Debt Disputes and Collection | M21-1 VI.iii.2.C

What this means

m21-1:VI.iii.2.C explains debt disputes and collection. In plain terms, the official guidance says a retroactive reduction of a beneficiary’s award usually results in the creation of an overpayment or debt in the beneficiary’s account. It also addresses informal debt disputes originating at DMC will be referred to the RO as a debt validation request.

How this may help with a claim

Use m21-1:VI.iii.2.C to audit how VA handled debt disputes and collection. Start with the decision date, the issue being reviewed, and the evidence VA was allowed to consider, then compare the record with this rule: A retroactive reduction of a beneficiary’s award usually results in the creation of an overpayment or debt in the beneficiary’s account. Informal debt disputes originating at DMC will be referred to the RO as a debt validation request. Cite the exact document and page when raising a factual or procedural error, and use the review rights in the actual notice for any deadline.

What to review in your file

Check the file against this official condition: When this occurs, the Debt Management Center (DMC) notifies the indebted beneficiary of the right to
Confirm that the record or notice addresses this source point: 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.
Document how this stated step or exception applies: Scenario — Action; The beneficiary asserts the debt is unjust and she should not have to repay it (particularly where a delay in claims processing resulted in creation of a larger debt than might have otherwise been incurred).

Important limits

m21-1:VI.iii.2.C explains VA guidance for debt disputes and collection; it does not guarantee an award or replace the statutes, regulations, binding decisions, and review instructions that control an individual claim. Conditions and exceptions still matter, including this source point: A retroactive reduction of a beneficiary’s award usually results in the creation of an overpayment or debt in the beneficiary’s account. 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 veteran or claimant might not be entitled to the full amount of the lump-sum retroactive payment.

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Phrases that may help when searching your claim file or this library.

Debt Disputes and Collection
m21-1:VI.iii.2.C
Debt Disputes Collection
About Debts
about rights afforded indebted
reviewing correspondence beneficiaries
examples properly interpreting processing
VI.iii.2.C.1.a. About Rights Afforded

Original VA guidance

The official VA text of this section

Overview

In This Section

This section contains the following topics:

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Topic	Topic Name
1	General Information About Debts
2	Actions to Take In Response to an Informal Debt Dispute
3	Processing a Request for Waiver of a Debt
4	General Information on Disagreements With Debts

1. General Information About Debts

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.

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Rights of the beneficiary	Characteristics
Informal dispute	A written statement from the beneficiary in which they question whether the debt is still outstanding and/or whether the amount is accurate.
Waiver request	A written statement from the beneficiary explaining why they should not be responsible for payment of the debt, or why collection of the debt would be unfair and create a financial hardship.
Decision review request	Completion of one of the following standardized forms for the underlying decision that resulted in the debt: VA Form 20-0995, Decision Review Request: Supplemental Claim VA Form 20-0996, Decision Review Request: Higher-Level Review, or VA Form 10182, Decision Review Request: Board Appeal.

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.C.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.

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Scenario	Action
The beneficiary asserts the debt is unjust and she should not have to repay it (particularly where a delay in claims processing resulted in creation of a larger debt than might have otherwise been incurred).	Treat the beneficiary’s statement as a request for waiver of the debt. Follow the instructions in M21-1, Part VI, Subpart iii, 2.C.3.b.
The beneficiary asserts the debt was incorrectly calculated.	Treat the beneficiary’s statement as an informal dispute. Do not treat the beneficiary’s statement as a request for a waiver of the debt. Follow the steps in the table in M21-1, Part VI, Subpart iii, 2.C.2.a.
The beneficiary asserts the debt was incorrectly calculated and notes that its repayment would create a financial hardship.	Treat the beneficiary’s statement as a(n) informal dispute, and request for waiver of the debt. Follow the steps in the table in M21-1, Part VI, Subpart iii, 2.C.2.a to address the validity of the debt. Follow the instructions in M21-1, Part VI, Subpart iii, 2.C.3.b to refer the waiver request to DMC.
The beneficiary asserts the underlying VA decision that created the debt was improper and wants VA to make a new decision.	Treat the beneficiary’s statement as a(n) request for application, when the statement is not submitted on a decision review request standardized form decision review request, when the beneficiary submits the appropriate form, or allegation of clear and unmistakable error, when the beneficiary’s statement meets the requirements set forth in M21-1, Part X, Subpart ii, 5.A.2.a.

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.

2. Actions to Take In Response to an Informal Debt Dispute

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.

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Step	Action
1	Establish control under end product (EP) 290 with the appropriate Debt Validation or PMC – Debt Validation claim label. References: For more information on establishing EP control, see M21-4, Appendix B, and EP claim labels, see M21-4, Appendix C.
2	Was the award adjustment that resulted in creation of the debt appropriate and properly executed? If yes, go to Step 5. If no, establish EP 930 using the date of claim of the underlying claim that was processed incorrectly correct the award, and go to the next step.
3	Did correction of the award eliminate the debt in its entirety? If yes, go to the next step. If no, go to Step 5.
4	Prepare and send a decision notice that notifies the beneficiary of the corrective action taken, and that the corrective action eliminated the debt in its entirety. Go to Step 6.
5	Notify the beneficiary that VA reviewed the award adjustment that created the debt and found it was proper in all respects, or V A made a correction to the award adjustment that created the debt, but the correction did not eliminate the debt in its entirety. Note: Do not provide decision review options when no change is warranted in the original decision.
6	Submit a Dispute Response ticket to DMC using the Light Electronic Action Framework (LEAF) system. Important: In support of the ticket prescribed above, provide the claimant’s file number or claim number and include the Veterans Account Management System (VAMS) case number included on the DMC debt dispute cover sheet, if of record, as well as the receipt date and document type of relevant documents in the Veterans Benefits Management System (VBMS).
7	Clear the EP 290.

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.

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Step	Action
1	Was an EP 290 established to control the informal debt dispute? If yes, change to EP 400. If no, establish an EP 400.
2	Inform the claimant that VA has already reviewed the validity of their debt, and any further disagreement needs to be submitted through the applicable decision review process, or as a request for a waiver of the debt.
3	Clear the EP 400.

3. Processing a Request for Waiver of a Debt

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.

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Step	Action
1	Use the Enterprise Management of Payments Workload and Reporting for VA (eMPWR-VA) to determine the amount of the debt COWC waived for any time period that overlaps the time period the pending award will affect.
2	On the OTHER ADJUSTMENTS tab in the awards-processing system, select Debt Waiver in the ADJUSTMENT REASON field enter the amount that must be withheld each month in the ADJUSTMENT AMOUNT field, and enter the time period for the withholding in the FROM DATE and TO DATE fields.
3	Make any other necessary adjustments to the beneficiary’s award.
4	Follow the instructions in M21-1, Part VI, Subpart i, 1.B, for notifying the beneficiary of the actions taken.

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).

4. General Information on Disagreements With Debts

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.