The VA Says They Overpaid Me, What Does That Overpayment Mean?

An overpayment made by the VA essentially means that the veteran owes the VA money. If the VA determines that there was a payment made to a veteran that was greater than the amount that should have been paid, there is a debt created. This debt is referred to as an overpayment.

Common Causes of Overpayments

• A failure to report a period of incarceration to the VA
• When a veteran who is receiving benefits fails to report income or a change in dependency status. A prime example of this is when a veteran fails to report a divorce to the VA and continues to collect benefits for their former spouse.
• When a veteran changes status in educational programs and does not notify the VA.

Once the overpayment identified, the VA will request that it be repaid. Sometimes the VA can create an overpayment by mistake or the veteran is unable to repay it; the veteran then can dispute it, request a waiver or discuss a compromise with the VA.

What Options Does a Veteran Have?

1. Dispute the validity or amount of the debt
2. Appeal the underlying benefit decision that produced the overpayment
3. Request a waiver (ask VA to forgive all or part of the debt)
4. Request a hearing on the waiver request
5. Appeal a denial (if the VA denies the waiver request or denies the veteran’s challenge to the validity/amount)
6. Make an offer to compromise (pay a smaller lump sum accepted as payment in full)
7. Ask for a repayment plan or a suspension that pauses collection for a time

The VA has to send a veteran written notice when there has been an alleged overpayment. This notice must include the following:

• Exact amount of the overpayment/debt
• The reasons behind the overpayment/debt (this must be provided in simple and clear language)
• How the debt can be paid back to the VA (collection of the debt can be made through an offset of the veteran’s current or future benefits)
• How to dispute the overpayment and how to request a waiver
• The possibility to enter into an agreement of repayment

Disputing the Validity or Amount of the Overpayment

A validity challenge argues that the veteran does not legally owe the debt, or that VA calculated it incorrectly. An overpayment may be invalid if it resulted entirely from VA’s mistake (“sole administrative error”) and the veteran did not contribute to the overpayment and neither knew nor reasonably should have known that the payments were incorrect.

If the veteran chooses to dispute the validity or amount of the overpayment, the VA is required to “review the accuracy of the debt determination.” The veteran should request that the VA send a copy of how they calculated the overpayment. If the dispute is filed within 30 days of receipt of the notice of overpayment, the VA cannot collect on the overpayment until the dispute is resolved.

A veteran can challenge the validity of the debt and request a waiver at the same time. The VA will address whether the debt was validly created before deciding whether recovery should be waived (if the debt is found invalid, there is no valid overpayment to waive).

Requesting a Waiver from VA

A waiver is basically a cancellation of the overpayment that the VA says you owe. VA can grant a full waiver, grant a partial one, or deny the request.

If the VA grants a request for a waiver, then the veteran’s future benefits will not be withheld and the veteran also gets back whatever VA already collected, up to the amount waived.

If a veteran wants to request a waiver of the overpayment, they must do so within 1 year from the date VA sends the notice of indebtedness. VA also accepts requests from an authorized representative or someone who is legally acting for the debtor (like the executor of a veteran’s estate).

Just like with disputing the overpayment, the veteran can stop collection pending VA’s decision if the request for a waiver is submitted within a certain timeframe: the deadlines are 90 days for VA disability compensation or pension benefits and 30 days for education benefit overpayments. If the veteran submits the waiver request after the applicable 90- or 30-day period, VA may begin or continue collection while the waiver request is pending.

When deciding whether to waive the overpayment, VA regulations state that “there shall be no collection of an overpayment, or any interest thereon, when it is determined that a collection would be against equity and good conscience.” Equity is basically whether it would be unfair, or unjust, to the veteran if the VA denied the waiver. The term “good conscience” boils down to looking at whether a reasonable person would think it fair to reduce the veteran’s benefits based on that veteran’s specific circumstances.

Factors VA Considers When Determining Whether to Grant a Waiver

1. Fault of the veteran: The overpayment occurred because of something the veteran did or didn’t do, such as a veteran receiving money for their spouse who becomes divorced and forgets to tell the VA.
2. Fault of the VA: This might be as simple as the VA made an error in the amount they paid you and ended up paying you too much, or they forgot to change your marital status after a divorce. VA fault can weigh in favor of waiver even if it doesn’t invalidate the debt itself.
3. Undue Hardship: Undue hardship would exist if the veteran would not have enough money to pay for food, clothing, shelter, and other essentials if the VA were to stop or reduce that veteran’s monthly payments. The VA will request a financial status report (VA Form 5655) to show proof of how the collection of the debt could cause the veteran a financial hardship.
4. Purpose for which benefits were originally awarded: The VA considers whether collecting the overpayment would defeat the purpose for which the benefits were originally awarded to the veteran. This factor typically is relevant in VA pension cases.
5. Unjust enrichment: Unjust enrichment is when someone unfairly gets a benefit simply by chance, mistake, or another’s misfortune. In other words, the person that has been unjustly enriched has been allowed to profit at another’s expense and it would be ethically or morally wrong to keep the benefits. For example, the attorney who helped a veteran win a claim should have received part of the compensation according to their contract; instead, the VA mistakenly sent the entire sum to the veteran. The veteran did nothing wrong but unknowingly received what rightfully belonged to someone else.
6. Change of position for the worse: Whether the veteran relied on the VA payments and, because of that reliance, gave up a valuable right or took on a legal obligation. For example, if a veteran has taken out a loan with the expectation that they would be able to make the payments on that loan because of their VA benefits, that veteran has now changed their financial position for the worse.

Remember, these are all just FACTORS the VA looks at. There is no single factor that requires the VA to grant or deny a request for a waiver.

Requesting a Hearing

A veteran can ask for an oral hearing on a waiver request, in writing, alongside the request itself. If the overpayment comes from a proposed reduction or termination of ongoing benefits and a hearing is requested within 30 days of the VA sending the notice for the proposed action, the VA is supposed to continue paying monthly benefits at their current rate.

If the VA does not follow this rule, they must restore the veteran’s payments, ensure the hearing is scheduled, and notify the veteran (and his representative) that their action was made in error.

An Offer to Compromise

Another option for a veteran facing an overpayment issue is to offer a compromise payment to the VA. This is an offer to pay an amount less than the total overpayment or debt in order to settle the issue.

A veteran can ask to compromise at any time after getting a notice of overpayment. However, if you submit a request to compromise AFTER you submit a request for a waiver, the VA will consider the offer to compromise first. The VA looks at 5 factors when deciding whether to accept an offer to compromise:

1. Will the full overpayment/debt be repaid in a reasonable time?
2. The age, health, current income, and future income of the veteran
3. Whether the veteran is likely to inherit any money?
4. The assets the veteran has that could be used to pay the debt
5. What the costs of collecting the debt are

The veteran can also contact the VA’s Debt Management Center to try to set up a payment plan. The Debt Management Center is responsible for collecting VA overpayments from the veteran.