Citation Nr: 20003229 Decision Date: 01/14/20 Archive Date: 01/14/20 DOCKET NO. 19-04 507 DATE: January 14, 2020 ORDER Entitlement to waiver of recovery of an overpayment of the Department of Veterans Affairs (VA) compensation benefits in the amount of $5,103.97 is granted. FINDINGS OF FACT 1. The Veteran was incarcerated for a felony on March 2, 2015. VA was notified of his incarceration on March 11, 2015 and June 24, 2015. 2. The Veteran did not commit fraud, misrepresentation, or bad faith in the creation of the debt. 3. Recovery of the overpayment would subject the Veteran to undue hardship and would be against equity and good conscience. 4. A waiver of the debt would not result in unjust enrichment to the Veteran. CONCLUSION OF LAW The criteria for entitlement to a waiver of recovery of overpayment of VA compensation benefits have been met. 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965, 3.666(e). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from June 1998 to July 2004. In his April 2017 Notice of Disagreement, the Veteran, through his representative, requested a line-by-line audit of his debt. It does not appear that a paid and due audit of the Veteran’s account was associated with the claims file. However, because this is a full grant of the benefit sought on appeal, this is nonprejudicial to the Veteran. See Waterhouse v. Principi, 3 Vet. App. 473 (1992). The Board acknowledges that the Veteran submitted a Rapid Appeals Modernization Program (RAMP) opt-in election form that VA received on November 19, 2018. However, VA determined that the appeal did not qualify for processing under RAMP. Accordingly, the Board will undertake appellate review of the case in the legacy review system. A Veteran has the right to dispute the existence and amount of the debt. 38 C.F.R. § 1.911(c). In determining whether a waiver of overpayment is appropriate, the inquiry is focused on three distinct questions. First, VA must determine if the overpayment at issue was validly created. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided). The term “overpayment” refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. See 38 U.S.C. § 5302; 38 C.F.R. § 1.962. Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation. If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(b); see also Ridings v. Brown, 6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate). Finally, if VA determines that the debt is valid, and that fraud, misrepresentation, and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. See 38 U.S.C. § 5302(b); 38 C.F.R. §§ 1.962, 1.963, 1.965. A. Validity of Debt The law limits the payment of compensation to persons incarcerated for a felony conviction. The law specifically provides, in relevant part, that any person entitled to compensation who is incarcerated in a state penal institution for a period in excess of 60 days for the conviction of a felony committed after October 7, 1980 shall not be paid such compensation for the period beginning on the 61st day of such incarceration and ending on the day such incarceration ends. In the case of a veteran with service-connected disability rated at 20 percent or more, he shall not be paid an amount in excess of the rate under 38 U.S.C. § 1114(a), which is at the rate of 10 percent. 38 U.S.C. § 5313; 38 C.F.R. § 3.665. Analysis The Veteran seeks a waiver of indebtedness for an overpayment in the amount of $5,103.97. The Veteran was granted disability benefits for service-connected disabilities and assigned a 30 percent rating effective July 17, 2004. He was subsequently incarcerated. The Veteran’s overpayment debt is due to the retroactive adjustment of his disability compensation benefits from May 2, 2015, i.e., the 61st day following confinement for conviction of a felony on March 2, 2015. See 38 C.F.R. § 3.665. The record shows, and the Veteran does not dispute, that he was incarcerated for a felony conviction from March 2, 2015. The Board notes there can be no dispute that the Veteran was not legally entitled to benefits beginning the 61st day of his incarceration. See 38 C.F.R. § 3.666. However, for a valid debt to be created, the overpayment must not have been solely due to administrative error. As will be explained below, the evidence does indicate that VA bore some fault in the creation of the overpayment; however, the evidence does not reflect that VA was solely responsible for the erroneous payment of excess benefits. Hence, the Board concludes that the debt was validly created debt. B. Waiver Despite the validity of the overpayment debt, the Veteran may still receive a waiver for the debt created. 38 C.F.R. § 1.962. Recovery of overpayments of any benefits made under the laws administered by VA shall be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver and if the recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963(a), 1.965. In this case, the Board has not found any evidence of fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the overpayment. The next question is whether the facts dictate that a waiver should be granted under the standard of “equity and good conscience.” The phrase “equity and good conscience” means the arrival at a fair decision between the obligor and the Government. In making this determination, consideration will be given to the following elements (which are not intended to be all-inclusive): (1) fault of the debtor, (2) balancing of faults between the debtor and VA, (3) undue hardship of collection on the debtor, (4) defeat of the purpose of an existing benefit to the appellant, (5) unjust enrichment of the appellant, and (6) whether the appellant changed positions to his or her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302; 38 C.F.R. § 1.965(a). The first and second elements pertain to the fault of the debtor versus the fault of VA. Here, the Board finds that VA is partially at fault in the creation of the overpayment. On March 11, 2015, the Veteran’s former spouse informed VA that the Veteran was convicted of crimes and was sentenced to 60 years in prison with possible parole in 30 years. On June 27, 2015, the Veteran’s mother notified VA that the Veteran had been incarcerated and had a prospective release date of March 2045. Although VA was notified of the Veteran’s incarceration in 2015, the Veteran’s benefits were not reduced until February 24, 2017. Therefore, the Board finds that VA is partially at fault for the creation of the debt. The Board finds no indication that collection of the overpayment would defeat the purpose of an existing benefit. Additionally, there is no indication that the Veteran detrimentally changed his position in reliance on the overpayment. However, the Board finds that collection of the debt would cause the Veteran undue financial hardship. In April 2017, the Veteran submitted a Financial Status Report in which he indicated net household monthly income totalling $133.17. The Board notes in February 2017, VA granted the Veteran’s ex-spouse’s request for apportionment in the amount of a $353.00 effective March 11, 2015; $343.00 effective October 1, 2005; $330.00 effective July 9, 2017; and $306.00 effective July 1, 2019. As such, the Veteran’s total net household income was $539.75 effective March 11, 2015; 487.75 effective October 1, 2015; $488.97 effective December 1, 2016; $464.97 effective July 9, 2017; and $440.97 effective July 1, 2019. The Veteran’s living expenses including food, clothing, OTC medication, and hygiene totaled $329.00. Additionally, the Veteran’s monthly payments on installment contracts and other debts were pass due and totaled $152,715.00. His credit cards were in collections, and his child support payments had increased since March 2015. The Board finds that this indicates that collection of the debt would impair the Veteran’s ability to provide for basic necessities and result in undue hardship. As such, any unjust enrichment concerns are outweighed by the undue hardship that the Veteran would suffer as a consequence of repayment. After weighing all of the equities involved, the Board finds that recovery of the overpayment from the Veteran would be against equity and good conscience. Thus, the Veteran’s request for waiver of recovery of the overpayment is granted. MICHAEL LANE Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board T. Moore The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential, and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.