Citation Nr: 20006920 Decision Date: 01/28/20 Archive Date: 01/28/20 DOCKET NO. 14-38 852A DATE: January 28, 2020 ORDER The overpayment of education benefits under Title 38, United States Code, Chapter 30 (Montgomery GI Bill (MGIB)) in the calculated amount of $15,876.37 was validly created. The overpayment of education benefits under Title 38, United States Code, Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 was validly created. Waiver of recovery of the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 is denied. REMANDED Entitlement to waiver of recovery of the overpayment of education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 is remanded. FINDINGS OF FACT 1. The Veteran received education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 that he was not legally entitled to keep; the overpayment was not the result of sole VA error. 2. The Veteran received education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 that he was not legally entitled to keep; the overpayment was not the result of sole VA error. 3. The Veteran’s actions in the creation of the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 constitute bad faith. CONCLUSIONS OF LAW 1. The overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 was validly created. 38 U.S.C. §§ 3001-3006, 5112, 5314; 38 C.F.R. §§ 1.911, 3.500, 21.7130, 21.7153. 2. The overpayment of education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 was validly created. 38 U.S.C. §§ 3301, 5112, 5314; 38 C.F.R. §§ 1.911, 3.500, 21.9520, 21.9640, 21.9675. 3. The criteria for waiver of recovery of the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 have not been met. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served on active duty in the United States Army from November 2005 to October 2007, to include service in Iraq. His decorations include the Combat Infantryman Badge. This matter comes to the Board of Veterans’ Appeals (Board) on appeal from determinations by the Department of Veterans Affairs (VA) Regional Office in Muskogee, Oklahoma. In his November 2014 substantive appeal, the Veteran indicated that he wanted to appear at a Board hearing. However, he later withdrew that request in April 2019. 38 C.F.R. § 20.704(e). Overpayment 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; 38 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation (DIC), educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956 (a). VA generally is required to recover erroneous VA payments or overpayment of benefits. See Edwards v. Peake, 22 Vet. App. 57, 59 (2008); 38 U.S.C. § 5314(a) (generally requiring VA to deduct from future benefit payments a debt arising from a person's participation in a VA benefits program); 38 C.F.R. § 1.912a(a) (same); 38 U.S.C. § 5316 (authorizing VA to recover benefits-related debt by bringing a suit if the person fails to appropriately respond to reasonable administrative efforts to collect the debt). Whenever the Secretary finds that an overpayment has been made to a veteran or other eligible person, the amount of such overpayment shall constitute a liability of such veteran or eligible person to the United States. 38 U.S.C. § 3685; Mountford v. Shinseki, 24 Vet. App. 443, 450, n.6 (2011). 1. Whether the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 was validly created The preliminary issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). In other words, before deciding a request for waiver, VA must first consider the validity of the debt. See also 38 U.S.C. § 5314(b) (prohibiting offset of a debt from future benefit payments unless VA first makes a determination with respect to the beneficiary's dispute of the existence or amount of debt). A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911(c)(1); VAOPGCPREC 6-98. The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. See Schaper, 1 Vet. App. at 434. For a determination that the overpayment was not properly created, such that the debt was not valid, it must be established that the appellant was either legally entitled to the benefits in question or, if the appellant was not legally entitled, then it must be shown that VA was solely responsible for the appellant being erroneously paid benefits. Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27757 (1990). Sole administrative error connotes that the appellant neither had knowledge of nor should have been aware of the erroneous award. Further, neither the appellant's actions nor his or her failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C. § 5112(b)(9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments were erroneous. When an administrative error or error in judgment by VA is the sole cause of an erroneous award, the award will be reduced or terminated effective the date of last payment. 38 C.F.R. § 21.9635(r). If fault for an overpayment cannot "clearly be ascribed to the beneficiary," VA's policy is to assume that fault and not create a debt against the beneficiary. Dent v. McDonald, 27 Vet. App. 362, 380 (2015) (citing VAOPGCPREC 2-90 (March 1990)). However, when both VA and the beneficiary are partially at fault, the debt based on the effective date of reduction or discontinuance of benefits is properly created. See Jordan v. Brown, 10 Vet. App. 171, 174 (1997). Chapter 30 (MGIB) sets forth provisions to allow for educational assistance for members of the Armed Forces after their separation from military service. See 38 U.S.C. §§ 3001-3006. VA will pay Chapter 30 educational assistance to an eligible Veteran while he is pursuing approved courses in a program of education. 38 C.F.R. § 21.7130. Here, the overpayment that is the focus of this appeal is not based upon any dispute over whether the Veteran satisfied the basic eligibility criteria for such benefits. In this case, the record reflects that the Veteran received Chapter 30 (MGIB) benefits for a program at a specified beauty school for a period from August 2011 to December 2012. The beauty school in question certified the Veteran’s enrollment during this period, and the record reflects that he was directly paid the education benefits on a monthly basis through November 2012. However, in December 2012, VA contacted the beauty school and was informed that the Veteran had withdrawn from that program of education on December 17, 2011. In light of the foregoing, VA took action which resulted in the creation of an overpayment in the calculated amount of $15,876.37. The Board notes that this action is consistent with the legal requirement that in order to receive educational assistance for pursuit of program of education under Chapter 30 (MGIB), an individual must maintain satisfactory attendance. 38 C.F.R. § 21.7153(c). VA will discontinue educational assistance if the individual does not maintain satisfactory attendance. Id. In addition, VA will not pay benefits under Chapter 30 for a course from which the veteran withdraws or receives a nonpunitive grade (grades that do not count toward graduation) unless the following conditions are met: (1) the veteran withdraws because he is ordered to active duty; or (2) all of the following criteria are met: (i) there are mitigating circumstances; and (ii) the veteran or service member submits a description of the mitigating circumstances in writing to VA within one year from the date VA notifies the veteran or service member that he or she must submit a description of the mitigating circumstances, or at a later date if the veteran or service member is able to show good cause why the one-year time limit should be extended to the date on which he or she submitted the description of the mitigating circumstances; and (iii) the veteran or service member submits evidence supporting the existence of mitigating circumstances within one year of the date that evidence is requested by VA, or at a later date if the veteran or service member is able to show good cause why the one-year time limit should be extended to the date on which he or she submitted the evidence supporting the existence of mitigating circumstances. 38 U.S.C. §§ 3034, 3680; 38 C.F.R. § 21.7139. Examples of qualifying mitigating circumstances include: illness in the individual or his family; family death; an unavoidable geographical transfer resulting from the individual's employment; an unavoidable change in employment conditions; immediate family or financial obligations beyond the individual's control that require him to suspend pursuit of the program of education in order to obtain employment; discontinuance of the course by the school; unanticipated active duty for training; or unanticipated child-care difficulties. 38 C.F.R. § 21.7020. The facts of this case reflect that the overpayment was created because the Veteran received benefits for classes he did not attend, and not that he received benefits for classwork he started, then withdrew. As such, it does not appear that these provisions are applicable. The Veteran has not disputed that he stopped attending the beauty school, nor has he disputed the date of last attendance. Rather, he contends that he was forced to withdraw because the school committed acts of fraud and embezzlement. He submitted evidence documenting that a class action lawsuit was filed against the school due to these actions. Further, he has indicated that he needed the money from his VA education benefits to pay his expenses, and that it was actually reimbursement for student loans he took out to pay the beauty school. Assuming the validity of the Veteran’s contentions regarding the beauty school in question, the Board is sympathetic that he had to deal with such an institution. Nevertheless, the Chapter 30 (MGIB) education benefits he received were for the express purpose of attending classes at the beauty school during this period. He acknowledges that he did not attend classes during this period. Consequently, the Board must find that this overpayment reflects Chapter 30 benefits he was not legally entitled to keep. The Board also finds that VA was not at fault in the creation of the overpayment of Chapter 30 (MGIB) education benefits in this case. As noted above, VA’s actions upon notification from the beauty school in December 2012 that the Veteran stopped attending in December 2011 were consistent with the legal requirements regarding satisfactory attendance. Although the school could have informed VA of the change prior to December 2012, VA had no control over the school in that regard. Certification of enrollment is provided by the education institution in accordance with 38 C.F.R. § 21.7152, and VA received verification of enrollment from the individual claiming such benefits in accord with 38 C.F.R. § 21.7140. The Board further notes that the Veteran has not disputed the calculated amount of the overpayment of $15,867.37. That is to say, he has not disputed that this reflects the amount of Chapter 30 (MGIB) education benefits he received after his last day of attendance in December 2011. The Veteran has contended that the VA has sided with the beauty school and its purported actions of fraud and embezzlement in creating the overpayment. However, VA has taken no position regarding these purported actions by the school. Rather, as noted above, VA finds only that it provided Chapter 30 (MGIB) benefits to the Veteran for classes he did not attend, which has resulted in a liability for which he is ultimately responsible. His contentions of fraud and embezzlement by the beauty school reflect a dispute between him and that school; a dispute to which VA is not a party. In light of the foregoing, the Board finds that VA was not at fault in the creation of the overpayment at issue. For all these reasons, the Board finds that the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 was validly created. Therefore, this aspect of his appeal must be denied. 2. Whether the overpayment of education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 was validly created The governing law regarding eligibility for educational assistance under 38 U.S.C. Chapter 33 (Post-9/11) can be found at 38 U.S.C. § 3301; 38 C.F.R. § 21.9520. Initially, the Board notes that, as with the Chapter 30 (MGIB) overpayment, there is no dispute the Veteran has satisfied the eligibility requirements for Chapter 33 (Post-9/11 GI Bill). Here, the record reflects that Chapter 33 (Post-9/11 GI Bill) benefits were provided for the Veteran for a program at a technical school for a period that occurred from December 2012 to March 2013, to include for tuition, housing allowance, and books and supplies. The record reflects he was initially certified for a total of 13.5 credit hours, which was reduced to 9 hours, then reduced to 4 hours; and that he ultimately withdrew from that coursework on January 7, 2013. In light of the foregoing, VA took action which resulted in the creation of an overpayment in the amount of $3,019.42 (which reflects $2,769.69 for tuition; $131.25 for books and supplies; and $118.48 for housing allowance.). The Board notes that the creation of the overpayment in this case is consistent with the legal requirement that VA will not pay Chapter 33 (Post-9/11 GI Bill) benefits for a course from which the claimant withdraws or receives a nonpunitive grade (grades that do not count toward graduation) unless either the claimant withdraws because he is ordered to active duty; or a situation occurs in which all of the following criteria are met: (i) there are mitigating circumstances; and (ii) the claimant or service member submits a description of the mitigating circumstances in writing to VA within one year from the date VA notifies the claimant or service member that he or she must submit a description of the mitigating circumstances, or at a later date if the claimant or service member is able to show good cause why the one-year time limit should be extended to the date on which he or she submitted the description of the mitigating circumstances; and (iii) the claimant or service member submits evidence supporting the existence of mitigating circumstances within one year of the date that evidence is requested by VA, or at a later date if the claimant or service member is able to show good cause why the one-year time limit should be extended to the date on which he or she submitted the evidence supporting the existence of mitigating circumstances. 38 C.F.R. § 21.9675. Examples of qualifying mitigating circumstances include, but are not limited to: illness of the individual or his family; family death; an unavoidable geographical transfer resulting from the individual's employment; an unavoidable change in employment conditions; immediate family or financial obligations beyond the individual's control that require him to suspend pursuit of the program of education in order to obtain employment; discontinuance of the course by the school; unanticipated active duty for training; or unanticipated child-care difficulties. 38 C.F.R. § 21.9505. No such mitigating circumstances have been identified by the Veteran in this case, or otherwise demonstrated by the record. The Board also notes that there are different rates of payment for education assistance under Chapter 33 based upon the number and types of credit hours pursued by a claimant. See 38 C.F.R. § 21.9640. Th Veteran has not disputed the aforementioned reduction of and ultimate withdrawal from the program he was pursuing at the technical school during the period in question. Further, he as not contended that the calculated amount of the Chapter 33 (Post-9/11 GI Bill) overpayment was in error. He also does not contend VA was at fault in the creation of the overpayment, nor is such otherwise demonstrated by the record. For all these reasons, the Board finds the Veteran received education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated amount of $3,019.42 that he was not legally entitled to keep, and it was not the result of sole VA error. Therefore, the overpayment was validly created, and this aspect of his appeal must also be denied. 3. Entitlement to waiver of recovery of overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 Recovery of overpayment of any benefits made under 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 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. §§ 1.963(a). However, if there is an indication of fraud, misrepresentation, or bad faith in the creation of the overpayment, waiver of the overpayment is precluded. See 38 U.S.C. §§ 5302(a); 38 C.F.R. §§ 1.962, 1.963, 1.965. Bad faith is defined as "a willful intention to seek an unfair advantage." Richards v. Brown, 9 Vet. App. 255, 257-58 (1996). The provisions of 38 C.F.R. § 1.965(b)(2) define bad faith as an unfair or deceptive dealing by one who seeks to gain thereby at another's expense. If there is no evidence of fraud, misrepresentation or bad faith, then a request for a waiver will be adjudicated under the standard "equity and good conscience." This standard will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government's rights. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving 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 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 the VA 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. 38 C.F.R. § 1.965(a). In this case, the agency of original jurisdiction (AOJ) denied waiver of the overpayment at issue because it was determined the Veteran’s actions in the creation of the overpayment of education benefits under Chapter 30 (MGIB) in the calculated amount of $15,876.37 constituted bad faith. The Board concurs with that determination. As discussed above, the Veteran received monthly payments of Chapter 30 (MGIB) education benefits when he was not attending the classes for which he was being paid benefits. The Board acknowledges his contentions regarding the beauty school, as well as his report that he needed the money to pay his expenses. However, those contentions do not change the fact that the benefits in question were paid for the specific purpose of attending classes. As such, he knew he was keeping benefits that were not being used for their intended purpose. Moreover, he did not report the change in his program to VA. As noted above, the Veteran’s contentions regarding the purported acts of embezzlement and fraud by the beauty school reflect a dispute between him and the school. VA is not a party to that dispute. In light of the foregoing, the Board finds that the Veteran’s actions in the creation of the overpayment were in bad faith. Accordingly, his request for waiver must be denied without further regard to principles of equity and good conscience. REASONS FOR REMAND Entitlement to waiver of recovery of the overpayment of education benefits under Chapter 33 (Post-9/11 GI Bill) in the calculated among of $3,019.42 is remanded. The Veteran has contended that recovery of the overpayments addressed by this appeal would result in financial hardship. For the reasons stated above, the Board has found that his actions in the creation of the Chapter 30 (MGIB) overpayment constituted bad faith. However, the record does not reflect that his actions in the creation of the Chapter 33 (Post-9/11 GI Bill) overpayment constituted fraud, misrepresentation, or bad faith. Thus, the Board must address whether waiver of the Chapter 33 overpayment is warranted pursuant to standards of equity and good conscience. The Veteran submitted a Financial Status Report in May 2014 which reflected that his monthly expenses exceeded monthly income by approximately $131, and that he could reportedly pay $100 per month towards the overpayment. However, he subsequently submitted additional evidence in November 2014 which reflected that his financial situation had become worse. No updated financial status report appears to have been submitted since the one in May 2014. A remand is required to obtain updated information. This matter is REMANDED for the following action: 1. Ask the Veteran to complete and submit updated Financial Status Reports covering the period from 2014 to the present. 2. After completing the above, and any additional development deemed necessary, readjudicate the matter of whether a waiver of the Chapter 33 (Post-9/11 GI Bill) overpayment is warranted in this case in accord with the principles of equity and good conscience. If any portion of benefit sought on appeal remains denied, the Veteran and his representative should be issued a supplemental statement of the case. An appropriate period of time should be allowed for response. DAVID A. BRENNINGMEYER Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board[Author] John Kitlas, Counsel 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.