Citation Nr: A21020504 Decision Date: 12/23/21 Archive Date: 12/23/21 DOCKET NO. 190913-185237 DATE: December 23, 2021 ORDER Waiver of recovery of an overpayment of VA compensation benefits in the amount of $5,612.51 is denied. FINDINGS OF FACT 1. The Veteran was incarcerated following conviction of a felony in March 2016. 2. The Regional Office (RO) retroactively reduced the Veteran's compensation benefits which were being paid at the 30 percent rate to the 10 percent rate effective May 8, 2016; this action resulted in an overpayment in the amount of $5,612.51. 3. The overpayment was not due to the Veteran's fraud, misrepresentation or bad faith. 4. Recovery of the debt in the amount of $5,612.51 is not against equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery of the overpayment of VA compensation benefits in the amount of $5,612.51 are not met. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from November 1997 to November 1999. The case is on appeal from an April 2018 rating decision of the RO's Committee on Waivers and Compromises (COWC). The Board notes that following the issuance of the June 2019 Statement of the Case, in September 2019, the Veteran submitted a VA Form 10182, Decision Review Request: Board Appeal Notice of Disagreement, requesting that his appeal be withdrawn from the legacy appeal and considered under the framework of the modernized review system, also known as the Appeals Modernization Act (AMA), on the Board's Evidence Submission docket. In a March 2020, the Veteran was informed that the September 2019 Notice of Disagreement (NOD) was untimely. However, a July 2021 letter reflects that the Board subsequently accepted the NOD as timely, and the Veteran was granted 90 days from the date of that letter in which to submit additional evidence. Therefore, the Board may only consider the evidence of record at the time of the COWC decision on appeal, as well as any evidence submitted by the Veteran or his attorney within 90 days from date of the Board's July 27, 2021 letter. 38 C.F.R. § 20.303. The Board has limited the discussion below to the relevant evidence required to support its findings 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, 21 Vet. App. 545, 552 (2008). Waiver of recovery of an overpayment of VA compensation benefits in the amount of $5,612.51. The Veteran limited the scope of the appeal to waiver of recovery of the overpayment of VA compensation benefits in the amount of $5,612.51. See April 2018 Correspondence; February 2018 NOD. The Veteran is receiving VA disability compensation benefits effective from November 23, 1999. The notification letter of those benefits, dated in January 2000, informed him that his benefits would be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony. 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 (where, as here, committed after October 7, 1980) 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). In May 2016, the Veteran informed VA of his incarceration for a felony. See May 2016 VA 21-VA 21-4193 Notice to Veterans Administration of Veteran or Beneficiary Incarcerated in Penal Institution. In September 2017, the penal institution confirmed that the Veteran was incarcerated for a felony on March 8, 2016. See August 2017 VA 27-0820e Report of Incarceration & VA 27-0820e. In a November 2017 letter, the RO advised the Veteran that VA proposed to retroactively reduce his VA benefits based on his incarceration. In January 2018, in accordance with VA law and regulation, the RO properly retroactively reduced the Veteran's compensation benefits which were being paid at the 30 percent rate to the 10 percent rate effective May 8, 2016; this action resulted in an overpayment in the amount of $5,612.51. See January 2018 Notification Letter. In March 2018, the Veteran submitted a VA Form 5655 Financial Status Report requesting waiver of the recovery of the overpayment debt. See April 2018 Correspondence. The April 2018 COWC decision reflects a determination that there was no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue, but that recovery of the overpayment of VA compensation benefits would not be against equity and good conscience. 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. 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). In this case, the COWC found, and the Board agrees, that there is no evidence demonstrating that the indebtedness resulted from fraud, misrepresentation, or bad faith on the part of the Veteran. 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. As to the principles of equity and good conscience, and as acknowledged by the Veteran, the Veteran was at least partially at fault for the creation of the debt. See April 2018 Correspondence; February 2018 NOD. Although the Veteran promptly notified VA of his incarceration, the Veteran's receipt of additional full funds from VA that he was not lawfully entitled to because he was incarcerated results in unjust enrichment. In a February 2018 letter, the Debt Management Center (DMC) informed him that an overpayment had been created in the amount of $5,612.51. Although the Veteran asserted that the retroactive reduction in benefit payments was unwarranted based on VA's failure to reduce his compensation contemporaneous with his timely notice of his incarceration, given that VA had to verify the incarceration, confirm the overpayment, provide due process to the Veteran, and take further administrative action to finalize the reduction, the Board finds that VA processed this case within a reasonable timeframe. The Board finds that the Veteran's receipt of disability compensation at the 30 percent rate when he should have received funds at the 10 percent rate for the period May 8, 2016 to November 30, 2017, see April 2018 VA 4-1837 Decision of Waiver on Indebtedness, represented monies that he was not entitled to because he was incarcerated, and that such receipt resulted in unjust enrichment. The Board notes that the Veteran's asserted that by VA withholding his benefits, he would be in a financial bind because he would be unable to appeal his conviction. See April 2018 Correspondence. In this regard, he explained that he had to pay for research and other essentials need to prove his innocence. The Board finds that, although recovery of the debt would cause some financial hardship to the Veteran, see April 2018 Correspondence (include Financial Status Report), recovery of the overpayment would not deprive the Veteran of the basic necessities of life. The Board notes that legal research and lawyer fees associated with his criminal appeal are not considered basic necessities as contemplated by 38 C.F.R. § 1.965(a)(3). The Board finds no indication that reliance on the overpaid benefits resulted in the Veteran's relinquishment of a valuable right or the incurrence of a legal obligation. 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. After weighing all the evidence of record, the Board finds that recovery of the overpayment would not be against equity and good conscience. In this case, the Board finds that the preponderance of the evidence is against the claim; the benefit of the doubt doctrine is not applicable; and waiver of recovery of the overpayment of VA compensation benefits in the amount of $5,612.51 is therefore not warranted. See 38 U.S.C. § 5107(b); 38 C.F.R. § 3.102. R. Erdheim Acting Veterans Law Judge Board of Veterans' Appeals Attorney for the Board M. Taylor 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.