Citation Nr: 0000851 Decision Date: 01/11/00 Archive Date: 01/27/00 DOCKET NO. 96-36 991A ) DATE ) ) On appeal from the Department of Veterans Affairs (VA) Regional Office (RO) in Buffalo, New York THE ISSUE Entitlement to waiver of recovery of an overpayment of chapter 30 educational assistance benefits in the amount of $553.34. ATTORNEY FOR THE BOARD K. J. Alibrando, Counsel INTRODUCTION The veteran served on active duty from July 1989 to July 1993. This appeal comes before the Board of Veterans' Appeals (Board) from an April 1996 decision of a Department of Veterans Affairs (VA) Regional Office's (RO) Committee on Waivers and Compromises (Committee), which denied the veteran's request for waiver of recovery of an overpayment chapter 30 educational benefits in the amount of $553.34. FINDINGS OF FACT 1. The appellant was paid an advance payment of Chapter 30 education benefits in the amount of $553.34 for the Fall 1995 quarter and the record shows that the veteran canceled registration prior to start of that quarter and did not attend courses for that same period. 2. The appellant was overpaid education benefits in the amount of $553.34. 3. The appellant was at fault in the creation of the overpayment of Chapter 30 education benefits. 4. The Government's recovery of the indebtedness would not defeat the purpose of payment of Chapter 30 benefits. 5. The record does not demonstrate that the appellant relied on VA benefits with the result that he relinquished a valuable right or incurred a legal obligation. 6. Repayment of the debt to the Government would not deprive the appellant of basic necessities. 7. Failure to make restitution would result in the appellant's unjust enrichment at the expense of the Government. CONCLUSION OF LAW There was no fraud, misrepresentation or bad faith in the creation of the overpayment but recovery of the overpayment of Chapter 30 education benefits, calculated in the amount of $553.34, would not be against equity and good conscience; therefore, waiver of recovery of the overpayment in the amount of $553,34 is denied. 38 U.S.C.A. § 5302(a) (West 1991); 38 C.F.R. §§ 1.963(a), 1.965(a) (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSION The veteran filed an application for VA education benefits in August 1993. An enrollment certification, received by VA in August 1993, shows that the veteran was enrolled for 12 credits at The Ohio State University for the period from September 22, 1993 to June 10, 1994. By letter dated in August 1993, the veteran was notified that he had been awarded Chapter 30 education benefits on the basis of full time enrollment beginning September 22, 1993. The veteran was advised that he was required to notify the VA and the school promptly of any change in enrollment. The record also shows that the veteran was given an advance payment for full time enrollment for the period from September 1993 to March 1994. A July 1995 enrollment certificate shows that the veteran was enrolled at The Ohio State University for the period from September 30, 1995 to June 1996. In July 1995, the veteran requested an advance payment for the Fall 1995 quarter and he certified that he intended to register for 12 credit hours. An October 1995 VA Form 22-1999b, Notice of Change in Student Status, shows that the veteran received the advance payment in September 1995 and canceled registration prior to start of the quarter in September 1995. An eligible veteran is entitled to a monthly benefit for periods of time during which he is enrolled in, and satisfactorily pursuing, an approved program of education. 38 C.F.R. § 21.7070 (1999); see also 38 U.S.C.A. § 3014 (West 1991). VA will pay educational assistance to an eligible veteran while he is pursuing approved courses in a program of education. 38 C.F.R. § 21.7130 (1999). As a result of the veteran's cancellation of his registration in September 1995, an overpayment of Chapter 30 education benefits in the amount of $553.34 was created. The law provides that a finding of fraud, misrepresentation or bad faith precludes a grant of a waiver of recovery of an overpayment. 38 U.S.C.A. § 5301(c) (West 1991); 38 C.F.R. § 1.963(a) (1998). In this case, the Committee found no fraud, misrepresentation or bad faith on the part of the appellant in the creation of the overpayment. After reviewing the facts and circumstances of this case, the Board agrees with the RO's conclusion. Therefore, waiver of the recovery of the overpayment is not precluded under the provisions set forth in 38 U.S.C.A. § 5302(a) (West 1991). Nevertheless, before the recovery of this indebtedness from the appellant can be waived, it must also be shown that it would be against the principles of equity and good conscience to require him to repay this debt to the Government. 38 C.F.R. §§ 1.963, 1.965 (1999). 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 decision reached should not be unduly favorable or adverse to either side. The phrase "Equity and Good Conscience" means arriving 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. 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. 38 C.F.R. § 1.965(a)(1999). It is clear that the appellant, not the VA, was at fault in the creation on the debt in question, as the appellant was properly notified at the time he was awarded education benefits in August 1993 of the need to inform the VA when his educational status changed. The veteran accepted an advance payment for Chapter 30 education benefits at the full time rate, yet he canceled the registration for the term beginning in September 1995. The veteran retained government funds to which he was not entitled and the Board finds that the appellant was at fault with regard to the creation of the overpayment. The second element pertains to the fault on the part of the VA, and a review of the record does not show that the VA was at fault in the creation of the overpayment. The RO made the advanced payment on the basis of the enrollment certificate dated in July 1995 indicating that the veteran was enrolled for 12 credit hours for the term beginning in September 1995. The veteran canceled the registration without notifying the VA. Accordingly, the Board has determined no fault can be found on the part of the VA in this case. As to the element of undue financial hardship, the appellant has asserted that repayment of the indebtedness in this case would result in financial hardship. The veteran submitted a financial status report in November 1995 which showed that he was married with two dependent children. He reported that he and his spouse had gross monthly income of $1,900 and net monthly income of $1,582. He reported total monthly expenses of $1,540, including $310 per month for rent, $400 per month for food, $210 per month for utilities, $280 per month for child care and $340 monthly payments on installment contracts and other debts, including a car payment, a motorcycle payment, credit card payments and doctor's bills. He reported installment contracts and other debts of $12,912. These included $7,253 owed for a motorcycle, $1,500 owed for a car, $1,355 owed to a doctor and $2,804 owed for other debt. There was a reported balance of $42 per month. In May 1996, the veteran reported on the notice of disagreement, that his financial status had changed. He indicated that he had the same debts but that he was now divorced. He indicated that he was paying $300 per month in child support and earning $1000 per month. In August 1996, the veteran reported on the substantive appeal that he was unable to afford to pay back the overpayment. He reported income of only $116 a week and that his rent was $300 a month. He asserted that he did not have enough money to buy groceries. By letter dated in April 1999, the RO requested the veteran to submit a new financial statement. By letter dated June 1999, the RO again requested that the veteran submit a new financial statement. The veteran has not responded to those requests and a new financial status report has not been received. With respect to the element of undue financial hardship, the Board notes that the pertinent regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor of the basic necessities. Based on the income and expense information of record, the Board concludes that the veteran has not demonstrated that recovery of the debt would render him unable to provide for life's basic necessities. The most recent income and expense information, reflected on the January 1995 financial status report, shows that the veteran had a surplus of $42 per month of income that could be applied toward repayment of the overpayment. It is to be emphasized that this does not mean that some sacrifice on the part of the veteran will not be required. However, absent a finding that the ability to provide for life's basic necessities would be endangered, it may not be held that financial hardship would result. The Board also notes that, at that time, the veteran reported $340 for other debts; however, the debt to the government is of equal importance and there is no reason that the veteran should not accord the government the same consideration that he accords his private creditors. The Board has considered the veteran's more recent assertions that repayment of the debt would create financial hardship. Although given the opportunity to submit a financial status report in support of his claim for waiver of recovery of the overpayment, he failed to do so. Reviewing the financial information of record, the Board does not find that requiring the appellant to repay the indebtedness in this case would not deprive the appellant of basic necessities. The Board notes further that the record also does not reflect that the appellant relinquished a valuable right or incurred a legal obligation as a result of his reliance on these additional benefits. 38 C.F.R. § 1.965(a). The effect on the appellant's financial situation, however, is but one factor for consideration and is not dispositive of the issue on appeal, in and of itself. The Board finds that failure to make restitution would result in unfair gain to the appellant because he received monetary benefits to which he was not entitled. The VA made the advance payment of benefits based on veteran's promise to attend school, when in fact he canceled his registration to attend classes. He, in turn, benefited. To allow him to profit by retaining money erroneously paid as a result of his own fault would constitute unjust enrichment. Another factor to be considered is whether the recovery of the overpayment would defeat the purpose for which the benefits are intended. In this case, the purpose is not defeated as the appellant is not entitled to the advance payment because he canceled his registration and did not attend the courses beginning in September 1995. The Board has weighed the evidence and concludes that the preponderance of the evidence is against the appellant and entitlement to waiver of recovery of Chapter 30 educational assistance benefits in the amount of $553.34 is not warranted. 38 U.S.C.A. § 5107. The Board finds that the facts of this case demonstrate that recovery of the overpayment would be not against the principles of equity and good conscience. 38 C.F.R. §§ 1.963, 1.965. ORDER Entitlement to waiver of recovery of an overpayment of chapter 30 educational assistance benefits in the amount of $553.34 is denied. K. OSBORNE Acting Member, Board of Veterans' Appeals