Bench & Bar March/April 2025

FEATURE: MILITARY LAW

FINANCIAL DIFFICULTIES FOR VETERANS OVERPAID BY BRAD HARRIS

T hrough several programs, the Veterans Administration (VA) provides monthly payments to veterans and other beneficia ries. Changes in eligibility, antiquated VA technology, and internal communication errors between IT systems lead to many overpayments to veterans, often through no fault of their own. Because there is no limit on how much the VA can ask a veteran to repay, and no limit on how far back it can go to collect the debt, these sums can become enormous. Many times, the VA withholds entire checks from veterans who may be living on fixed incomes, potentially leading to housing instability, food insecurity, and dif ficulty paying medical bills. A veteran’s obligation to repay the overpayment is not affected by the fact that the balance due was caused not by the veteran but by VA administrative error. This lack of defense to the government’s claim is very frustrating to those who were unaware of the responsibility to refund the government. In addition to VA error, an overpayment problem develops when the veteran fails to report changes in marital status, employment, or dependents, and to follow other complex rules of required VA benefit regulations. There are limited options for repayment plans. The stress and anx iety of managing a large debt and the potential for further financial hardship can significantly impact a veteran's mental health. EXAMPLE OF THE PROBLEM One client had an improper debt collected in full. It took 10 years for the VA to acknowledge their error, which cost the client over $7,800 in benefits. Before the VA fixed the error, the client's 100 percent disability was awarded, but the error stopped that from being paid. Then the computer system increased the original debt to the 100 percent amount, creating an additional $14,000 in debt. WHAT CAN VETERANS DO IF FACING AN OVERPAYMENT? VA law provides that 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 faults. The VA will weigh the veteran’s and VA’s degree of fault in causing the overpayment. (3) Undue hardship. Whether collection would deprive the veteran or family of basic necessities. (4) Defeat the purpose. The VA will consider whether withholding benefits or recovery would nullify the objective for which benefits were intended. For example, it might defeat the purpose of the VA Pension program if collecting the overpayment would prevent the veteran from paying for basic necessities. (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). A veteran facing an overpayment problem can dispute the overpay ment by contesting it, and requesting a review. Although veterans are not required to hire an attorney, a legal professional or veterans service organization can help the veteran understand their rights and options. The Overpayment Accountability Act of 2021 aims to address these issues by improving VA IT systems to reduce the likelihood of erro neous overpayments due to poor communication between systems. It also seeks to provide better credit protection for veterans who have received overpayments. Here are summaries of several overpayment cases that may be help ful to attorneys representing veterans with overpayment issues: DOCKET NO. 09-30 977 CITATION NR: 1530375 DECISION DATE: 7/16/15 $6,482.50 due to failure to report veteran’s incarceration for a felony

16 march/april 2025