Citation Nr: A21017386 Decision Date: 10/27/21 Archive Date: 10/27/21 DOCKET NO. 210907-184218 DATE: October 27, 2021 ORDER 1. Entitlement to waiver of recovery of debt in the amount to be determined resulting from the overpayment of additional dependent compensation for the period of mid-February 2015 to November 2020 is granted. 2. Entitlement to waiver of recovery of debt from the overpayment of additional dependent compensation for the period from October 2013 to mid-February 2015 is denied. FINDINGS OF FACT 1. The Veteran married his former spouse, J.C., in May 2012, who was added as a dependent for VA compensation purposes. The Veteran divorced J.C. in September 2013. 2. The Veteran did not inform VA at the time of his divorce that he and J.C. were no longer married. 3. The Veteran married his current spouse, A.C., in mid-February 2015 and still is currently married to her. 4. In October 2020, the Veteran submitted a completed VA 21-0538 Mandatory Status of Dependents and in November 2020, he submitted VA Form 21-686c Application Request To Add And/Or Remove Dependents, his marriage certificate to A.C., and divorce decree to J.C. 5. To require recovery of the properly-created debt for the period from mid-February 2015 to November 2020, would be unfair because it would nullify the objective for which the benefits were intended, in part because the Veteran was married during this period. 6. To require recovery of the properly-created debt from October 2013 to mid-February 2015 would be fair, as the Veteran was not married for this period. CONCLUSIONS OF LAW 1. Recovery of the properly-created debt for dependent overpayment for the period from mid-February 2015 to November 2020 would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. 2. Recovery of the properly-created debt for dependent overpayment for the period from October 2013 to mid-February 2015 is not against equity and good conscience. 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 from July 1962 to July 1970. This appeal comes to the Board of Veterans' Appeals (Board) from an August 2021 decision by the Department of Veterans Affairs (VA) Debt Management Center (DMC). In the September 2021 VA Form 10182, Decision Review Request: Board Appeal, the Veteran elected the Direct Review docket. Therefore, the Board may consider only the evidence of record at the time of the agency of original jurisdiction (AOJ) decision on appeal. 38 C.F.R. § 20.301. The Board notes that the VA Form 10182 does not specify which decision the Veteran wished to appeal, but in the body of the argument, the Veteran wrote that he does not mind paying what he owes but he does not feel good about it since he submitted documentation of his divorce, and he was married during a portion of the period and now has to pay it back. This argument is a direct response to the August 2021 DMC decision that denied the Veteran's waiver request on the basis that he did not provide documentation regarding his divorce and that he was responsible for payment of the overpayment. Therefore, the Board finds that it is clear that he wished to appeal the August 2021 DMC decision. Analysis In a January 2003 VA Form, 21-526 Veterans Application for Compensation or Pension, the Veteran reported he was married to S.C. since February 1991. A July 2003 VA letter requested that the Veteran complete VA Form 21-686c, Declaration of Status of Dependents to provide the Veteran and his then spouse's marital history. In the November 2011 VA Form 21-526 Veterans Application for Compensation or Pension, the Veteran reported that he was divorced. In April 2012, the RO granted service connection for ischemic heart disease and assigned a 100 percent disability rating from November 18, 2011. In a notification letter sent to the Veteran at that time, the RO informed the Veteran that he was being paid as a single Veteran with no dependents and requested the Veteran complete and return VA Form 21-686c, Application Request to Add and/or Remove Dependents, to receive additional compensation for any spouses or dependent children. In June 2012, the Veteran submitted a completed VA Form 21-686c in which he reported he was married to J.C. since May 2012, and he provided a copy of the marriage certificate. He also reported that he had a stepchild who was born in January 1999. He reported that he divorced S.C. in October 2008. In August 2012, the Veteran submitted an additional VA Form 21-686c in which he reported his and J.C.'s marital history. In October 2012, the Veteran was informed that J.C. was added to his VA award as a dependent spouse, effective from May 31, 2012, the date of marriage. The Veteran was advised to inform VA right away of any changes in the status of the Veteran's dependents. In August 2013, the Veteran's stepchild was added as a dependent and, again, the Veteran was advised to inform VA right away of any changes in the status of the Veteran's dependents. In September 2020, VA requested the Veteran submit a completed VA Form 21-0538, Mandatory Status of Dependents, to continue to receive payments for his spouse and child. It further advised the Veteran that he must immediately notify VA of any change in his dependents' statuses including divorce, death, a child marrying, or other life-changing event. In October 2020, the Veteran submitted a completed VA Form 21-0538, Mandatory Status of Dependents, in which he reported he was married to A.C. since February 2015. In a November 2020 notification letter, the RO proposed to remove his prior spouse J.C. from his compensation award and that to add A.C. as his dependent spouse, the Veteran was required to submit a completed VA Form 21-686c, Application Request To Add And/Or Remove Dependents. In a December 2020 notification letter, the RO informed the Veteran that his prior spouse would be removed from his award due to their divorce, effective from October 1, 2013. The Veteran was also informed that he was being paid as a single Veteran with no dependents. In November 2020, the Veteran provided a partially completed VA Form 21-686c regarding his current spouse A.C., as it was missing the signature page. A copy of his marriage certificate was provided at that time. A copy of his divorce decree was also provided which confirmed that he divorced J.C. in September 2013. The completed signature page was submitted in December 2020. In a January 2021 notification letter, the Veteran was informed that A.C. was added as a dependent from November 21, 2020. In February 2021, the Veteran filed a VA-Form 20-0995, Decision Review Request: Supplemental Claim, requesting review of the January 2021 notification letter regarding the effective date of the addition of his spouse, A.C., as a dependent. He also provided a statement that he divorced his prior spouse in 2013 and married A.C. in February 2015. In May 2021, the Veteran filed VA Form 20-0996, Request for Higher-Level Review, requesting review of the December 2020 notification letter that removed the Veteran's prior spouse from his award effective September 2013. He wrote that he was seeking credit for his marriage to A.C. from 2015. In a June 2021 letter from the DMC, the Veteran was informed that he was overpaid in the amount of $14,413.66. The Veteran was informed that he could dispute the debt or request a waiver; and request an extended monthly recoupment plan with a financial status report. In response, in July 2021, the Veteran wrote that he submitted the proper documentation to inform VA that he was divorced. He reported that he waited a couple months and submitted a letter informing VA of his divorce and that if this information was received at the wrong office, to please forward it to the correct office. He wrote that if he owes some money, he would like to settle the debt. He reported that he believes VA made an error and therefore he should not have to pay for the debt. He requested a waiver and included a financial status report. The Veteran reported his household monthly net income was $7,880.00 and monthly expenses of $7,728.00. This leave a monthly net income of $152.00. In July 2021, the RO issued an HLR decision that determined the effective date of dependency benefits for spouse A.C. was proper. In September 2021, the Veteran filed a Board appeal on VA Form 10182 Notice of Disagreement. In August 2021, the DMC explained the $14,589.09 was created December 1, 2020 for the period of October 1, 2013 through November 30, 2020. The DMC explained the debt resulted due to retroactive removal of the divorced spouse. The DMC noted the Veteran is 77 years old with a dependent spouse and review of the Financial Status Report shows that all the monthly income appears to be listed on the form. The DMC determined the claimed expenses seem reasonable and necessary and noted the monthly income exceeds monthly expenses by $2,116.00. The DMC noted the Veteran reported $300.00 in cash assets and five monthly installment debts and determined the future income potential appeared very good. The DMC denied the waiver request and explained there was no finding of fraud, misrepresentation, or bad faith on the part of the claimant and therefore the waiver decision was based on the elements that assist in defining the principles of equity and good conscience and that based on 38 C.F.R. § 1.965. The DMC determined the Veteran was at fault in the creation of this debt because, as a recipient of VA compensation benefits, it was the Veteran's responsibility to immediately report any changes in the status of his dependent spouse to ensure that his monthly benefit amount was properly adjusted by VA. The DMC explained that the Veteran's failure to inform VA in a timely manner resulted in an unjust enrichment at government expense. The DMC acknowledged the Veteran's statement that he informed VA of his divorce from J.C. at the time, but a review of the claim file showed no record of the Veteran notifying VA of the divorce. The DMC determined that the establishment of a monthly debt repayment plan will not cause financial hardship based on the Veteran's financial status report and the repayment of this debt will not defeat benefit purpose. The DMC noted that the changed position standard was not found in this case. 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 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. The U.S. Court of Appeals for Veterans Claims has defined bad faith 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. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government. 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 Board has not found evidence of fraud, misrepresentation, or bad faith on the part of the Veteran in creation of the overpayment debt. The record does not show a willful attempt to gain an unfair advantage. The Veteran was at most negligent in failing to inform VA of his divorce and remarriage, which amounted to a year and four months without a spouse-dependent. Therefore, the question is whether or not a waiver should be granted under the standard of "equity and good conscience." Looking to the several factors listed in 1.965(a), the Board finds that recovery of the overpayment would nullify the objective for which the benefits were intended and would not result in unjust enrichment of the Veteran. 38 C.F.R. § 1.965(a). While VA was not notified of the change in the Veteran's particular dependents until October 2020, the Veteran was married for all but one year and five months, from September 2013 to mid-February 2015, and was eligible to receive compensation for his spouse/dependent from mid-February 2015 and thereafter. The purpose of dependency compensation is to provide for the Veteran's spouse. Therefore, collecting debt when the Veteran had a spouse would defeat the purpose of the spouse-dependent compensation. Further, given that the Veteran reported a current monthly net income of $152.00 after monthly expenses are paid, collection of the overpayment may cause undue hardship of collection on the Veteran. Additionally, the Veteran would not be unjustly enriched if the overpayment debt from mid-February 2015 to November 2020 were to be waived, because he was married and entitled to this compensation. Therefore, waiver of overpayment is granted, except for the period between his marriages from September 2013 to mid-February 2015. This represents a grant of the full benefit of the waiver of overpayment that the Veteran sought on appeal as the Veteran acknowledged that he was married for the entire period except from September 2013 to mid-February 2015 and he specifically requested that he pay for this period and receive credit for the period that he was married to A.C. See February 2021 correspondence from the Veteran. The Board points out to the AOJ that based on the December 2020, January 2021, and July 2021 Award Print documents, the Veteran's stepchild, M.H., from his previous marriage to J.C. was not removed from his award on the date of his divorce from J.C. It appears M.H. was not removed until January 2017, on her 18th birthday. Therefore, it appears that the Veteran erroneously continued to receive compensation for a dependent child from October 2013 to January 2017 despite being divorced from J.C. since September 2013. Thus, the AOJ should review his compensation award from this period to confirm this is the case and adjust the overpayment waiver granted herein, if deemed appropriate, for the period of mid-February 2015 to November 2020 during the Veteran's marriage to A.C. Finally, the Board notes that the Veteran's supplemental claim for an earlier effective date for the addition of A.C. as a dependent spouse has been pending since February 2021, the receipt date of the supplemental claim, VA Form 20-0995, within one year of the January 2021 notification letter. As the Board has granted a waiver of the overpayment for the receipt of dependency payments for A.C. from mid-February 2015 to November 2020, the issue of an earlier effective date for the addition of A.C. as a dependent spouse is rendered moot because the Veteran cannot receive double compensation for his spouse, A.C., from mid-February 2015 to November 2020. A. P. SIMPSON Veterans Law Judge Board of Veterans' Appeals Attorney for the Board Sarah Campbell, 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.