Citation Nr: 20005680 Decision Date: 01/28/20 Archive Date: 01/27/20 DOCKET NO. 19-22 366A DATE: January 28, 2020 ORDER Entitlement to waiver of recovery of an overpayment of the Department of Veterans Affairs (VA) compensation benefits in the amount of $34,657.93 is granted. FINDINGS OF FACT 1. The Veteran was incarcerated for a felony on August 27, 2015. VA was notified of his incarceration on January 8, 2016. 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 FINDING AND CONCLUSION The Veteran served on active duty from May 1972 to June 1974. 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 Under 38 C.F.R. § 3.666, no pension shall be paid to (or for) a veteran who has been imprisoned in a Federal, State, or local penal institution as a result of conviction of a felony or misdemeanor for any part of the period beginning sixty-one days after such individual’s imprisonment begins and ending when such individual’s imprisonment ends. 38 U.S.C. § 1505; 38 C.F.R. § 3.666. Pension will be resumed as of the day of release if notice is received within one year following release; otherwise, resumption with be effective the date of receipt of such notice. 38 C.F.R. § 3.666(c). Analysis The Veteran seeks a waiver of indebtedness for an overpayment in the amount of $34,657.93. The Veteran was granted disability pension benefits effective February 1, 2001. He was subsequently incarcerated. The Veteran’s overpayment debt is due to the retroactive adjustment of his pension benefits from October 27, 2015, i.e., the 61st day following confinement for conviction of a felony on August 27, 2015. See 38 C.F.R. § 3.665. In his March 2018 Statement in Support of Claim, the Veteran stated that he was innocent of the charges, was in the process of appealing the conviction, and was granted an evidentiary hearing in May 2018 to overturn the conviction. However, to date, he has not submitted documentation indicating that the conviction has been overturned. As such, the Board finds that the Veteran was incarcerated for a felony conviction from August 27, 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 debt. On January 8, 2016, VA and SSA State Prisoner Computer printout revealed that the Veteran was incarcerated from August 27, 2015. Although VA was notified of the Veteran’s August 2015 incarceration in January 2016, the Veteran’s benefits were not reduced until July 18, 2018. As such, 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 September 2018, the Veteran submitted a Financial Status Report in which he indicated net household monthly income totalling $8.50 and $5 cash in the bank. The Board notes that the Veteran’s total household income, to include VA benefits was $133.17 effective October 27, 2015; $136.24 effective December 1, 2016; and $140.05 effective December 1, 2018. The Veteran had no expenses; however, he stated that he used his VA benefits to pay bills and purchase items while in prison. The Board also notes that the Veteran’s income consisted entirely of VA benefits in the amount of $133.17. Thus, the collection of the debt could create financial hardship to the Veteran. As VA is partially at fault for the overpayment of disability benefits and considering the other factors including the possibility of undue hardship, the Board finds that waiver of recovery of the overpayment is warranted. 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.