Debts & Over-Payments
Recipients of veterans’ benefits may find themselves subject to a debt collection action by the VA. Commonly a debt is created when the VA pays more benefits than it should have. For example, the amount of a veteran’s Non-service-connected Pension is reduced for every dollar in income the veteran receives. If the veteran underreports his income to the VA, this will create an overpayment and a debt will be owed to the VA. Similarly, an overpayment will be created if a veteran who receives spousal pay for his Disability Compensation fails to report his divorce. Other common debts are created from a veteran defaulting on a VA-guaranteed home loan. No overpayments will be created when excess payments were awarded based solely on VA administrative error.
The VA’s policy is to attempt to collect debts aggressively. The VA may attempt to collect the debt by reducing or discontinuing benefits, seizing tax refunds, and suing the debtor.
The VA says I owe them money, what are my rights and remedies?
The alleged debtor has the following rights and remedies:
- Dispute the validity or the amount of the debt.
Disputing the validity or amount of the debt requires the VA to review the accuracy of the debt. There is no deadline to dispute the debt, but if the dispute is submitted within 30 days after notice of the overpayment, collection actions by the VA will stop until the dispute is resolved. You can send a letter disputing the debt. There is no official VA form to use for submitting a dispute.
- Request waiver of collection of the debt.
The debtor has 180 days from the date of the notice of the debt to request a waiver of recovery of a debt. The waiver can be requested in a letter as there is no official VA form. The debt will be waived if collection would be against “equity and good conscience.” The following factors are considered in determining if collection of the overpayment would be against equity and good conscience:
- The fault of the debtor versus the fault of the VA in the creation of the debt;
- Whether collection would cause undue hardship, in the form of depriving the debtor and his family of basic necessities;
- Whether failure to collect would result in the unjust enrichment of the debtor; and
- Whether the debtor has changed their position for the worse in reliance on the VA benefits to be offset or collected.
You can dispute the debt and request a waiver at the same time. When this happens, the VA will first decide the validity of the debt. If the debt is found to be valid, the VA will issue a written decision discussing the validity of the debt. After the written decision is prepared, the VA will decide the waiver. A hearing can also be requested and the VA must provide the hearing prior to reaching a decision about the dispute and waiver requests. If either the waiver request or the validity of the debt is denied, the decision can be appealed, including appealing to the Court of Appeals for Veterans Claims.
- Offer a compromise payment.
A debtor has the option to offer a “compromise” payment to the VA of an amount less than the total debt in order to settle the matter. In determining whether to accept a compromise offer, the VA will consider:
- The debtor’s ability to pay the full amount of the debt in a reasonable time
- The strength of the VA’s case in court
- The cost of collecting the claim
It can be difficult dealing with the VA when it comes to debts and overpayments. Let the Law Office of Edward M. Farmer help you. Contact us now.