Citation Nr: 19104167 Decision Date: 01/16/19 Archive Date: 01/16/19 DOCKET NO. 16-42 392 DATE: January 16, 2019 ORDER Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $7,356.00 based on change in dependency status is denied. FINDINGS OF FACT 1. This overpayment was not due to the Veteran’s fraud, misrepresentation or bad faith. 2. The Veteran received compensation benefits for a spouse after his divorce in August 2008, with no fault on his part due to timely notification of the divorce. 3. There is financial hardship; however, the preponderance of the evidence weighs against a finding that financial strain rises to the level of undue hardship. 4. Since the Veteran was not married during the pertinent period, the recovery of the overpayment would not defeat the purpose for which the benefits were intended, namely, payment of additional compensation to support a spouse. 5. Waiver of recovery of the overpayment would constitute an unjust enrichment to the Veteran by paying additional benefits for an individual that was no longer a dependent. 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 $7,356.00 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 April 1980 to April 2004, with service in Southwest Asia. The Veteran’s overpayment debt is due to the retroactive adjustment of his disability compensation benefits from September 1, 2008, due to removal of the Veteran’s former spouse from his award due to divorce. See 38 C.F.R. § 3.4(b)(2) (a veteran in receipt of compensation at the rate of 30 percent or more is entitled to additional compensation for a spouse, children and/or dependent parents). Historically, the Veteran was informed in a September 2005 notification letter that he was being paid VA compensation benefits as a veteran with three dependents, his spouse and two children, and was directed to inform VA right away if there was any change in the status of his dependents. In July 2008, the Veteran submitted an application for compensation benefits that informed VA of his divorce. He also contended that he followed up with VA multiple times to have his divorce be processed via telephone; review of the record also shows he indicated in a September 2009 statement that his primary relationship had ended; a July 2010 report of general information noted the Veteran’s reports that some of his military records included his ex-wife’s social security number, and a December 2012 VA Form 21-686c, declaration of status of dependents, reported he divorced in August 2008. A September 2013 status of dependents questionnaire reported the Veteran’s dependents only included his two children. In an October 2014letter, VA informed the Veteran that his compensation benefits were retroactively reduced due to removal of his spouse, effective September 1, 2008, and notified the Veteran that an overpayment was created. A November 2014 Debt Management Center first demand letter indicated withholding for an overpayment of $11,579.06 would begin in February 2015. The Veteran requested a waiver of recovery of the overpayment debt. The April 2015 decision on waiver of indebtedness on appeal from the Committee on Waivers and Compromises (COWC) did not find fraud, misrepresentation, or bad faith on the Veteran’s part. The Board agrees with this determination. The COWC further did not find evidence the Veteran reported his divorce prior to July 2010, but resolved all doubt in the Veteran’s favor. The COWC noted that even though the Veteran was not at fault, allowing him to retain the benefits that he knew he was not entitled to when he reported his divorce in a timely manner amounted to unjust enrichment at the government’s expense. Further, the COWC found no undue hardship based on the Veteran’s self-reported financial information in a VA Form 5655, Financial Status Report, that showed monthly income exceeded his expenses and reported assets including a car and some savings. In May 2015, the Veteran submitted an updated VA Form 5655 that listed expenses exceeded his income; he explained that he was unemployed, recently purchased a home, and had to support two full-time college students and contended that repayment of his debt was causing hardship on his family. Based on the above, the COWC found continued repayment of the debt would cause some financial hardship in a June 2016 statement of the case and granted waiver for the remaining outstanding balance of $4,223.06, but confirmed that waiver of the previously collected debt in the amount of $7,356.00 would be not be against equity and good conscience. 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 the evidence is at least in equipoise that he affirmatively and timely notified VA of his divorce. VA bears fault for delayed processing of the adjustment to his compensation benefits. See 38 C.F.R. § 3.665. However, the Board finds the remaining elements do not weigh in the Veteran’s favor. With regard to the third element, the Board finds the evidence does not support a finding that collection of the overpayment debt resulted in undue hardship when viewing the Veteran’s financial history since the November 2014 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). Here, the Veteran’s self-reported financial information documented monthly income greater than expenses in November 2014. Even though his updated information in June 2015 indicated his monthly expenses exceeded his income, the expenses included about $1,100.00 in payments for other outstanding contracts and debts. The Board notes that the Veteran’s debts to other creditors do not supersede any responsibility to repay debt to VA. 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 finances fluctuated since the debt was assessed in 2014, the Board finds the Veteran’s ability to purchase a home to be highly probative evidence that the prior collection of the overpayment debt did not (and will not) result in undue hardship. Moreover, the Board notes that COWC has already allowed a partial waiver of the total overpayment debt due to evidence of some financial hardship in the amount of $4,223.06. Although the Veteran indicated in June 2015 that he was unable to contribute any monthly amount toward the debt, the June 2016 partial waiver renders the issue of future payments moot. Therefore, the Board concludes the preponderance of the evidence weighs against a finding that collection of the debt resulted in, or would cause undue hardship. With regard to the fourth element, the recovery of the debt would not defeat the underlying objective of the benefit, paying the additional compensation benefits to support a spouse, as the purpose of paying additional compensation was nullified by his divorce. With regard to 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 that included compensation for a spouse. Based on the above, the Board finds the weight of the elements of equity and good conscience are not in the Veteran’s favor. Although there is no evidence of fault on the part of the Veteran, the lack of undue hardship, no nullification of the purpose for which the benefits were intended, nor any reliance on the benefit to his detriment supports a finding that failure to make restitution would result in unfair gain to the debtor and unjust enrichment at the expense of the government. As such, the elements supporting recoupment of the overpayment debt outweigh the elements in favor of a waiver of recovery, particularly the lack of undue hardship and no evidence that recovery would nullify the objective for which benefits were intended. The Board concludes that recovery would not defeat the purpose for which the disability compensation benefits were intended. Accordingly, the standard of equity and good conscience may not be applied and waiver of recovery of the overpayment debt in the amount of $7,356.00 is not warranted. The claim is denied. Nathan Kroes Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD A. Odya-Weis, Counsel