Citation Nr: 21012205 Decision Date: 03/03/21 Archive Date: 03/03/21 DOCKET NO. 16-00 342 DATE: March 3, 2021 ORDER The overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $16,287.74 was properly created; the appeal is denied. Entitlement to a waiver of recovery of an overpayment of VA compensation benefits in the amount of $16,287.74 is denied. FINDINGS OF FACT 1. The Veteran was incarcerated following conviction for a felony on December [REDACTED], 2005; the 61st day of incarceration was February [REDACTED], 2006. 2. The Regional Office (RO) retroactively reduced the Veteran’s compensation benefits, which were being paid at the 100 percent rate, to the 10 percent rate; this action resulted in an overpayment in the amount of $16,287.74. 3. The overpayment was not due to the Veteran’s fraud, misrepresentation or bad faith. 4. The overpayment at issue was 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. CONCLUSIONS OF LAW 1. An overpayment of $16,287.74 in VA compensation benefits was properly created. 38 U.S.C. § 5313; 38 C.F.R. § 3.665. 2. Recovery of the overpayment of the VA compensation benefits in the amount of $16,287.74 would not be contrary to the principles of equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. § 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The matters on appeal come before the Board of Veterans’ Appeals (Board) from a July 2007 decision of the Committee on Waivers and Compromises (COWC) to deny the Veteran’s request for waiver of overpayment of the debt at issue. The Veteran’s August 2007 notice of disagreement included a suggestion that the debt is not valid. The Board remanded the issues related to the debt in January 2016 and again in October 2017 in order for a statement of the case (SOC) to be issued that considered both the waiver issue, as well as the matter of the validity of the debt. The requisite SOC was issued in June 2020, after which the Veteran perfected his appeal by submitting a VA Form 9 in July 2020. The Veteran provided testimony before the undersigned Veterans Law Judge in January 2021. A transcript of the hearing is within the record before the Board. A separate matter related to the appropriate effective date for termination of apportionment related to the Veteran’s daughter is being decided in a separate Board decision. Turning to the merits of these claims, the Veteran is receiving VA disability compensation benefits and has been assigned a 100 percent rating since April 10, 1992. In August 1992, he was notified of this award and 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 May 2006, VA received information indicating the Veteran was incarcerated on or about December [REDACTED], 2005. The RO informed the Veteran in June 2006 of its proposal to reduce his benefits to the 10 percent rate effective February [REDACTED], 2006. In July 2006, the penal institution confirmed the incarceration date and felony status. The RO then, in September 2006, 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 February [REDACTED], 2006. An overpayment debt resulted and later in September 2006 the VA Debt Management Center notified the Veteran of the $16,287.74 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 December [REDACTED], 2005, so VA was required to reduce the Veteran’s VA disability compensation, which was being paid at the 100 percent rate, to the amount payable for a disability evaluated as 10 percent disabling effective February[REDACTED], 2006, 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 in the amount of $16,287.74 was proper. The Board notes that the Veteran has not suggested the amount was improperly calculated. In fact, the Veteran has largely argued that the debt is improper because he was improperly convicted for a crime he alleges he did not commit. Further, he has suggested that he asked someone else to notify VA of his incarceration and they did not. Unfortunately, neither argument changes the fact that the Veteran was indeed incarcerated on December [REDACTED], 2005 following a conviction for a felony, and the 61st day following that incarceration was February [REDACTED], 2006. 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 May 2007, 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 July 2007, 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 at fault in the creation of the debt in failing to report his change in status to incarcerated felon. The Board recognizes the Veteran’s suggestion in March 2007 that he had asked someone he trusted to notify VA of his incarceration, but there is no evidence that VA was actually notified until several months later. The Veteran did not immediately notify VA of his change in status; thus, he was at fault in the creation of this debt. Further, the financial status report the Veteran submitted in this case shows that his income exceeds his expenses. Moreover, at his January 2021 hearing, the Veteran confirmed that the debt at issue has been repaid. There is no evidence that the Veteran’s basic necessities were unmet during the repayment of the debt. 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 100 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. 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). T. REYNOLDS 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.