One of two events may take place whenever the VA pays a veteran more than it should, either an Overpayment or an Administrative Error/Error in Judgement. An overpayment is when the veteran or veteran’s dependent receives more money than allowed because of an action or lack of action of the veteran or dependent. This can include under-reporting income, not reporting a change in family status, or defaulting on a VA-guaranteed loan. This can also include failing to report Social Security back-pay while receiving VA Pension. In contrast, an Administrative Error/Error in Judgement occurs when the VA erroneously overpays a veteran or dependent through no fault of the beneficiary. This can include when the VA fails to provide clear notice of a specific reporting requirement, and there is no evidence that the veteran or dependent has reason to believe that he or she is not entitled to the extra compensation.
What Are Your Options?
When presented with a potential Overpayment, the alleged debtor may dispute the validity or amount of the debt, request a waiver of collection of the debt, offer a settlement amount to satisfy the debt, or any combination of the three simultaneously. There is no deadline to dispute the validity or amount of the debt, however if the alleged debtor submits a dispute within thirty (30) days of receiving the Notice of Overpayment (NOO) the VA will stay collection by offsetting other VA benefits. Unlike a dispute, there is a one-hundred and eighty (180) day deadline from the NOO to request a waiver of recovery of a debt.
To obtain a waiver, the VA must find that “collection would be against equity and good conscience.” The VA may not waive a debt if there is “an indication of fraud, misrepresentation, or bad faith….” Bad faith is further defined as an action worse than the lack of good faith and is an “unfair or deceptive dealing…undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government.” In determining equity and good conscience, the VA must weigh:
- the relative fault of the debtor versus the relative fault of the VA in creating the debt,
- whether collection would cause undue hardship;
- whether collection would defeat the purpose of the benefit involved;
- whether failure to collect would result in unjust enrichment of the debtor; and
- whether the debtor has relied upon the benefits to be offset to his or her detriment.
All decisions regarding VA overpayment are appealable. However, unlike most VA benefit appeals, upon remand the VA can actually increase the amount of overpayment. This was upheld by the Court of Appeals for Veterans Claims in Majeed v. Nicholson, 19 Vet. App. 525 (2006).
If the amount of the debt is less than one-hundred-thousand dollars ($100,000.00), the beneficiary can offer a settlement to the government of a lesser amount. The strongest support for such a compromise is usually that the debtor is unable to pay the full amount in a reasonable time, the government’s case in court seeking the enforced collection is weak, and the cost of pursuing collections is not justified by the debt amount.
If the debtor dies before satisfying the overpayment, the VA may collect from the decedent’s estate. If the decedent died after September 11, 2001, from service-connected injuries, the VA can terminate the uncollected portions of the debt.
 38 C.F.R. §§ 1.962 and 1.963 (a). See Cullen v. Brown, 5 Vet. App. 510, 512 (1993).
 38 C.F.R. §1.965(b).
 Id at § 1.965(b)(2).