BVA9502908 
DOCKET NO.  93-04 865     )       DATE
          )
          )

On appeal from the decision of the
Department of Veterans Affairs Regional Office in Des Moines,
Iowa

THE ISSUE

Recovery of a loan guaranty indebtedness.

WITNESS AT HEARING ON APPEAL

Appellant

ATTORNEY FOR THE BOARD

Michael A. Pappas, Associate Counsel

INTRODUCTION

The appellant was separated from active duty in November 1971
following over two years and nine months of active service.

This matter comes before the Board of Veterans' Appeals (the
Board) on appeal from a decision on waiver of a loan guaranty
indebtedness of the Department of Veterans Affairs (VA) Des
Moines, Iowa, Regional Office's Committee on Waivers and
Compromises (RO).  The appellant's loan guaranty indebtedness had
been established by negotiated agreement in the amount of
$5,500.00, plus accrued interest.  This amount was subsequently
paid by the appellant to the VA.  In November 1991, the appellant
requested a waiver of the loan guaranty indebtedness and a
reimbursement of the amount he had previously paid.  A February
1992 decision of the RO denied the appellant's request for a
waiver.  The appeal was received and docketed at the Board in
March 1993.  The appellant has represented himself throughout his
appeal.

The appellant has not challenged the validity of his loan
guaranty indebtedness.  Accordingly, the Board limits its
consideration to the issue of waiver of the indebtedness.

CONTENTIONS OF APPELLANT ON APPEAL

The appellant asserts that the RO committed error by failing to
grant a retroactive waiver of recovery of his previously collected
loan guaranty indebtedness, in the amount of $5,500.00.
Essentially, the appellant argues that he should not be considered
at fault in the creation of the indebtedness, the VA and the note
holder were partially at fault, and the enforcement of collection
resulted in an undue hardship to him.

Specifically, the appellant believes that the RO did not favorably
consider the following mitigating factors:  (1)  Shortly after
purchasing the subject property used as security for the VA
guaranteed loan, the appellant was required by his business to
move to a new city, away from the subject property.  The appellant
then sold the subject property under circumstances that reasonably
led him to believe that the loan payment obligation would continue
to be met.  In fact, as part of the transaction, the purchasers
were to apply for the release of the appellant from further
liability under the loan and the VA indemnity obligation.  This
sale occurred prior to the initial uncured default of the VA
guaranteed loan.  Unfortunately, shortly after their purchase, one
of the purchasers had a heart attack, lost his job, and was no
longer able to make the monthly loan payments.  Because of their
debilitated financial status, the purchasers were also precluded
from qualifying to assume the liability of the appellant under his
loan indemnity obligation.  Consequently, the appellant remained
liable.  (2)  Following the initial uncured default on the loan,
the appellant was willing to do everything he could to avoid the
foreclosure, but realistically, since he no longer owned the
property, there was nothing that he could do but allow the
property to be sold at foreclosure.  In essence, the appellant
argues that he was no longer in control of the circumstances that
lead to foreclosure, and therefore, he should not now be held
responsible for its consequences.  (3)  The failure of the note
holder and the VA to liquidate the subject property in an
efficient manner through a timely foreclosure inordinately
increased the loan guaranty indebtedness that has been charged to
the appellant.  (4)  The only way that the appellant was able to
obtain the money required to pay the VA in the negotiated
compromise of the loan guaranty indebtedness was through the use
of a credit card.  The appellant was originally grateful to avoid
the possibility of an indebtedness to the VA in excess of
$20,000.00.  Following the negotiated settlement, however, the
appellant's income decreased by a factor of 40 percent.  As a
result, the appellant was required to borrow from his Individual
Retirement Account to meet several other obligations.  He still
owes the credit card company the amount that he borrowed to pay
off the loan guaranty indebtedness; the reimbursement of that
amount would allow the appellant to remain in current status on
his obligations to other creditors, including the Internal Revenue
Service.  Consequently, it must be construed that the recovery of
the appellant's loan guaranty indebtedness by the VA created an
undue hardship to the appellant and his family.

The proper consideration of these factors should have led the RO
to find that a waiver of the appellant's entire loan guaranty
indebtedness would not be against the principles of "equity and
good conscience."

DECISION OF THE BOARD

The Board, in accordance with the provisions of 38 U.S.C.A. § 7104
(West 1991), has reviewed and considered all of the evidence and
material of record in the appellant's claims files.  Based on its
review of the relevant evidence in this matter, and for the
following reasons and bases, it is the decision of the Board that
the preponderance of the evidence is against the appellant's
request for a waiver of recovery of his loan guaranty
indebtedness, in the amount of $5,500.00, plus accrued interest.

FINDINGS OF FACT

1.  All relevant evidence necessary for an equitable disposition
of the appellant's appeal has been obtained by the RO.

2.  There was a default in the appellant's VA guaranteed loan
necessitating a foreclosure sale of the subject property resulting
in the appellant's negotiated loan guaranty indebtedness of
$5,500.00, plus accrued interest. The appellant subsequently paid
off that indebtedness to the VA, in full.

2.  The appellant was not without fault in the creation of his
loan guaranty indebtedness.   Through the pursuit of a resale of
the subject property and a negotiated settlement with the VA, the
appellant attempted to mitigate the amount of the loan guaranty
indebtedness.

3.  The VA and the note holder were not at fault in the creation
of the loan guaranty indebtedness.

4.  The appellant would be unjustly enriched if a waiver of
recovery of his loan guaranty indebtedness was granted.

5.  The appellant's income, with consideration of the cost of
life's basic necessities, was sufficient to permit repayment of
the loan guaranty indebtedness, without resulting in excessive
financial difficulty, and the collection of that indebtedness
would not be inequitable.

CONCLUSIONS OF LAW

1.  There was a default on the VA guaranteed loan, resulting in a
loss of the property which constituted security for the loan.
38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. § 1.964(a)
(1994).

2.  Recovery of the appellant's loan guaranty indebtedness would
not violate the principles of equity and good conscience.
38 U.S.C.A. §§ 5107, 5302; 38 C.F.R. § 1.965(a) (1994).

REASONS AND BASES FOR FINDINGS AND CONCLUSIONS

The Board notes that the appellant's claim with respect to waiver,
is "well grounded" within the meaning of 38 U.S.C.A. § 5107(a).
That is, he has presented a claim which is not inherently
implausible.  The Board is also satisfied that all relevant facts
have been properly developed.  There is no indication that there
are other records pertinent to the appellant's claim for a waiver
which have not been obtained.  Consequently, no further assistance
to the appellant is required to comply with the duty to assist the
appellant mandated by 38 U.S.C.A. § 5107(a).

Factual Background

The documentary evidence before the Board supports the following
factual summary:

In December 1984, the appellant and his spouse purchased a home
in Iowa from another veteran and his spouse for $63,518.38,
financed partially by the assumption of a VA guaranteed loan.
The appellant and his spouse also assumed the obligation to
indemnify the VA in the event of a future loss on the loan
guaranty.  The subject loan had an existing principal balance of
$63,018.38.  Under the terms of the underlying contract of
conveyance, the appellant had agreed to pursue the release of the
continuing liability of the original veteran-seller under the VA
loan.  Pursuant to that end, the appellant allowed the sum of
$1,600 to be held in escrow until the release was received by the
original veteran.  In conjunction with qualifying to assume the
original veteran's liability, the appellant filed a financial
statement.  It was noted in that statement that the appellant's
gross monthly income was $7,000.00 for work as a sales manager
with an insurance company.  This information was verified by the
appellant's employer.  By May 1985, the VA was satisfied with the
documentation received from the appellant, and informed the
original veteran that he would be released from all liability to
the VA under the loan guaranty.

The appellant claims that he and his spouse resided in the
subject property for approximately three years, at which point
his business required that he move to St. Louis.  They marketed
the subject property for sale and soon found a potential buyer.
Although the sale had not been consummated, they allowed the
potential buyer to move into the subject property under the
condition that he would make the monthly mortgage payments until
the sale could be finalized.  The potential buyer failed to do
so; there was a default on the loan for the March 1, 1988
payment.  The appellant claims that he was forced to resume
payments on the loan, and had to hire an attorney to remove the
potential buyer from the subject property.  By June 1988, this
original default was cured.  The appellant and his spouse sought
another buyer.

In October 1988, the appellant and his spouse conveyed the
subject property to Terry E. Hobt and Sharon K. Hobt, husband and
wife.  Under the terms of the sale, the Hobts had agreed to
assume the obligation under the subject VA guaranteed loan, and
had further agreed to obtain a release of the liability of the
appellant from the VA loan and indemnity obligation.  The Hobts
never pursued the release of liability for the appellant.

The first uncured default occurred with the July 1, 1989 payment.
A Notice of Default was issued by the note holder to the VA in
October 1989.  It was noted in that document that the transferee
(Mr. Hobt) had contacted the note holder to inform them that the
default was due to a heart attack.  He indicated that he would
double his payments, and be able to make up the arrearage within
two months.  The transferee was unable to follow through on the
proposed repayment plan.

In November 1989, the note holder issued to the VA a Notice of
Intention to Foreclose.  On November 14, 1989, the VA sent a
letter to the note holder directing them to proceed to
foreclosure.  The VA also sent a letter to the appellant to
inform him of the default of the transferees' and to advise him
of his continuing liability under the loan.  The appellant began
a series of communications with the note holder, the VA, the
Hobts, and a new potential purchaser, Craig Schaefer.  The
possibilities of a resale of the property, or a deed in lieu of
foreclosure by the transferees, were discussed.  In December
1989, the VA directed a letter to the note holder asking that
liquidation action be taken.  It was noted that foreclosure
should be completed by August 12, 1990; that date was established
as the cutoff date for the accumulation of interest for which the
VA would be responsible under the loan guaranty.

In January 1990, the note holder's attorney initiated the
foreclosure process by directing letters to the appellant and his
spouse, and to the Hobts, to inform them of their legal right to
cure the default by February 19, 1990.  In March 1990, the Hobts
met with the VA and discussed the possibility of curing the
default, and their other options, including the possibility of
offering a deed in lieu of foreclosure.  A VA representative also
contacted the appellant to discuss with him his options.  It was
projected that the liability of the VA under the loan guaranty
would be approximately $18,612.00.  It was noted that this
liability could eventually become a debt to the appellant, and be
the subject of active collection efforts by the VA.

According to the note holder's attorney's ledger, on March 22,
1990, a Petition in foreclosure of the subject property was filed
on behalf of the note holder, in the Iowa District Court in and
for Polk County.  The appellant and his spouse, the Hobts, and
Craig W. Schaefer, among others, were all named as party
defendants.  The appellant and his spouse, and the Hobts,
retained legal counsel to represent them in the matter.  It
appears that between March 1990 and November 1990, the matter was
contested vigorously by all parties.  It appears that each party
defendant, including the appellant, provided answers to the
petition, motions for discovery, and other pleadings.  The
appellant and his spouse also filed for a cross-claim judgment
against the Hobts.

In April 1990, the appellant explored the possibility of
brokering a deed in lieu of foreclosure between the Hobts and the
VA.  In May 1990, however, it became clear to the VA that the
Hobts had abandoned the possibility of offering a deed in lieu of
foreclosure.  It was noted that they had retained counsel; it was
speculated by the VA that the Hobts had decided to let the
foreclosure process be completed and live in the subject property
for the duration.

In November 1990, the attorney for the appellant and his spouse,
the note holder's attorney, the Hobt's attorney, and a loan
guaranty officer at the RO acting as a representative of the VA,
entered into active negotiations towards a settlement of the
contested foreclosure.  These negotiations continued until a full
settlement was reached in January 1991.

Under the terms of the negotiated settlement, in the likely event
that the VA would be required to pay the note holder on the VA
loan guaranty following a foreclosure, the appellant and his
spouse agreed to pay the total sum of $5,500.00 to the VA as a
lump sum settlement payment.  It was further agreed that that
amount would be held in escrow by the appellant's attorney until
such time as the VA was required to tender payment on the
guaranty.  It was expressly agreed that, thereafter, the
appellant would be able to follow established VA procedures for
the request of a waiver.  In exchange for the appellant's
payment, the note holder, with the permission of the VA, agreed
to dismiss the appellant and his spouse as defendants in the
foreclosure action, and further agreed that they would be
precluded from asserting any further claim against the appellant
and his spouse for a post-foreclosure deficiency on the loan.
The appellant and his spouse, however, expressly retained their
cross-claim rights against the Hobts in the lawsuit.

In January 1991, the VA directed the note holder's attorney to
dismiss the appellant and his spouse as defendants in the
foreclosure.  It was also requested that the Hobts be released
from personal liability under the loan in order to seek the
shortest redemption period under the circumstances.  A Final
Decree filed in February 1991 gave the note holder a judgment in
rem in the amount of $64,781.86, plus interest, attorney fees in
the amount of $4,022.53, and court costs.  According to the note
holder's attorney's ledger, on February 12, 1991, "attention [was
directed] to [the] receipt of [a] judgment entry regarding [the]
cross suit."

A foreclosure sale was held on May 30, 1991.  The note holder was
the successful bidder at the sale for VA's specified bid amount
of $52,988.00.  Thereafter, the note holder conveyed the subject
property to the VA for the specified bid amount.  In June 1991,
the note holder assigned to the VA their rights to a deficiency
judgment that had been entered in the subject foreclosure suit.
In September 1991, the note holder filed a claim against the VA
on the loan guaranty.  In October 1991, a claim under the
guaranty was paid to the note holder in the amount of $21,180.43.
The appellant's attorney was informed of the VA's payment on the
guaranty, and the consequential establishment of the appellant's
debt to the VA in the amount of $5,500.00.  In November 1991, the
appellant's attorney forwarded payment in that amount to the VA
in satisfaction of his client's outstanding indemnity obligation.

Pursuant to his contemporaneous request for a waiver of recovery
of the loan guaranty indebtedness, the appellant and his spouse
submitted a comprehensive financial status report in November
1991.  He noted that he had been self-employed since 1979 as an
insurance sales broker.  The appellant's spouse was not employed
outside of the home.  They reported one minor dependent.  The
appellant reported that his monthly gross income was $6,700, but
after deductions for taxes, social security, and business
overhead, his monthly net income was listed as $2,439.  They
reported monthly expenses totaling $4,005.  These expenses
included $1,248 for mortgage payments, $500 for food, $195 for
utilities and heat, $340 for auto expenses, $228 for insurance,
and $1,279 for payments on installment loans or other debts.
After payment of monthly expenses, the appellant indicated that
they were left with a negative net balance of $1,566.

The appellant and his spouse reported assets totaling $165,067,
consisting primarily of their home valued at $126,000.  Since
they listed the value of the mortgage owed on the home as
$112,300, but did not deduct that amount from its value, in
reality, the actual total equity in their home was $13,700.
Their other assets included two automobiles valued at $8,500,
furniture valued at $10,000, cash in the bank valued at $1,367,
and an IRA valued at $19,200.  They reported that the unpaid
balance of their other debts totaled approximately $26,355.
These debts included the balance due from the original $5,500
credit card debt allegedly borrowed to pay off the loan guaranty
indebtedness.  They indicated that they were current on all of
their outstanding debt obligations.

In February 1992, following the active marketing of the subject
property, the VA resold it to a private individual for the gross
sales price of $60,000, incurring additional expenses in the
process.

Analysis

The law and regulations authorize a waiver of collection of a loan
guaranty indebtedness from an appellant where he has been found to
be free from an indication of fraud, misrepresentation, or bad
faith, and both of the following factors are found to exist:

(1) After default there was a loss of the property which
constituted security for the loan, and (2) collection of the
indebtedness would be against equity and good conscience.
38 U.S.C.A. § 5302(b); 38 C.F.R. § 1.964(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 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) The fault of the debtor, (2) balancing of faults
between the debtor and the VA, (3) undue hardship of collection on
the debtor, (4) a defeat of the purpose of an existing benefit to
the veteran, (5) the unjust enrichment of the veteran, and,
(6) whether the veteran changed positions to his detriment in
reliance upon a granted VA benefit.  38 U.S.C.A. § 5302; 38 C.F.R.
§ 1.965(a).

The RO found the appellant to be free from an indication of fraud,
misrepresentation or bad faith, and the Board concurs with that
preliminary finding.  In the evaluation of whether equity and good
conscience necessitate a favorable waiver decision, the Board must
consider all of the specifically enumerated elements applicable to
a particular case.  However, the issues of fault, unjust
enrichment, and undue financial hardship, are more significant to
the case before us.  Furthermore, although not an explicit element
of equity and good conscience, the Board also looks to whether the
appellant attempted to mitigate the indebtedness.  The RO found
the appellant to be free from fault in the creation of the
indebtedness, but denied a waiver based upon the general
principles of equity and good conscience.  The Board concurs with
their ultimate finding, but disagrees with their finding regarding
fault.

VA's working definition of "fault" is "The commission or omission
or an act that directly results in the creation of the debt."
(Veteran's Benefits Administration Circular 20-90-5, February 12,
1990)  Fault should initially be considered relative to the degree
of control the appellant had over circumstances leading to the
foreclosure.  If control is established, even to a minor degree,
the secondary determination is whether the debtor's actions were
those expected of a person exercising a high degree of care, with
due regard for the debtor's contractual responsibilities to the
Government.  The age, financial experience, and education of the
debtor should also be considered in these determinations.

The Board's analysis of fault presents two distinct avenues for
review:  the manner in which the appellant sold the subject
property, and the appellant's negotiated settlement of the debt
with the VA following the initiation of the judicial foreclosure
by the note holder.  Clearly, the appellant was in direct control
of the debt obligation during his entire ownership of the subject
property.  This includes the time period immediately preceding his
sale of the property.  The appellant's initial attempt to sell the
subject property met with near financial disaster.  Fortunately,
and to his credit, the appellant was able to recover from the
aborted sale.

Following that initial experience, the Board believes that the
appellant, who appears to be an extremely sophisticated and savvy
business person, should have been cognizant of the difficulty
associated with finding a responsible purchaser to assume the VA
loan.  Consequently, he should have taken additional steps to
insure that he would not be held responsible for any resulting
indebtedness in the event that the parties to whom he sold the
subject property defaulted on that loan.  It should be noted that
the original veteran from whom the appellant had purchased the
subject property only three years prior had required that money be
held in escrow to assure that the appellant, would take the
necessary steps to relieve the original veteran from further
obligations under the loan.  It would have been prudent if the
appellant had taken similar steps.  In contrast, based upon an
imputed minimal price of the appellant's sale, and the limited
conditional terms, it appears that the appellant's transferees,
the Hopts, had very little to lose.  Granted, the appellant could
not have predicted that one of the transferees would have a heart
attack and lose his job; but it does not appear that the heart
attack itself was the ultimate cause of the foreclosure.  Had the
appellant been more selective in finding and negotiating with a
credit worthy purchaser, the consequences of foreclosure may have
been more formidable to that purchasers and more difficult to
ignore.  The appellant acted in a manner that was expedient to his
needs, and only secondarily considered the consequences to the VA.
He did so at his peril.  The Board finds that the decisions were
taken to the detriment of his contractual responsibility to the
Government.

The appellant argues that he should not be considered at fault
since, at the time of the foreclosure, he no longer owned the
subject property, and therefore, was no longer in control of the
underlying VA debt obligation.  This is true only in a limited
sense.  It is true that the appellant no longer owned the subject
property, but he remained primarily responsible under the VA
indemnity obligation, and secondarily responsible under the loan
obligation.  He was made a party to the foreclosure suit; he
actively defended his interests in that suit; and he became the
key figure in negotiating its end.  It was, in fact those very
negotiations that resulted in the creation of the appellant's
loan guaranty indebtedness.  Under VA's definition of "fault,"
the Board is concerned with whether the appellant was responsible
for "the commission or omission or an act that directly results
in the creation of the debt."  "Fault" in terms of "right or
wrong" is secondary, if not irrelevant.  Determining the
proximate cause of the resulting debt is the critical issue.   It
was the appellant through his attorney who pre-emptively
negotiated a reduced indebtedness.  He did so of his own
volition, and under no apparent duress.  By definition, the
appellant must be considered at fault in the creation of that
loan guaranty indebtedness.

Notwithstanding this conclusion, the Board may take into
consideration any mitigating factors, and a finding of fault can
be tempered by a finding that the appellant made some efforts to
avoid or minimize the loan guaranty indebtedness.  The record
shows that the appellant was able to cure at least one earlier
default in 1988.  This undoubtedly was the result of a serious
effort made on his part, under adverse conditions.  Further,
following the initial uncured default by the transferees in 1989,
he made a concerted effort to negotiate a resale or a deed in lieu
of foreclosure.

Placing these acts in their best light, it can be found that the
appellant made a significant effort toward the avoidance of
foreclosure.  In so doing, he exhibited a sense of responsibility
for his obligation to the Government, although it was secondary to
the allegiance he had for his own financial well-being.  It would
be unrealistic for him to believe, however, that he could avoid
the entire debt.  The appellant's efforts in mitigation of his
fault can be acknowledged under "equity and good conscience."
This approach is consistent with the end result of the foreclosure
settlement negotiations and the arrival at a substantial reduction
of the appellant's ultimate indebtedness.  The amount that the
appellant was required to pay represented less than twenty five
percent of the debt that could have been assessed against him by
the VA.

In summary, the appellant made financial choices that he believed
were in his best interest; in so doing, he unilaterally agreed to
accept the consequences of those choices.  He negotiated the
amount of his indebtedness in the first place, and in so doing, he
has already, in effect, been credited for his unsuccessful efforts
toward reducing the considerable financial harm incurred by
others, namely the VA.

The appellant has argued that, in a balancing of faults, the VA
and the note holder should share responsibility for an inordinate
increase in the amount of the indebtedness since they failed to
liquidate the subject property in an efficient manner through a
timely foreclosure.  The appellant is reminded that the primary
cause of the delay in the foreclosure sale was the fact that the
foreclosure was actively contested by the appellant and the
appellant's transferees.  This is not to imply that a veteran or
debtor should refrain from pursuing any legitimate defense he or
she may have to a foreclosure in a court of law, or be somehow
penalized for doing so.  Indeed, that should never become a
factor.  It must be understood, however, that when a foreclosure
is contested by a debtor, the additional time taken in court
cannot be used as a defense to the increase resulting in the
ultimate indebtedness because of a contemporaneous accumulation of
interest.

Notwithstanding, it is noted that the foreclosure action was
initiated nine months after the initial default.  In the interim,
a concerted effort was made by all, including the appellant, to
avoid the foreclosure altogether.  At the time of the initiation
of the foreclosure in March 1990, the VA had projected that the
loan guaranty indebtedness would be approximately, $18,612.  In
fact, the total loan guaranty paid by the VA in October 1991 was
$21,180.43.  Therefore, although it may be true that an inordinate
time did transpire between the initial default and the time that
the subject property was finally sold at foreclosure, the evidence
shows that a relatively minimal portion of the ultimate
indebtedness accumulated because of the unintentional delay.  In
any event, it was the VA and not the appellant that ultimately
absorbed the additional indebtedness.

In a waiver determination, the Board is required to consider
whether the granting of a waiver would provide an unjust
enrichment to the appellant.  The evidence suggests that the
appellant and his spouse may have been able to secure a cross-
claim judgment against the Hobts, in the judicial foreclosure
action.  The amount of this judgment is unknown, and the
certainty that it will ever be collected is probably remote.
Nevertheless, if such a judgment were secured, and if any
monetary gain were to materialize as a result, this would become
a substantial asset that would be obtained unjustly if a total
waiver of the appellant's loan guaranty indebtedness were
granted.

Finally, the Board must retroactively analyze the appellant's
financial status during that period of time when his loan guaranty
indebtedness was collected.  In that regard a determination must
be made as to the actual impact of the loan guaranty payment on
his ability to discharge his responsibilities to provide himself
and his family with the basic necessities of life during that
time.  Following this analysis, the Board may factor in the
various aspects discussed above in a determination whether equity
and good conscience would necessitate a waiver of the appellant's
indebtedness.

After having objectively reviewed the financial data provided by
the appellant, it is found that it substantiates the fact that the
collection of his debt obligation in a single lump sum did not
seriously impair his abilities to provide himself and his family
with the basic necessities of life.  At the time of the collection
of the indebtedness in 1991, the appellant had a substantial
income.  Although his expenses, including business expenses, were
portrayed as exhausting his total income, it does not appear that
he and his spouse made an effort to minimize those expenses.
Although the appellant claims that he had to incur a credit card
debt in order to make the loan guaranty payment, it is significant
to note that he had substantial assets that could have been
liquidated as an alternative.  Further, the appellant has argued
that the reimbursement of the loan guaranty debt, would allow him
to pay off other creditors.  The appellant is reminded that a debt
to the VA must be accorded the same regard given to those other
creditors.  Further, the appellant is relatively young, educated,
and employed in a historically lucrative business.  Not only was
he able to repay the indebtedness with minimal hardship, it is
found that he should also be able to personally recoup the amount
he was required to pay the VA without impairing his abilities to
provide himself and his family with the basic necessities of life
in the future.

The Board has determined that the fault of the appellant in the
creation of the loan guaranty indebtedness was reduced, but still
significant.  The VA was entirely without fault, but has absorbed
a substantial loss in this transaction.  The appellant made an
attempt to mitigate the amount of that loss, but his efforts have
heretofore been amply rewarded.  It has also been determined that
he has the potential to be unjustly enriched as a direct result of
his actions, but more importantly, that he had the financial
ability to repay the indebtedness.  It is noted that the RO found
the appellant was less than at fault in the creation of the
indebtedness, but denied a waiver since it was further determined
that an undue hardship would not be created.  Under the principles
of "equity and good conscience," the RO was free to choose
whichever of the specifically enumerated elements found in
38 C.F.R. § 1.965(a) they deemed appropriate.  They were also able
to consider pertinent elements that are not specifically
enumerated.  The weight to be accorded each element in arriving at
their determination was at their discretion, provided that the
determination was not unduly favorable or adverse to the obligor
or the Government, and was generally fair.

The Board believes that the RO arrived at a fair determination
that was not unduly favorable or adverse to either the Government
or the appellant.  The Board finds, therefore, that under the
principles of equity and good conscience, taking into
consideration, as a whole all of the specifically enumerated
elements of 38 C.F.R. § 1.965(a), it was not unfair to recover
$5,500.00, plus accrued interest, of the appellant's loan guaranty
indebtedness.  The decision of the RO is affirmed for the reasons
and bases cited herein.

ORDER

Waiver of recovery of the appellant's loan guaranty indebtedness,
in the amount of $5,500.00, plus accrued interest, is denied.

          RENÉE M. PELLETIER
          Member, Board of Veterans' Appeals

The Board of Veterans' Appeals Administrative Procedures
Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, ___
(1994), permits a proceeding instituted before the Board to be
assigned to an individual member of the Board for a
determination.  This proceeding has been assigned to an
individual member of the Board.

NOTICE OF APPELLATE RIGHTS:  Under 38 U.S.C.A. § 7266 (West
1991), a decision of the Board of Veterans' Appeals granting less
than the complete benefit, or benefits, sought on appeal is
appealable to the United States Court of Veterans Appeals within
120 days from the date of mailing of notice of the decision,
provided that a Notice of Disagreement concerning an issue which
was before the Board was filed with the agency of original
jurisdiction on or after November 18, 1988.  Veterans' Judicial
Review Act, Pub. L. No. 100-687, § 402 (1988).  The date which
appears on the face of this decision constitutes the date of
mailing and the copy of this decision which you have received is
your notice of the action taken on your appeal by the Board of
Veterans' Appeals.