In This Section

This section contains the following topics:

Introduction

This topic contains general information on debts, including

• general information about the rights afforded an indebted beneficiary
• reviewing correspondence from beneficiaries, and
• examples of properly interpreting and processing a beneficiary’s expression of disagreement with debt.

Change Date

May 6, 2024

VI.iii.2.C.1.a. General Information About the Rights Afforded an Indebted Beneficiary

A retroactive reduction of a beneficiary’s award usually results in the creation of an overpayment or debt in the beneficiary’s account.

When this occurs, the Debt Management Center (DMC) notifies the indebted beneficiary of the right to

• informally dispute the existence or amount of the debt
• request waiver of collection of the debt, to include a hearing, and
• seek review of the Department of Veterans Affairs (VA) decision underlying the debt.

The table below describes the characteristics of each right afforded to the beneficiary.

Reference:  For more information on the rights afforded an indebted VA beneficiary, see 38 CFR 1.911.

VI.iii.2.C.1.b. Reviewing Correspondence From Beneficiaries

Beneficiaries may send informal debt disputes, waiver requests, or decision review requests directly to the regional office (RO) for action.

Carefully evaluate the verbiage beneficiaries use when they express disagreement with a debt, as they often take this action without explicitly stating their intent or providing the rationale for doing so.

Informal debt disputes received by DMC will be routed to the RO for debt validation and should be processed as discussed in M21-1, Part VI, Subpart iii, 2.C.2.a.

VI.iii.2.A.1.c.  Examples:  Properly Interpreting and Processing a Beneficiary’s Expression of Disagreement With a Debt

The table below contains

• examples of the proper interpretation of a beneficiary’s expression of disagreement with a debt, and
• instructions for processing the beneficiary’s statement.

Note:  A statement of disagreement with a debt may be construed as a request for a waiver of debt.  There is no requirement that a beneficiary explicitly request a waiver in no uncertain terms.

References:  For more information on

• VA’s duty to sympathetically read correspondence from a beneficiary, see Edwards v. Peake, 22 Vet.App. 29 (2008)
• legacy appeals, see M21-5, Chapter 7
• higher-level reviews, see M21-5, Chapter 5
• supplemental claims, see M21-1, Part II, Subpart iii, 2.B
• determining whether a beneficiary’s statement constitutes a request for waiver of a debt, see
  • M24-3, Chapter 8, and
  • VA Financial Policy, Volume XII, Chapter 11A, and
• the Committee on Waivers and Compromises (COWC), see M21-1, Part VI, Subpart iii, 2.C.3.a.

Introduction

This topic describes the actions to take in response to an informal debt dispute, including

• processing a beneficiary’s informal debt dispute request, and
• additional informal debt dispute requests.

Change Date

May 6, 2024

VI.iii.2.C.2.a.  Processing a Beneficiary’s Informal Debt Dispute Request

Informal debt disputes originating at DMC will be referred to the RO as a debt validation request.

Follow the steps in the table below to control and respond to the inquiry from DMC.

Omit the action described in Step 6 of the table below if the informal debt dispute originates at the RO.

Note:  When an informal debt dispute originates at the RO, use the document’s subject line to clearly identify the notification associated with Steps 4 and/or 5 in the electronic claims folder (eFolder) so that it can be referenced if DMC submits a debt inquiry to the RO.

VI.iii.2.C.2.b.  Additional Informal Debt Dispute Requests

The right to informally dispute a debt is limited to one time per debt.  Debtors continue to have the right to request a waiver of the debt or pursue a decision review option when VA adversely resolves the debt dispute request.

Follow the steps in the table if an additional informal debt dispute request is received.

Introduction

This topic contains information on processing a request for waiver of a debt, including

• description of the COWC
• processing a debt waiver request originating at the RO
• processing an award after VA grants a request for waiver of a debt, and
• example of a situation in which
  • VA must withhold benefits from a retroactive award, and
  • withholding benefits from a retroactive award is not in order.

Change Date

May 6, 2024

VI.iii.2.C.3.a.  Description of the COWC

The COWC is a decision-making panel comprised of designated VA employees of the St. Paul and Milwaukee Pension Management Centers and DMC that is responsible for

• conducting hearings, and
• accepting or rejecting waiver requests or compromise offers.

Note:  The COWC is not responsible for determining the validity of a debt.  If a debtor raises this issue, the COWC refers it back through the LEAF system to DMC for proper routing as an informal dispute. 

References:  For more information on the COWC, see

• M24-3, Chapter 8, and
• VA Financial Policy, Volume XII, Chapter 11A.

VI.iii.2.C.3.b.  Processing a Debt Waiver Request Originating at the RO

When a debt waiver request originates at the RO, refer the waiver request, along with all related documentation, to DMC by submitting a Found Waiver ticket using the LEAF system.

VI.iii.2.C.3.c.  Processing an Award After VA Grants a Request for Waiver of a Debt

If VA retroactively awards benefits over a range of dates that includes a time period over which VA previously created and later waived all or part of a debt, the claimant might not be entitled to the full amount of the lump-sum retroactive payment.

Explanation:  The retroactive payment of benefits for a time period over which VA had previously created and waived a debt would represent a duplicate payment of benefits if the basis for the adjustment that resulted in the debt and the basis for the subsequent retroactive award is the same.  In such cases, claims processors must follow the instructions in the table below for withholding any benefits VA already paid a beneficiary.

Notes: 

• If the COWC has waived all or part of a debt, documentation of the waiver will exist in the beneficiary’s eFolder.
• For an example of a case in which
  • VA must withhold benefits from a retroactive award because VA waived a prior debt, see M21-1, Part VI, Subpart iii, 2.C.3.d, and
  • withholding benefits from a retroactive award because VA waived a prior debt is not in order because the basis for the adjustment that created the debt and the basis for the retroactive award are not the same, see M21-1, Part VI, Subpart iii, 2.C.3.e.

References:  For more information on

• using eMPWR-VA, see the eMPWR-VA User Guide, and
• establishing withholdings in VBMS, see the VBMS-Awards Users Guide.

VI.iii.2.C.3.d.  Example:  VA Must Withhold Benefits From a Retroactive Award

Situation: 

• A Veteran received pension based on income of $2,400.00 for the period August 1, 2022, through July 31, 2023.  (This income consisted of a monthly Social Security benefit of $200.00.)
• In February 2024, the Veteran reports that her Social Security income was actually $215.00 per month (or $2,580.00 per year) for the same period of time. 
• VA adjusts the Veteran’s award to reflect the increased income, thereby creating an overpayment (debt) of $180.00.
• The Veteran subsequently requests a waiver of the debt.
• VA waives the entire amount of the debt. 
• The Veteran later submits to VA a letter from the Social Security Administration (SSA) showing her correct gross monthly rate of Social Security income was $200.00 from August 1, 2022, through July 31, 2023.

Actions: 

• The subsequent award adjustment reflecting the lower rate of Social Security income must include a withholding of $15.00 per month.
• The corresponding decision notice must inform the Veteran that the purpose of the withholding is to prevent duplicate payment of benefits following VA’s waiver of a prior debt.

Note:  Had the Veteran, for example, submitted unreimbursed medical expenses for the period August 1, 2022, through July 31, 2023, instead of submitting the letter from SSA, a withholding would still be in order because the basis for the two award adjustments – countable income for VA purposes – remains the same.

VI.iii.2.C.3.e.  Example:  Withholding Benefits From a Retroactive Award Is Not in Order 

Situation:

• In September 2018, VA created a debt when it retroactively removed the Veteran’s son from the Veteran’s award effective July 1, 2016, because the Veteran failed to return VA Form 21-0538, Mandatory Verification of Dependents.
• The Veteran subsequently submitted, and VA granted, a request for a waiver of the entire debt.
• In February 2019, the authorization activity promulgated a rating decision that granted service connection for a knee disorder, rated 10-percent disabling, effective March 1, 2016.

Result:  A withholding is not in order because the basis for the September 2018 award adjustment (entitlement to additional benefits for a child) is not the same as the basis for the February 2019 award adjustment (entitlement to disability compensation for a compensable service-connected disability).

Introduction

This topic contains information on disagreements with debt decisions, including, disagreements

• with a debt decision, and
• not submitted on a prescribed form.

Change Date

May 6, 2024

VI.iii.2.C.4.a.  Disagreements With a Debt Decision

Claimants can seek review of their VA benefits decisions through the decision review process by submitting one of the prescribed forms in M21-5, Chapter 4, Topic 2.c.

Exception:  Follow the guidance set forth in M21-1, Part X, Subpart ii, 5.A.2 when the beneficiary submits a statement requesting revision of a decision based on CUE.

References:  For more information on

• legacy appeals, see M21-5, Chapter 7
• higher-level reviews, see M21-5, Chapter 5, and
• supplemental claims, see M21-1, Part II, Subpart iii, 2.B.

VI.iii.2.C.4.b.  Disagreements Not Submitted on a Prescribed Form

Treat disagreements with a VA decision that resulted in a debt that are not submitted on the appropriate prescribed decision review form or as a valid statement of CUE as a request for application.

Note:  When the claimant’s request is unclear, obtain clarification by telephone.

References:  For more information on

• requests for application, see M21-1, Part II, Subpart iii, 2.G.1.a
• obtaining information by telephone, see M21-1, Part III, Subpart i, 2.D.1.d and e, and
• properly interpreting and processing a beneficiary’s expression of disagreement with a debt, see M21-1, Part VI, Subpart iii, 2.C.1.c.