When the VA Wants Its Money Back: Handling a VA Overpayment Demand

Receiving mail from the Department of Veterans Affairs (VA) may be a source of excitement for some folks, particularly when they are waiting for news of an initial VA decision. However, once a claimant is getting the correct monthly benefit, correspondence from the VA is generally not good news. Unfortunately, there are times when the VA decides that benefits were awarded and paid in error, resulting in an overpayment demand from the VA’s Debt Management Center. The Debt Management Center (DMC) is a separate department from the Pension Management Center (PMC). The PMC may send you a decision letter explaining why a claimant’s entitlement has changed, but it is left to the DMC to issue the actual request for repayment if the change in entitlement has resulted in a so-called overpayment. This is done via a form letter punctuated by only a few personal details, such as the type of benefit, the amount of debt, and the date on which the VA plans to start withholding benefits until the amount overpaid is recouped. The horror is compounded by the convenient payment remittance stub at the bottom, by which the VA hopes you will pay in full within 30 days.

Overpayment demands occur for various reasons. The claimant’s income may have increased and/or there is a decrease in medical expenses, so he/she no longer qualifies for the same monthly benefit. Or the claimant may have received an inheritance that disqualified him/her completely, based on the VA treating the inheritance as both income and countable assets after a certain date, even though the claimant continued to receive a benefit. If there is indeed more income/less medical expenses than previously reported, consider submitting actual medical expenses for the same time period if sufficient to offset the discrepancy. However, just because the VA claims to have overpaid, that does not necessarily mean that the claim is accurate. Sometimes an overpayment demand is simply the result of a clerical error or the VA considering historical income and/or asset information that should be irrelevant post the effective date.

When you receive an overpayment notice from the DMC, you must generally respond in some way within 30 days of the date of the letter. Responding within this time frame will also ensure that any scheduled withholding action does not occur until after your response is considered by the VA. How you respond depends on whether the overpayment demand has merit and/or whether or not the claimant can repay the debt. If the claimant does owe the debt, the back of the form letter gives you four different ways to pay: by phone, by mail, online, and via Western Union Quick Collect. The DMC has its own toll-free number: (800) 827-0648. If you cannot afford to pay the entire debt at once, the VA is willing to make arrangements for repayment over time or even ultimately to grant a waiver of the debt, if the claimant does not have the means to repay at all.

Claimants may dispute a debt if it is not owed or dispute the amount of the debt if it is inaccurate. The form letter from the DMC should be accompanied by VA form 0748, which is a Notice of Rights and Obligations that explains the claimant’s options for appealing and requesting a waiver of a debt. If you dispute the debt, you must explain in writing why you dispute the validity of the debt or the amount of the debt. If you request a waiver of part or all of the debt, you must explain in writing either why you are not responsible for the debt or how collection of the debt would cause undue hardship. Claims of hardship should be documented by submitting a VA form 5655 Financial Status Report within 180 days, which the VA considers in deciding whether to waive the debt. Pursuant to 38 CFR §1.963, “Recovery of overpayments of any benefits made under laws administered by the VA shall be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the [claimant] and recovery of the indebtedness . . . would be against equity and good conscience.”

Finally, you must remember – having now dealt with the DMC – to consider whether you should also respond to the appropriate pension department. If an overpayment occurred because the VA made an erroneous decision, you would need to file a request for reconsideration or notice of disagreement with the Pension Management Center serving your particular state in order to start the appeal process. I would not count on the VA to consider your dispute of a debt as an appeal of the PMC’s decision.

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC, and Director of VA Services for Lawyers with Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.