Citation Nr: 21069385 Decision Date: 11/18/21 Archive Date: 11/18/21 DOCKET NO. 18-28 598A DATE: November 18, 2021 ORDER Entitlement to a waiver of overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $12,118.59, is denied. FINDINGS OF FACT 1. The overpayment was not due to the Veteran's fraud, misrepresentation, or bad faith. 2. Recovery of the debt in this case in the amount of $12,118.59, is not against equity and good conscience. CONCLUSION OF LAW The criteria for a waiver of overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $12,118.59 have not been met. 38 U.S.C. § 5302; 38 C.F.R. § 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty in the U.S. Army from June 1990 to August 1990 and from December 1990 to May 1991. He also served in the U.S. Marine Corps from December 1992 to August 2002. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a June 2017 decision by the Committee on Waivers and Compromises (COWC). Entitlement to a waiver of overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $12,118.59. VA law provides that recovery of overpayment of any benefits 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). The standard "equity and good conscience" 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. 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. 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. See 38 U.S.C. § 5302; 38 C.F.R. § 1.965(a). The Veteran contends that a waiver of recovery for a debt in the amount of $12,118.59, is appropriate because repaying the overpayment would cause undue hardship. Also, he avers that he submitted his divorce decree to VA and 'just like so many other documents, they were never recorded,' so that he should have doubt resolved in his favor for creation of this debt. In addition, he avers that he was on 18 different medications at the time, has a traumatic brain injury (TBI), was going to speech therapy, endured a hard divorce, and underwent Chapter 13 bankruptcy, and that these hardships should be reasons to waive the overpayment. See June 2018 correspondence. The Veteran felt he was set up 'for failure' as VA made 'it very difficult...to respond in the specified time period.' Id. By way of background, the Veteran was awarded VA compensation benefits in a March 2004 rating decision. His combined ratings for his service-connected disabilities were at 90 percent, effective August 16, 2002, and at 100 percent, effective October 3, 2003. A March 2004 notification dated 20 days later informed him of the award and explained that he was paid at the rate set for a veteran with one dependent child, and prior to paying additional benefits for his spouse, he should fill out and return VA Form 21-686c, Declaration of Status of Dependents. Five days later, VA received his VA Form 21-686c that contained information for one dependent child and his dependent spouse at the time. A July 2004 notification letter regarding his claim for an increased evaluation of a service-connected disability informed the Veteran that he was being paid as a veteran with two dependents, which meant his VA compensation payments included an additional amount for his spouse and child. The letter also asked him to inform VA right away if any changes in the status of his dependents occur. In February 2005, VA received an updated VA Form 21-686c, on which the Veteran provided information for a second dependent child. He wrote in the comment section that this was the second time he submitted this form and that his pay had not been adjusted yet. In response, the AOJ sent the Veteran a letter in March 2005, confirming additional benefits were added, effective May 1, 2004, and that he 'must tell [VA] immediately if there is any change in the number or status of [his] dependents.' He was provided VA Form 21-8764 that contained information about rights to receive this benefit. In December 2007 and December 2008, the Veteran received annual letters from VA that informed him of his new monthly rate of compensation; the letter also stated to advise VA immediately if his marital status changes or of any changes in his status. In April 2012, VA sent a letter asking the Veteran to verify his continued entitlement to additional benefits by completing and returning the enclosed VA Form 21-0538, Mandatory Status of Dependents, within 60 days. The Veteran returned the completed and signed form one day later. The form reflected that he was not married and did not list a spouse but listed his two dependent children. Thereafter, a September 2015 Report of General Information showed that the Veteran stated that he was divorced as of May 15, 2008, and that he gave this divorce information to the Defense Enrollment Eligibility Reporting System (DEERS). A VA employee informed him that the VA compensation system and DEERS did not communicate with each other and that VA compensation benefits program had no way of knowing about the divorce until he submitted his VA Form 21-0538. On that same date, VA informed the Veteran in a letter that his former spouse was removed from his award benefit payments, effective May 15, 2008. The decreased payments would begin on June 1, 2008, the first day of the next month, following the date of divorce. The Veteran was notified of a debt owed to VA in a correspondence by the Debt Management Center (DMC) sent in October 2015. The letter indicated that VA would withhold some of his VA compensation benefits beginning January 2016. In November 2015, the Veteran submitted a notice of disagreement to the September 2015 VA notice letter. He asserted that he has informed VA since day one, that he should not be penalized for a 'clerical error,' and then provided a list of organizations notified during the week after receiving his divorce papers. The Veteran also requested a waiver due to financial hardship. He submitted copies of the divorce decree, his court order from his Chapter 13 bankruptcy proceedings, and proof of income, to include a VA Form 5655, Financial Status Report (FSR), in December 2015. That same month, the DMC referred his case to COWC for consideration of waiver of the debt. In January 2016, VA sent a clarification letter to the Veteran regarding his November 2015 letter and mention of notice of disagreement. The letter informed him that VA regulations required appeals be submitted on a standardized form and must be completed, signed, and returned within one year of the decision notice. In response, the Veteran faxed a statement two days later, stating that he did not wish to file an appeal. See January 2016 VA Form 21-4138, Statement in Support of Claim. In the decision on appeal, the COWC did not find fraud, misrepresentation, or bad faith here. The COWC found shared fault regarding the creation of his overpayment, finding that the Veteran did not report the dependency change timely, even though VA did not process his claim timely. Moreover, the COWC found that the Veteran's installment debt of $3,290.00 in monthly payment should have been repaid, and as such, can be used to establish and maintain a repayment plan on the overpayment without imposing undue hardship. As such, the COWC denied a waiver for his overpayment debt in the amount of $12,118.59, as it would be against the principles of equity and good conscience if the debt was not collected. In July 2017, the Veteran submitted additional financial information and an updated VA Form 5655, along with a notice of disagreement on a VA standardized form. He also submitted a letter from a construction company that reflected he had remaining payments owed. See July 2017 third party correspondence. The Veteran submitted another statement in April 2018, stating that his only income is through VA, military retirement pay, and Social Security Administration (SSA) disability income. In December 2019, the Veteran submitted an updated VA Form 21-686c that updated his marital status to reflect his current marriage and to add additional dependent children. VA awarded additional dependency benefits in January 2020, based on this new information. A May 2020 Report of General Information showed that the Veteran telephoned in regarding updating his marital and dependent status. In December 2020, the Veteran submitted a statement requesting an audit of this appeal. Based on the applicable law and current appeal, the question now before the Board is whether the facts dictate that a waiver should be granted under the standard of "equity and good conscience." Prior to addressing that question, the Board must address the creation of the debt. 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). Prior to the COWC's decision on appeal, the Veteran filed a notice of disagreement in November 2015 on the issue of the validity or creation of this debt. However, he subsequently withdrew his appeal via the January 2016 facsimile of his VA Form 21-4138, Statement in Support of Claim and stated he did not wish to file an appeal. The appeal regarding the validity of debt is therefore withdrawn. Although the Board has considered his December 2020 statement requesting an audit as to the creation of this debt, this is considered untimely, as the time limit to file a notice of disagreement has passed. VA has already informed the Veteran that appeals were required to be submitted on a VA standardized form and to be filed within one year of the decision notice. See January 2016 correspondence. Therefore, the September 2015 VA notice letter is final. See 38 C.F.R. §§ 3.160(d), 19.52(a). Given the above, the Board finds this issue has been addressed. As to whether the facts dictate that a waiver should be granted under the standard of "equity and good conscience," the next step is to look at first and second factors pertain to the fault of the debtor versus the fault of VA. Here, the Veteran demonstrated he understood how to update VA regarding dependent status changes, as he first submitted a VA Form 21-686c back in late March 2004. He then informed VA of another dependent status change in February 2005 by submitting a second VA Form 21-686c. On this form, he commented that this was the second time he submitted it and that his pay had not been adjusted yet. Based on this evidence, the Board finds that the Veteran knew how to notify VA regarding a dependent status change and that he knew how these changes affected his VA compensation payment. He demonstrated knowledge of figuring out or reviewing his VA monthly compensation, as he stated that his pay had not been adjusted yet. Therefore, the Board discounts his statements regarding VA set him up 'for failure' or that VA made 'it very difficult...to respond in the specified time period,' as the evidence clearly showed that the Veteran previously executed these dependent status changes in a timely manner. Although the Board sympathizes with his hardship incurred during that time, such as his medical issues, a difficult divorce, and Chapter 13 bankruptcy proceedings, the fact still remains that the Veteran knew how to submit changes or provide updates to VA. As a result, the Veteran is partially at fault. Regardless, even if VA's compensation benefits system was aware of the initial May 2008 divorce decree and delayed in administratively processing the removal of his former spouse, the circumstances still show that the Veteran did not notify VA that he continued to receive compensation benefits at a rate that included a dependent spouse. The Board has reviewed the list of organizations he notified in May 2008, and VA compensation benefits was not one of them, but yet, he knew how to notify VA compensation benefits when he would like additional compensation based on extra dependents. As such, in balancing of faults, the Board finds that he is therefore partially at fault in the creation of the debt by keeping the payments. As indicated earlier, the Veteran recognized changes in his VA compensation payments. Thus, the Veteran knew, or should have known, that he was not entitled to the payments in the amount in which he was receiving. In addition, waiving recovery of the overpayment would defeat the purpose of the benefit, since the Veteran was not entitled to dependent spousal compensation for his former spouse from May 2008 to September 2015, as he no longer had a spouse during the period in question. He was notified by VA on how to update his dependent and marital status changes in letters sent in March 2004, July 2004, March 2005, December 2007, and December 2008. Concerning possible unjust enrichment, failure to make restitution would result in unfair gain to the debtor; the Veteran would be unjustly enriched by waiver of the debt. The Board finds that unjust enrichment of the Veteran would result if the government was not repaid for the period of additional VA compensation benefits to which the Veteran was not entitled. There is also no evidence that the Veteran changed position to his detriment due to his reliance upon receipt of VA benefits. The Veteran has not indicated nor has the evidence shown that reliance on VA compensation resulted in relinquishing a valuable right or incurred a legal obligation. Therefore, the final factor is whether collection would impose undue hardship on the Veteran. As noted earlier, the Veteran submitted a court order from his Chapter 13 bankruptcy proceedings. The Order showed that he was to pay his Chapter 13 bankruptcy trustee $3,265.00 monthly for 60 months, effective 30 days from December 2010. In April 2014, his payment was increased to $3,290.00, effective that same month. Based this calculation, his trustee payments should have concluded by December 2015 or January 2016. On a November 2015 VA Form 4-5655, Financial Status Report (FSR), he reported that his monthly net income was $5,502.90. His monthly expenses totaled $5,501.00. This included 'other living expenses' (listed as home/health/life/auto insurance, child support, and phone/internet/tv/garbage/house supplies), totalling $3,290.00. Discretionary income was reported to be $1.90. The Veteran listed his total assets as $320.00. In July 2017, the Veteran's finances showed his income totaled $5,410.15. His reported monthly expenses totaled $5,703.00 to cover items listed as mortgage, utilities, cable/internet/telephone, insurance policies, health insurance, other creditors, and major home repairs (i.e., air conditioning, septic, and rebuilding his home). He submitted a letter from his contractor that indicated he had a deductible of $9,360.00 that would be paid off in 12 months through payments of $800.00 per month. Calculations show a deficit of $292.85. In June 2018, the Veteran submitted a letter stating that his father set-up payments on his behalf when he had health problems. The Veteran also submitted medical scripts for medications taken between 2008 and 2012. He stated that he was responsible for payments for 5 years due to his Chapter 13 bankruptcy and automatic payments were setup from his bank, which paid his bills until November 2015. The Veteran provided evidence of an Order of Discharge dated December 2015 issued by the U.S. Bankruptcy Court. Given the above, there is no evidence showing that payment of this debt would cause or in fact, did cause, undue hardship. In reaching this conclusion, the Board acknowledges that the Veteran has endured hardship. However, the Chapter 13 bankruptcy debt was discharged effective December 2015. This indicates the Veteran had discretionary funds in the amount of $3,265.00 to $3,290.00 that was formerly directed to the U.S. bankruptcy trustee that could now be used toward the overpayment. The Board has also considered the installment payments noted in July 2017 and the fact that his finances showed a deficit of $292.85 per month. Nonetheless, those payments were limited to only a one-year period. Seeing as a few years has passed and neither the contractor nor the Veteran submitted additional information indicating hardship in repaying those installments, the Board surmises that he has $800.00 less in obligations toward construction costs that could be paid toward this overpayment. Although the Veteran has not submitted a more recent FSR, the 2017 finances and contractor letter indicate he owns a house, which is a previously unreported asset. The Board finds no reason that this monthly deficit amount, when considered along with the Veteran's asset and the nature of some of the reported living expenses that reasonably could be adjusted (e.g., cable television or house supplies) to minimize the impact of any debt recovery, would result in undue financial hardship. Furthermore, the DMC letter indicated withholding would begin in January 2016 and a span of 5 years of withholding has already taken place. Thus, the evidence of record does not show that payment of this debt would cause or in fact, did cause, undue hardship. The Board acknowledges the contention that the Veteran has financial difficulties, minimal assets, and multiple dependents to care for. However, as the overpayment at issue represents a valid debt to the U.S. Government, there is no reason that the Veteran should not accord the Government the same consideration that he accords his other creditors. The evidence shows that he takes care to timely pay off his credit card debts, and as such, he should afford that same standard and care toward a valid debt to the U.S. Government. For these reasons, the Board finds that any financial hardship the Veteran may experience from recovery of this debt is outweighed by the other elements of equity and good conscience. Based on the foregoing, after weighing all of the enumerated factors, the Board finds that recovery of the overpayment does not violate the principles of equity and good conscience. Thus, waiver of the recovery of the overpayment of the debt of $12,118.59 is not warranted, and the appeal must be denied. D. JOHNSON Veterans Law Judge Board of Veterans' Appeals Attorney for the Board M. Tang, 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.