Citation Nr: 21070052 Decision Date: 11/22/21 Archive Date: 11/22/21 DOCKET NO. 19-17 973 DATE: November 22, 2021 ORDER Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $7,329.92, to include the question of whether the overpayment was properly created, is denied. FINDINGS OF FACT 1. The Veteran was incarcerated on September 21, 2015 following conviction for a felony; the 61st day of incarceration was November 20, 2015. 2. On December 12, 2016, the Veteran requested that VA stop paying him VA compensation in lieu of military retirement payments. 3. The Regional Office (RO) retroactively reduced the Veteran's compensation benefits, which were being paid at the 40 percent rate, to the 10 percent rate for the period from November 20, 2015 to December 12, 2016, and terminated his compensation benefits effective December 12, 2016; this action resulted in an overpayment in the amount of $7,329.92. 4. The overpayment was not due to the Veteran's fraud, misrepresentation, or bad faith. 5. The overpayment at issue was partially the fault of the Veteran; there was no undue hardship caused by repaying this debt; collection of the debt would not defeat the purpose of the benefit; the overpayment at issue led to unfair enrichment of the Veteran; and the Veteran's reliance upon the benefits did not result in the Veteran's relinquishment of a valuable right or the incurrence of a legal obligation. CONCLUSION OF LAW An overpayment of $7,329.92 in VA compensation benefits was properly created, and recovery of the overpayment would not be contrary to the principles of equity and good conscience. 38 U.S.C. §§ 5302, 5313; 38 C.F.R. §§ 1.965, 3.665. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran had active service from January 1964 to September 1985. This matter comes before the Board of Veterans' Appeals (Board) from an August 2017 Decision on Waiver of Indebtedness from VA's Committee on Waivers and Compromises (COWC). While the Veteran did appeal the denial of a waiver of his overpayment, he also suggested there is an error in the creation of the overpayment. Following the Board's November 2020 remand, the RO adjudicated the matter related to whether the debt at issue was properly created in January 2021. The waiver issue was then readjudicated in February 2021. These matters are now again before the Board. The Veteran is receiving VA disability compensation benefits and has been assigned a 40 percent rating since November 2, 2012. In November 2013, at the time he was notified of his award of service connection for posttraumatic stress disorder (PTSD), which brought his combined rating to the 40 percent level, he was provided a VA Form 21-8764. The VA Form 21-8764 states, in pertinent part, that compensation is subject to future adjustment, and that "benefits will be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony." This notice complies with VA law and regulation. 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 committed after October 7, 1980, shall not be paid such compensation or dependency and indemnity compensation for the period beginning on the 61st 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). In November 2016, the RO informed the Veteran that it had received information showing he was incarcerated on September 21, 2015 following conviction of a felony. The RO proposed to reduce his benefits to the 10 percent rate effective November 20, 2015, the 61st day following the Veteran's confinement. The RO then, in February 2017, informed the Veteran that it was taking the action proposed and, in accordance with VA law and regulation, retroactively reduced the Veteran's compensation benefits to 10 percent effective November 20, 2015. This letter also informed the Veteran that VA had received his election to no longer receive VA compensation benefits in lieu of military retired pay. The letter informed the Veteran that his VA benefits were being terminated accordingly, effective December 12, 2016, the day he submitted the request. Thus, the Veteran's benefits were reduced to 10% effective November 20, 2015 and terminated effective December 12, 2016. This retroactive adjustment resulted in an overpayment. In March 2017, the VA Debt Management Center notified the Veteran of the $7,329.92 due. The initial consideration in this case is whether the reduction to the 10 percent compensation rate was proper. As noted, the Veteran was incarcerated for a felony offense on September 21, 2015, so VA was required to reduce the Veteran's VA disability compensation, which was being paid at the 40 percent rate, to the amount payable for a disability evaluated as 10 percent disabling effective November 20, 2015, the 61st day following the felony conviction. 38 U.S.C. § 5313(a); 38 C.F.R. § 3.665(a). Therefore, the creation of the debt was proper. In December 2016, the Veteran filed a VA Form 21-526EZ and elected to collect military retired pay instead of VA compensation. The RO terminated the Veteran's receipt of compensation effective December 12, 2016, the date his VA Form 21-526EZ was received. Thus, the $7,329.92 debt represents the overpayment of benefits between November 20, 2015 and December 12, 2016. The Veteran has not contended that these adjustments were improper. His argument related to the validity of the debt is centered around his contention that he did not actually receive the overpaid funds. According to various statements, his ex-wife had access to the funds and took them without his knowledge. He suggested in November 2017 that she was his fiduciary and that this should be treated as a case of misuse of funds by a fiduciary. However, the Board has reviewed the claims file. At no time was the Veteran's competency to receive funds raised, and at no time has VA appointed a fiduciary. Thus, this argument is not valid. As to whether someone in the Veteran's personal life misused the Veteran's funds, this is not a matter before the Board and it does not change the fact that the Veteran was indeed incarcerated on September 21, 2015 following a conviction for a felony, and the 61st day following that incarceration was November 20, 2015. The law required the RO to reduce the Veteran's benefits accordingly. This debt was properly created in accordance with the law. Moving to the matter of whether a waiver is warranted, in June 2017, the Veteran submitted a VA Form 5655 Financial Status Report requesting a waiver of recovery of this overpayment debt. 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). In August 2017, the COWC determined that there was no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue, and the Board will not disturb that favorable finding. Therefore, waiver of indebtedness is not precluded if shown that it would be against the principles of equity and good conscience to require the Veteran to repay the debt to the government. 38 C.F.R. §§ 1.963, 1.965. In this case, the record shows the Veteran was incarcerated in September 2015 and contacted VA in January 2016 requesting that VA "stop the disability deduction from [his] retired pay immediately." The Veteran reported his address as the Lovelock Correctional Center at that time. Thus, the Board finds the Veteran notified VA of his incarceration within several months. While this notice was not immediate, the Board finds it reasonable, and the Board recognizes VA did not act on this information for several additional months. Thus, the fault in the creation of this debt was essentially balanced between the Veteran and VA. The financial status report the Veteran submitted in this case shows that his income exceeds his expenses. However, as he is imprisoned, his basic needs are being met by the state. The Board, therefore, finds there is no undue hardship associated with the repayment of this debt. As to whether collection of the debt would defeat the purpose of paying the benefits by nullifying the objective for which the benefits were intended, the Board notes that the rating schedule is intended to compensate a claimant for average impairments in earning capacity resulting from service-connected disability in civil occupations. 38 U.S.C. § 1155. "Generally, the degrees of disability specified in the rating schedule are considered adequate to compensate for considerable loss of working time from exacerbations or illnesses proportionate to the severity of the several grades of disability." 38 C.F.R. § 4.1. However, due to his incarcerated status, he had no earning capacity at that time. Therefore, the Board finds that collection of the debt would not defeat the purpose of paying the benefits. The Board further finds that the Veteran's receipt of disability compensation at the 40 percent rate when he should have received funds at the 10 percent rate represented monies that he was not entitled to because he was incarcerated, and such receipt resulted in unfair enrichment to him. Again, whether or not someone in his personal life spent those excess funds without his knowledge is not a matter before the Board. As noted in the administrative decision related to the validity of this debt, which was sent to the Veteran in February 2021, the funds were sent to the account with the Veteran's name on it and after the Veteran notified VA in July 2016 to stop depositing funds into this account, the RO took action to make the change for the month of August 2016, and payment was redirected in September 2016. Thus, the RO acted in accordance with the Veteran's request related to the routing of funds. This does not change the unfair enrichment to him. The Board also finds that there is no indication in the record that reliance on the overpaid benefits resulted in the Veteran's relinquishment of a valuable right or the incurrence of a legal obligation. After weighing all the evidence of record, the Board finds that recovery of the overpayment would not be against equity and good conscience. Accordingly, the preponderance of the evidence in this case is against the Veteran's claim for a waiver and this appeal must be denied. The Board has duly considered the benefit-of-the-doubt doctrine. However, the preponderance of the evidence is against the Veteran's claim, so that doctrine is not applicable. 38 U.S.C. § 5107; see also Gilbert v. Derwinski, 1 Vet. App. 49, 54 (1990). MICHAEL E. KILCOYNE Veterans Law Judge Board of Veterans' Appeals Attorney for the Board A. Adamson, 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.