Citation Nr: 21012181 Decision Date: 03/03/21 Archive Date: 03/03/21 DOCKET NO. 17-04 944A DATE: March 3, 2021 ORDER A waiver of the recovery of the overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $6,478.66 is granted. FINDINGS OF FACT 1. The overpayment of VA compensation benefits was not due to the Veteran’s fraud, misrepresentation or bad faith. 2. The Veteran did not notify VA of her October 2014 divorce until August 2015, and VA did not take action to remove the Veteran’s dependents from her award until the following year; thus, the Veteran was at least partially, although not fully, at fault in the creation of the debt at issue. 3. Recoupment of the $6,478.66 debt would not defeat the purpose of the benefit since the Veteran was not entitled to the additional benefit amounts for her dependents following her divorce. 4. The Veteran received benefits to which she was not entitled and as such, she was unjustly enriched. 5. The Veteran does not contend and the evidence does now show that her reliance on VA benefits resulted in relinquishment of another valuable right. 6. The Veteran’s assets and income, with consideration of the costs of life’s basic necessities, is not sufficient to permit repayment of the overpayment indebtedness of $6,478.66 without resulting in undue hardship. CONCLUSION OF LAW Recovery of the overpayment of VA compensation benefits in the amount of $6,478.66 would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.963(a), 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran had active service from October 1970 to January 1973. The matter before the Board of Veterans Appeals (Board) is on appeal from an October 2016 decision of VA’s Committee on Waivers and Compromises (COWC), which denied a waiver of overpayment debt. The Veteran and her son provided hearing testimony before the undersigned Veteran’s Law Judge in January 2021 at a Board hearing held virtually. The Veteran is in receipt of VA compensation benefits and has been awarded a total rating based upon individual unemployability since September 2003. The Veteran was being paid additional benefits for her dependent spouse and children. In March 1992, when she was notified of these additional benefits for her spouse and children, she was also informed that she must notify VA of any change in the number or status of her dependents and that failure to do so would result in an overpayment debt. A review of the claims file reveals the Veteran confirmed her ongoing marriage and having a handicapped dependent step-daughter in December 2013. In July 2015, VA requested the Veteran complete an updated VA Form 21-0538 status of dependents questionnaire. An August 2015 memorandum in the claims file shows the Veteran called VA to report her divorce. She indicated she was divorced on October 28, 2014, and she requested that her spouse and stepchild be removed from her award. The Veteran also submitted a written statement in May 2016 confirming her divorce. In July 2016, VA notified the Veteran that they removed the step-child from her award on August 22, 2014, and removed the former spouse from her award on September 1, 2014. This action resulted in an overpayment of $6,478.66. The Veteran was notified of the debt by the VA Debt Management Center (DMC) in August 2016. The Veteran then filed a VA Form 5655 Financial Status Report (FSR) in September 2016 and requested a waiver of recovery of this overpayment debt. The COWC’s October 2016 decision followed and the Veteran has since perfected an appeal of the determination to deny her a waiver. The Board notes that the Veteran has not challenged the validity of this debt. Rather, this is an appeal of the denial of her waiver request. The COWC found there was no finding of fraud, misrepresentation or bad faith on the part of the Veteran. The Board will not disturb this favorable finding. In cases where fraud, misrepresentation, or bad faith on the Veteran’s part with respect to the creation of the overpayment at issue has not been demonstrated, and, therefore, waiver is not precluded pursuant to 38 U.S.C. § 5302(a), the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). In making this determination, consideration is given to the following elements, which are not intended to be all-inclusive: (1) fault of debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue hardship (whether collection would deprive the 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); and (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 C.F.R. § 1.965(a). The first and second elements pertain to the fault of the debtor versus the fault of VA. The Veteran did not file a timely report of her October 2014 divorce. The first report of the divorce was in August 2015, nearly a year later. The Veteran suggests that the debt owed in this case was VA’s fault because it delayed in adjusting the benefits after she notified VA. However, the Board finds that the Veteran’s notification to VA being nearly a year after the divorce makes her at least partially at fault in the creation of this debt. In regard to whether failure to collect would cause unjust enrichment to the debtor, the Board notes that the Veteran received benefits to which she was not entitled and as such, she was unjustly enriched. Likewise, there is no indication that the Veteran’s reliance on VA benefits resulted in relinquishment of another valuable right. As to whether recoupment of those benefits would defeat the purpose of the benefit, recoupment of those benefits would not defeat the purpose of the benefit since the Veteran was not entitled to the additional benefit amounts for her dependents. However, the Board has also considered whether the Veteran would suffer undue hardship if forced to repay the debt at issue. A review of the September 2016 FSR reveals that the household income at the time was far exceeded by the monthly expenses, including payments on various installment loans listed on the form. Further, subsequent information collected has revealed that her health and her financial situation has changed for the worse since then. Treatment records show the Veteran suffered an aneurysm and has since had cognitive difficulties. She began living in a VA nursing home in May 2018. Moreover, in August 2018, the Veteran’s son notified VA that the Veteran’s new husband has not been involved at all in her care and has been utilizing the Veteran’s funds without authorization. The son reported that the Veteran had by then lost her vehicle, home and storage unit as a result of her husband’s control of her finances. The son indicated he and his brother had recently obtained durable power of attorney in order to intervene in the situation. The record includes forms filed in September 2018 to change the direct deposit information to send the Veteran’s benefits to a new account. Further, VA has since, by way of a March 2019 rating action, deemed the Veteran incompetent to handle disbursement of funds. The Veteran’s son provided testimony before the undersigned at the January 2021 Board hearing. He reported the Veteran had been homeless for a period of time in 2015 and/or 2016. He also reported that they are now seeking a divorce from the current husband who took approximately $30,000 from the Veteran’s account since her hospitalization. The son also reported that the spouse had pawned off a lot of her belongings while she was hospitalized. He reported that by the time he took over her finances in 2018, there was $80 in her account. The Board left the record open for 30 days in response to the Veteran’s son’s request to submit a new FSR. No such updated FSR was received. Although the Board believes the original FSR submitted was likely inaccurate, and no updated form was received, the Board also finds no reason to question the Veteran’s son’s testimony. Moreover, the action in the file to find the Veteran incompetent, to appoint her son as fiduciary, and the documentation showing the request to change the direct deposit information at the time in question, certainly corroborates his testimony. The evidence clearly shows the Veteran’s cognitive limitations and her living situation in a nursing facility. The Board thus finds no reason to further delay decision on this appeal. It appears that without waiver of the debt at issue, the Veteran would be unable to afford the basic necessities. Based on the foregoing record in this case, the Board is persuaded that recovery of the overpayment at issue would be unjust. This is so because of a finding of no intentional fault on the part of the Veteran, the mitigation of her fault, and the potential for imposed hardship must be accorded significantly greater weight than other elements in this analysis. The Board finds, therefore, that under the principles of equity and good conscience, taking into consideration all of the specifically enumerated elements of 38 C.F.R. § 1.965(a), it would be unfair to recover the Veteran’s service-connected disability compensation overpayment indebtedness in the amount of $6,478.66. The end result would not be unduly favorable or adverse to either the Government or the Veteran. 38 U.S.C.A. § 5107(b). Accordingly, the Veteran’s request for a waiver of her overpayment debt is granted. Michael A. Pappas 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.