Citation Nr: 21030493 Decision Date: 05/19/21 Archive Date: 05/19/21 DOCKET NO. 12-33 851 DATE: May 19, 2021 ORDER Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $4,975.13 is denied. FINDINGS OF FACT 1. The Veteran's entitlement to compensation benefits was reduced from 80 percent to 10 percent beginning on December 26, 2005, the 61st day of her incarceration, and this resulted in an overpayment in the amount of $4,975.13. 2. The Veteran did not commit fraud, misrepresentation, or bad faith in the creation of the debt; but is found to be at fault in the creation of the debt. 3. Repayment of the debt, which has already been repaid, would not deprive the Veteran of the basic necessities of life, would not result in financial hardship, and recovery of the overpayment would not defeat the purpose for which benefits were intended. 3. A waiver of the debt would result in unjust enrichment to the Veteran. CONCLUSION OF LAW The criteria for entitlement to a waiver of recovery of overpayment of VA compensation benefits have not been met. 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965, 3.665, 3.666(e). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from March 1988 to August 1988. This appeal comes before the Board of Veterans' Appeals (Board) from a March 2011 decision of a Department of Veterans Affairs (VA) Regional Office (RO). In August 2020, the Veteran testified before the undersigned Veterans Law Judge (VLJ). A transcript of the hearing is of record. The record was held open for an additional 60 days following the hearing to allow for the submission of evidence. The Board notes that the Veteran has appointed a private attorney to represent her. However, that appointment is explicitly limited to the compensation claims. Therefore, the Veteran is considered to be pro se in the instant matter. Entitlement to Waiver of Recovery A veteran has the right to dispute the existence and amount of the debt. 38 C.F.R. § 1.911(c). 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). First, VA must determine if the overpayment at issue was validly created. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided). The term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. See 38 U.S.C. § 5302; 38 C.F.R. § 1.962. Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation. If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(b); see also Ridings v. Brown, 6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate). Finally, if VA determines that the debt is valid, and that fraud, misrepresentation, and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. See 38 U.S.C. § 5302(b); 38 C.F.R. §§ 1.962, 1.963, 1.965. Any person incarcerated in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony will not receive compensation in excess of specified amounts. See 38 C.F.R. § 3.665. When a veteran is incarcerated for a period in excess of 60 days for conviction of a felony, his compensation must be reduced, "for the period beginning on the sixty-first day of such incarceration." 38 U.S.C. § 5313(a)(1); see also 38 C.F.R. § 3.665(a). Payments to the person may resume upon release from incarceration. The term "release from incarceration" includes participation in a work release or halfway house program, parole, and completion of sentence. 38 C.F.R. § 3.665(b). The Veteran seeks a waiver of indebtedness of VA compensation benefits in the amount of $4,975.13. In March 1993, the Veteran was granted service connection for her disabilities. VA provided the Veteran with VA Form 21-8764 which 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." The form instructed that Veteran to immediately notify VA if there was a change in any condition affecting her right to continued payments as failure to immediately notify VA of these changes may result in a debt that the Veteran would have to repay. In November 2005, a VA and Social Security Administration (SSA) State Prisoner Computer March revealed that the Veteran had been incarcerated since October [REDACTED], 2005. A prison/convict information sheet from the New Jersey Department of Corrections noted that the Veteran's date in custody was February [REDACTED], 2006. In a May 2006 letter to the Warden, Atlantic County Justice Facility, VA noted that it received information that the Veteran is/was imprisoned beginning on October [REDACTED], 2005. VA asked the facility to complete and return VA Form 21-4193 detailing the admission and release date and indicate whether the Veteran's admission was for a felony or a misdemeanor. On July 3, 2006, a prison/convict information sheet from the Department of Corrections noted that the Veteran had been at the facility from February [REDACTED], 2006. On July 11, 2006, VA proposed to reduce the Veteran's benefits to 10 percent effective April [REDACTED], 2006. In October 2006, VA finalized the decision and reduced the Veteran's compensation benefits. See 38 C.F.R. § 3.665. In October 2006, the Debt Management Center (DMC) assessed a debt of $4,404.90. The Veteran disagreed with the reduction. In May 2008, VA issued a Statement of the Case noting that the reduction was proper. The Veteran did not perfect an appeal to the Board. In January 2009, the Veteran requested an audit of her account.. In February 2009, VA completed the audit report. The report noted that the Veteran was owed and paid $26,087.80. In March 2009, the disagreed with the audit report. She requested a hearing. In April 2009 after reviewing the audit report, VA confirmed the amount due to the Veteran. In a November 2009 Report of General Information, the Veteran telephone VA regarding her retroactive payment. She stated that she sent documentation proving that the amount she received was incorrect. She noted that she requested a hearing. In December 2009, the Veteran submitted a letter from the State of New Jersey. The letter noted that the Veteran was confined at the E.M. Correctional Facility for Women from April [REDACTED], 2006 until August [REDACTED], 2006. In February 2010, the Veteran reiterated that she was disagreeing with the findings in the audit report. In May 2010, the Veteran testified at a VA local regional office. During her testimony, the Veteran stated that she was convicted on October [REDACTED], 2005; however, she was not sentenced until April 2006. She was released on August [REDACTED], 2006. She stated that since she was actually convicted or sentenced in April 2006, her disability benefits should have been reduced in June 2006. On January 18, 2011, the Department of New Jersey Correctional Facility for Women verified that the Veteran was convicted and incarcerated from October [REDACTED], 2005 until August [REDACTED], 2006. In a January 24, 2011 decision, VA noted that the Veteran's benefits were previously reduced to the 10 percent rate due to her incarceration from April [REDACTED], 2006 and were resumed at the full rate of compensation from August [REDACTED], 2006. VA stated that during her May 5, 2010 hearing, the Veteran indicated that she was actually convicted on October [REDACTED], 2005 but that her benefits should not have been reduced until June of 2006, since she were not actually sentenced until April [REDACTED], 2006. VA noted that the 61st day is calculated from the date a veteran was actually incarcerated following the conviction of a felony, not the date the Veteran was sentenced. VA also noted that the New Jersey Department of Corrections verified the Veteran's October [REDACTED], 2005 conviction date. Based on the information the Veteran provided along with the information obtained from the New Jersey Department of Corrections, VA reduced the Veteran's compensation benefits effective December 26, 2005, i.e. the 61st day of imprisonment following conviction of a felony. In February 2011, the DMC assessed a debt of $4,975.13. The Veteran did not disagree with the January 2011 decision. As such, the validity issue is not before the Board. However, on March 4, 2011, the Veteran requested a waiver. The Committee on Waiver and Compromises (COWC) denied the waiver request. In August 2020, the Veteran testified at a Board hearing. She stated that the money she received while she was incarcerated went towards her daughter's care. As such, the debt should be waived. She stated that at the time of the hearing, the debt had been repaid in full. She further stated that repaying the debt did not "really" result in financial hardship because the money used to repay the debt was taken from a retroactive payment. The Board notes that recovery of overpayments of any benefits made under the laws administered by VA 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 if the 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. §§ 1.962, 1.963(a), 1.965. In this case, the Board has not found any evidence of fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the overpayment. The next question is whether the facts dictate that a waiver should be granted under the standard of "equity and good conscience." 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). After reviewing all the evidence of record, the Board finds that recovery of the debt would not violate principles of equity and good conscience. With regard to the first factor, fault of the debtor, the Board finds that the Veteran is at fault for creation of the debt. In March 1993, the Veteran received a Notification Letter stating that a veteran's benefits would be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony. However, the Veteran failed to inform VA of her October [REDACTED], 2005 incarceration. The Board notes that a November 2005 a VA and SSA State Prisoner Computer March revealed that the Veteran had been incarcerated since October [REDACTED], 2005. However, the Department of Corrections stated that the Veteran's custody date was not until April 2006. It was not until the Veteran's 2010 Regional Office hearing that the Veteran informed VA that she was actually convicted in October 2005. Additionally, in January 2011, the Department of New Jersey Correctional Facility for Women confirmed the Veteran was convicted on October [REDACTED], 2005. Therefore, the Board finds that VA is not at fault for the incurrence of this debt. With respect to the third factor, financial hardship, the pertinent regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor of basic necessities. 38 C.F.R. § 1.965(a)(3). "Financial hardship" is primarily intended to mean that he or she would be deprived of basic necessities, such as food, clothing, and shelter. In this case, collection of the debt would not cause the Veteran undue financial hardship. In March 2011, the Veteran submitted a Financial Status Report (FSR). She indicated net household monthly income of $2,687.00. Her average monthly expenses and monthly payments on installment contracts and other debts totaled $2,556.00. The Veteran's household monthly income exceeded her expenses by $142.00 per month. Additionally, during her August 2020 Board hearing, the Veteran stated that because VA repaid the debt with a retroactive award, repaying the debt "wasn't really financially hardship." Based on the Veteran's FSR and her testimony, the Board finds that collection of the debt would not impair the Veteran's ability to provide for basic necessities. As to whether collection of this debt would defeat the purpose for which the benefits were intended, 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. However, as the Veteran was incarcerated, she had no earning capacity. Therefore, the Board finds that collection of this debt would not defeat the purpose of paying the benefits. Additionally, because the debt has already been repaid, a waiver of such an overpayment would essentially require VA to pay the Veteran additional benefits that were not due to her and would result in unjust enrichment. There is also no indication that the Veteran detrimentally changed her position in reliance on the overpayment or incurred a legal obligation. The Board notes the Veteran's arguments that the debt was improperly calculated as it included the period before she was sentenced and should be calculated beginning upon her sentencing as well as her arguments that VA should have representatives in correctional facilities throughout the United States to assist inmates with their cases. However, the regulations clearly state that VA compensation is reduced on the 61st day of incarceration following conviction of a felony not sentencing for a felony conviction. Although the Veteran stated that she used her benefits to care for her children, she did not file for an apportionment of her benefits during this time. Moreover, VA statues and regulations do not require VA to have representatives in correctional facilities and the Veteran was provided with notice that her benefits would be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony in March 1993. This argument is therefore without merit. Based on the above, the Board finds the weight of the elements of equity and good conscience are not in the Veteran's favor. Accordingly, waiver of recovery of the overpayment is not warranted, and the claim must be denied. KRISTY L. ZADORA Veterans Law Judge Board of Veterans' Appeals Attorney for the Board T. Moore, 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.