Citation Nr: 21004056 Decision Date: 01/25/21 Archive Date: 01/25/21 DOCKET NO. 15-40 979A DATE: January 25, 2021 ORDER Entitlement to a waiver of indebtedness for an overpayment against the Veteran's account in the amount of $1,690.43, to include whether the creation of the debt was valid, is denied. FINDINGS OF FACT 1. The Veteran’s disability compensation was reduced by half from the 10 percent rate effective April 6, 2013 due to incarceration in excess of 60 days for a felony. The Regional Office effectuated the change in compensation in June 2015. This action resulted in the creation of an overpayment in the amount of $1,690.43. 2. A waiver of indebtedness for the recovery of the overpayment is not warranted based on the standard of equity and good conscience. CONCLUSION OF LAW The criteria for a waiver of indebtedness for an overpayment against the Veteran’s account in the amount of $1,690.43, to include whether the creation of the debt was valid, have not been met. 38 U.S.C. §§ 5107, 5302, 5313; 38 C.F.R. §§ 1.911, 1.962, 1.963, 1.965, 3.500, 3.665. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty in the U.S. Army from November 1985 to November 1988 and from November 1989 to December 1991. This matter comes before the Board of Veterans’ Appeals (Board) on appeal from an August 2015 decision issued by the Department of Veterans Affairs (VA) Committee on Waivers and Compromises (COWC). The claim was denied in a January 2019 Board decision. The Veteran appealed to the United States Court of Appeals for Veterans Claims (Court). A Memorandum Decision was issued in March 2020 vacating the January 2019 Board decision and remanding for compliance with the terms of the Memorandum Decision. The case has now been returned for further appellate consideration. The Board has limited the discussion below to the relevant evidence required to support its finding of fact and conclusion of law, as well as to the specific contentions regarding the case as raised directly by the Veteran and those reasonably raised by the record. See Scott v. McDonald, 789 F.3d 1375, 1381 (Fed. Cir. 2015); Robinson v. Peake, 21Vet. App.545, 552 (2008). 1. Entitlement to a waiver of indebtedness for an overpayment against the Veteran's account in the amount of $1,690.43, to include whether the creation of the debt was valid, is denied. The March 2020 Memorandum Decision directed attention to the statement of reasons or bases in the January 2019 Board decision. Specifically, the Court determined that the Board’s discussion was inadequate as it cited 38 C.F.R. § 3.660 (a) for its conclusion that if not waived, retroactive discontinuances of benefits are subject to recovery. The Court determined that, as the Veteran is incarcerated, the Board’s reliance on 38 C.F.R. § 3.660 was in error, and that the Board should have cited 38 C.F.R. § 3.665. The Veteran seeks a waiver of indebtedness for an overpayment against his account in the amount of $1,690.43, to include whether the creation of the debt was valid. For the reasons that follow, the Board finds that the creation of the debt was valid and a waiver of indebtedness is not warranted. Under pertinent VA laws and regulations, any individual who is entitled to compensation or to dependency and indemnity compensation and who is incarcerated in a Federal, State, local, or other penal institution or correctional facility for a period in excess of sixty days for conviction of a felony shall not be paid such compensation or dependency and indemnity compensation, for the period beginning on the sixty-first day of such incarceration and ending on the day such incarceration ends, in an amount that exceeds (A) in the case of a veteran with a service-connected disability rated at 20 percent or more, the rate of compensation payable under section 1114 (a) of this title; or (B) in the case of a veteran with a service-connected disability not rated at 20 percent or more or in the case of a surviving spouse, parent, or child, one-half of the rate of compensation payable under section 1114 (a) of this title. 38 U.S.C. § 5313 (a); 38 C.F.R. § 3.665 (a). The evidence shows the Veteran was incarcerated on February 5, 2013 in a state correctional facility following conviction for a felony. The sixty-first day following his incarceration was April 6, 2013. In a June 2015 decision, the Regional Office retroactively reduced his VA compensation benefit of 10 percent by half effective the sixty-first day of incarceration. This action resulted in the creation of an overpayment in the amount of $1,690.43. The Veteran remains incarcerated. Based on consideration of all evidence, the Board finds the creation of the debt was valid. The Veteran does not dispute that he was convicted of a felony and incarcerated from February 5, 2013. He remained incarcerated from April 6, 2013 through June 2, 2015, the period for which his overpayment relates. During this period, he received the full amount of his VA compensation benefits; however, under VA law and regulations, he was only entitled to a reduced amount of benefits. The retroactive reduction in VA compensation benefits, effectuated by a June 2015 decision, created the overpayment and debt. As outlined above, VA had legal authority to take such action. The Board acknowledges VA received correspondence from the Veteran in April 2013 indicating he was incarcerated and providing additional relevant information. As the Veteran has asserted, this was timely notice of his incarceration and VA failed to amend his benefits in accordance with the law for the following two years. This administrative delay, however, does not constitute sole administrative error such that the creation of the debt would be considered invalid. 38 U.S.C. § 5112(b)(10); 38 C.F.R. § 3.500 (b)(2). The Veteran had, at least, prior constructive knowledge of the law concerning his VA compensation benefit, and his failure to return the monies he was not entitled to constituted an act of omission. 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); see Dent v. McDonald, 27 Vet. App. 362, 380 (2015) (knowledge can be actual or constructive); January 2006 notice letter (Informed Veteran of compensation award and included an enclosed VA Form 21-8764, informing him that incarceration for a period in excess of 60 days would result in a reduction of compensation benefits). The Board is without authority to grant benefits on the basis of equity. 38 U.S.C. §§ 503, 7104; Harvey v. Brown, 6 Vet. App.416 (1994). The actions taken by VA were in accordance with the facts and law relevant to the appeal. There is no reasonable doubt to be resolved. 38 U.S.C. § 5107(b); 3 8C.F.R. § 3.102. The creation of the debt against the Veteran’s account in the amount of $1,690.43 was valid. The recovery of overpayment of any benefits shall be waived if collection of such indebtedness would be against equity and good conscience and 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. 38 U.S.C. § 5302; 38 C.F.R. § 1.963(a). In determining whether collection of the indebtedness is against equity and good conscience, consideration will be given to the following elements, which are not intended to be all-inclusive: (1) Fault of the debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing fault of the 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. 38 C.F.R. § 1.965 (a)(1)-(6). Based on a review of all evidence of record, the Board finds that a waiver of the $1,690.43 debt is not warranted. There is no evidence demonstrating that the indebtedness resulted from fraud, misrepresentation, or bad faith on the Veteran’s part. Therefore, a waiver of indebtedness is not precluded. 38 C.F.R. §§ 1.963, 1.965. The Board will apply the standard of equity and good conscience. The actions of the debtor caused the creation of the debt. He was convicted of a felony and incarcerated in excess of 60 days. While he did inform VA of the conviction and subsequent incarceration, he continued to collect and hold the monies to which he no longer had a legal right. VA did bear some fault in the creation of this debt based on an approximate two-year administrative delay in adjusting the compensation benefit. Nonetheless, the majority of the fault does lie with the debtor based on his actions. Collection of the debt would not cause undue hardship. The Veteran submitted a financial status report. It showed a total monthly net income of $146.19 and total monthly expenses of $66.64, resulting in monthly net income less expenses of $79.55. The Board acknowledges that in monthly net income the Veteran used his VA compensation amount prior to reduction. Changing the original amount of $133.17 to $66.58, his reduced amount, results in a monthly net income of $79.60. In his June 2015 waiver request, he also identified his net monthly salary as $6.19. This is less than the $13.02 he identified in his financial status report. Further adjusting his net monthly income by this figure leads to a total $72.77. This amount still exceeds his listed total monthly expenses, notwithstanding that they should also be adjusted downward by $13.52 to account for the fact that they include payments on a debt based on a percentage of VA compensation benefits, which were reduced. In sum, the above information shows the Veteran has sufficient liquid assets to retire the debt and not deprive him of basic necessities, particularly when many of which are provided by the state penal institution. Recovery of benefits would not defeat the purpose for which they were intended because the Veteran continues to be imprisoned and his basic necessities are furnished by the State at taxpayer expense. This is notwithstanding that, per his statement, he still has to contribute some monies to purchase soap, razors, shampoo, etc. Failure to make restitution to the government would result in unfair gain to the debtor because he was not entitled to receive that compensation by virtue of his incarceration in excess of 60 days for conviction of a felony. Lastly, there is no indication the Veteran changed his position to his own detriment based on reliance of VA benefits. The factors set forth in 38 C.F.R. § 1.965 (a) have been assessed in a holistic analysis and considered relative to one another. The factors largely weigh against the application for a waiver, and any potential financial hardship or change of position is not of such a degree to outweigh the other factors and warrant a waiver of the debt. Accordingly, the application for a waiver of $1,690.43 is denied. (continued on next page) TANYA SMITH Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board T. Bynum, Associate 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.