA of her divorce in a timely manner. No fault can be attributed to the VA with respect to the creation of the debt. The Board must next consider whether reliance on benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that she had relinquished a valuable right or incurred a legal obligation in reliance on his VA benefits. Another factor to be considered is whether recovery of the overpayment would defeat the purpose for which the benefits are intended. The Board finds that recovery of the debt would not nullify the objective for which benefits were intended. As the Veteran received VA compensation based on a failure to report a change in the number of her dependents, she received benefits to which she was not entitled. Without the benefit of accurate and timely information, the VA is unable to determine whether a veteran meets the eligibility criteria. Therefore, the Board finds that to recover the overpayment of such benefits does not nullify the objective of the payment, as the Veteran did not provide the information which was required to determine her entitlement to the benefits received. In addition, failure to make restitution would result in the Veteran’s unjust enrichment by virtue of the fact that she has retained money to which she was not legally entitled. However, the Board must also consider whether recovery of the debt would result in financial hardship to the Veteran. In January 2011, the Veteran submitted a Financial Status Report (FSR) (VA Form 5655). In that report, the Veteran indicated that she had monthly income of $780 and monthly expenses of $1,116.49 In June 2016 the Board remanded the Veteran’s claim in order to obtain an updated FSR. The Veteran did not respond to a January 2017 letter from the RO requesting that she submit a new FSR. Accordingly, the Board must consider the Veteran’s claim based on the evidence of record. An October 2014 VA letter to the Veteran notes that the Veteran had been awarded $1,366 a month in VA compensation benefits, effective from April 1, 2013. An April 2017 VA letter indicates VA monthly compensation benefits were over $1400 a month. (CONTINUED ON NEXT PAGE)   The issue is whether the recovery of the overpayment deprives a veteran-debtor of basic necessities and thereby results in undue hardship. See 38 C.F.R. § 1.965(a)(3). The Board finds that the withholding of part of the monthly compensation to which she is currently entitled does not cause her undue hardship. The Veteran’s most recent (and only) report of her monthly expenses was $1116.49. Given that her monthly VA compensation benefits are several hundred dollars greater than her reported monthly expenses, the collection of the overpayment would not deprive her of the basic necessities of life. The Board therefore finds that undue financial hardship would not be incurred by the Veteran. Accordingly, the Veteran’s request for a waiver of her overpayment debt must be denied. G. A. WASIK Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD R. E. Jones, Counsel