Overpayments of VA Benefits

When a veteran receives money from the VA that the VA later thinks the veteran shouldn't have received, the VA will issue a debt or overpayment. This is essentially the VA's way of getting money back that was paid to a veteran by mistake.

If you've received an overpayment notice, you have some options in how to respond. This guide will help you figure out the best way to respond to a notice like this from VA and hopefully help you keep as much of your benefits as possible.

Why am I getting this notice?

There are a few common reasons why the VA creates an overpayment –

• Unreported Income: You receive VA non-service-connected pension and the VA learned you received more money than your reported earnings. For example, you turned 65 and started to receive your Social Security Retirement benefits in addition to your VA Pension, but you didn't tell the VA about this new, additional income.
• Education Debts: You were enrolled in school using GI Bill education benefits, but you had to drop out mid-semester.
• Incarceration: You were incarcerated for over 60 days after a felony conviction, but still received your full service-connection benefits while in prison.
• Dependents: You were paid for a dependent, but you weren't entitled to receive additional benefits for them. For example, you got divorced but never told the VA, and they continued to pay you at the rate of a veteran with a spouse.

The VA is often alerted of these issues because they will cross check other government databases, such as the Internal Revenue Services (IRS), the Social Security Administration (SSA), the Bureau of Prisons (BOP), and other correctional facilities databases. Using the veteran's Social Security Number, the VA will periodically check to see if a veteran is still eligible to receive benefits. If your information shows that you were overpaid benefits due to unreported incomes, incarceration, or other issues, that's when the VA will do an accounting, calculate how much you were overpaid, and issue a debt notice.

How does the VA get the overpaid money back?

In these cases, the VA will issue a bill. If that bill isn't paid, the VA has a few ways to collect on the debt. The most common way is to recoup the money from future VA benefits checks that the veteran would receive. For example, if the veteran owes $10,000, and would normally receive $1000 a month in VA benefits, the VA will stop the veteran's benefit payments for 10 months to recoup the debt amount ($1000/mo x 10 months = $10,000). If that option isn't available, the VA may also repay itself by taking money from the veteran's future federal tax returns, and even state and federal job income and benefits.

Steps VA Takes to Process an Overpayment

Step #1: Regional Office – Proposed Overpayment Notification Letter:

The first step in this process is typically a Notification Letter from the VA Regional Office saying that the VA thinks it overpaid you and is proposing to create a debt. Read this letter carefully as it will explain your options.

The VA will allow you to file a hearing request at this point, and if you file that within 30 days, the VA will pause any collection action until the hearing takes place. This means you'll continue to get your benefits until the hearing date. If, after the hearing, the VA still thinks you owe money back, the amount you received while you waited for a hearing will get added to your total debt, so you should not to spend that money if possible while you wait for a hearing.

A hearing is especially helpful if the VA is missing important facts and would likely decide you don't owe the money once those facts are considered. For example, the VA can reduce or stop benefits after a criminal conviction, but time spent in jail before trial should not affect benefits. The prison records that the VA crosschecks may not show this level of detail though, so the VA might wrongly claim an overpayment based on pre-trial jail time. In that case, you can request a hearing to explain you and submit court documents showing the overpayment is wrong.

Step #2: Debt Management Center – Overpayment Notice

If you don't respond to the Regional Office Notification letter, or if you do but the Regional Office decides that the overpayment is still valid, the VA's next step is to send your overpayment information to the VA's Debt Management Center (DMC) – this is the VA office that will create the debt and issue you a bill for the overpayment.

At this point, you have a few options of how to respond.

Option for Responding to a DMV Overpayment Notice:

Option #1: Waiver – Best option if you cannot afford to repay the VA

One option is to request that the VA "waive" the debt, or in other words, ask the VA to get rid of the debt all together. This option is available when the veteran proves they are financially unable to pay the debt back. For example, if there's no way for you to pay your rent and buy groceries if the VA recoups your benefits, you will want to file a waiver request.

What's my deadline to file a Waiver Request?

The deadline to file a waiver request is one year from the date of the DMC Overpayment Notice. But, if you file the waiver request within 30 days of the DMC notice, the VA will continue to pay you your full monthly benefits while it processes the waiver request, which usually takes several months.

If you file your waiver request after the 30-day deadline but before the one-year deadline, the VA will still process your waiver request, but it will begin to withhold your monthly benefits on the date specified in the notice. You'll be without VA funds, at least until the VA makes a decision on your request. If the decision goes in your favor, the VA will then pay you all the money that's been withheld.

Should I include a statement and evidence along with the VA Form 5655?

Yes! In deciding whether to give a veteran a debt waiver, the VA considers six factors, listed below. Ideally, you will want to write a statement explaining any of these factors that are relevant to your situation. It doesn't need to be long – 1-2 pages.

And, you'll want to provide any documentation or statements from other people that will help support what you've said in your statement. For example, if the VA thinks you stopped going to school in January, but you stopped attending in August, provide school records showing that.

TIP: Don't worry if you don't include every factor in your waiver request. Not all factors apply to every case, so only use the ones that fit for your situation.

Waiver Factors:

• Were you "at fault" in creating the overpayment? One factor that the VA will consider is how much you are to blame for the debt. So, if you have a valid reason that excuses what happened, you'll want to explain that to VA. For example, you have memory issues due to a service-connected Traumatic Brain Injury (TBI) which caused you to forget to tell the VA of your divorce. Or, you had to drop out of school mid-semester because your PTSD symptoms became unmanageable. Or, you didn't know you needed to report that one-time inheritance check that you received to the VA, and had you known, you would have told VA right away.
• Was the VA "at fault" in creating the overpayment? Another factor is if the VA contributed at all to the overpayment. For example, you promptly reported your new income to the VA, but the VA took six months to reduce your monthly payments. Or, you wrote the VA to tell them you were incarcerated, but they didn't do anything about that until years later. In these cases, the VA carries some of the blame for continuing to pay you when it shouldn't have.
• Would repaying the debt cause "undue hardship" to you and your family by depriving you of basic necessities? If the VA stopped or reduced your monthly benefits, would you still have enough money to pay for food, clothing, shelter, and other essentials? If not, the VA will strongly consider that in its decision whether to waive the debt.
• Would recovery of the overpayment defeat the purpose of the benefit? This factor is about the underlying purpose of the VA benefit that you receive, that the VA is planning to cut off to repay your debt. One example is if you receive VA pension. Pension is meant to be a financial "safety net" for low-income veterans and their families, to ensure they can take care of their basic needs, like housing. If a reduction in your pension benefits, for example, would cause you to go homeless, the reduction would defeat the purpose for which the VA awarded the benefit in the first place.
• Would failure to recover the overpayment leave you "unjustly enriched"? The VA wants to make sure you won't have a lot of extra money left over if they waive your debt. Would you be left with a windfall if the VA failed to stop or reduce your benefits? If no, then you should provide the VA with an accurate picture of your current finances to show that you wouldn't be flushed with cash if VA waived your debt.
• Have you changed your position or made certain choices because you were relying on the benefits the VA now wants to recover? For example, say you signed a new lease for an apartment or a car assuming you would receive your VA benefits. If the VA recoups that money now, you'll risk eviction or repossession. In other words, you've "changed your position" in the expectation that your VA benefits would be sufficient to cover the payment. In these circumstances, the VA would consider whether it's fair to stop or reduce your benefits.

Think about all six factors when you write your statement telling the VA why you believe it should cancel the overpayment. The stronger your argument, the better your chances of success.

You can write your statement on VA Form 21-4138, Statement in Support of Claim. Or, you can write your statement in a letter to the DMC – but if you do that, be sure to include your full name, social security number, and sign and date the statement. Ideally, above your signature, include "I sign this under the pains and penalty of perjury in the United States of America."

How do I request a waiver?

You'll fill out VA Form 5655– Financial Status Report to request a waiver, and write in the top righthand box "WAIVER". On the form, you'll see a section asking about your monthly expenses, like your rent, food, transportation, and utilities. If these expenses add up to a dollar amount that is higher than the amount you would receive if the VA turned off your benefits to repay the debt, the VA will see that as an indication that you are unable to afford to repay the debt. You'll submit this form with your statement, all at once.

Keep a copy of your form and statement for your records, and mail the original documents, with tracking, to:

U.S. Department of Veterans Affairs
Debt Management Center
PO Box 11930
St. Paul, MN 55111

Or you can submit the forms by fax to: 612-970-5688 (be sure to get a fax confirmation sheet)

TIP: If your one-year deadline is near, you should send in the VA Form 5655 right away so you don't miss the deadline. Then, within the next week or so, write out the statement and collect whatever documents you can, and submit those to VA right away. What's important is that you send in the form before the 1-year mark.

What happens next?

VA will review your 5655 form and statement, and weigh the factors listed above to determine whether to fully waive the debt, partially waive the debt, or deny the waiver. If your waiver request is denied, you can appeal the denial following the instructions you receive with the VA decision notification letter.

Option #2: Dispute the Debt – Best Option if the VA made a Mistake in Creating the Debt

Another way to respond to a DMC debt notice is to file an appeal to dispute the validity of the debt. In this appeal, you are disagreeing with the VA about whether you owe back any money or the amount of money you owe back.

What's my deadline to dispute a debt?

There's no deadline to file a dispute, but you should do so as soon as you realize that the VA committed a mistake in your overpayment. You can also request a hearing. If you notify the VA in writing within 30-day of receiving the DMC notice, the VA won't start collecting on the debt until after the hearing takes place. If you lose your appeal though, you may owe back all the money you received while the appeal hearing was pending, so it would be best not to spend that money until you know the outcome of the appeal.

TIP: You can submit an appeal at the same time you submit your waiver request.

How do I file a dispute?

To file a dispute, you don't need to use a special form. You could write it in a letter to the DMC, or use VA Form 21-4138, or you can fill out VA Form 5655– Financial Status Report with the DMC and write in the top righthand box "DISPUTE VALIDITY OF DEBT" or "DISPUTE AMOUNT OF DEBT".

You'll want to include a statement explaining to the VA why the debt should not have been created, or why the amount is incorrect -- be sure to include as much detail as possible. Lastly, include any important documentation to support your reasoning for why the VA debt is incorrect, for example documents related to your dependents, or incarceration, or proof that you didn't receive income that the VA claims you did.

You can submit an appeal on your VA.gov account or by mail at:

U.S. Department of Veterans Affairs
Debt Management Center
PO Box 11930
St. Paul, MN 55111

Option #3: Payment Plan – Best Option if you owe VA money but want to pay the debt off over time

The third option is to request that the DMC put you on a payment plan to repay the debt. By default, the VA will repay itself the amount you owe by taking it from your current monthly VA benefits check. Typically, the VA will take 100% of your monthly check until the debt is repaid in full. But, instead of having VA take the full amount, you can request the VA to put you on a payment plan so that only a portion of your monthly check is taken out.

For example, let's say you the VA normally pays you $1,000 a month, and you have a VA debt of $10,000. Normally, the VA would stop paying you entirely for 10 months until the debt is fully paid off. (10 months x $1,000 = $10,000).

But, instead, you can request the VA to put you on a 3-year payment plan to pay the debt off over 36 months instead of 10 months. In that case, you'll continue to receive $722.22/month, and the VA will be "repaid" $277.78/month toward your debt. (36 months x $277.78 = $10,000). You can request up to a 5-year payment plan (60 months), which would increase your monthly check amount even more.

Tip: You can request a Payment Plan if the VA is collecting on your debt while your request for a Waiver or Appeal is pending.

What's my deadline to request a Payment Plan?

There is none – you can request one at any time.

How do I request a Payment Plan?

It's easy! You simply call the DMC and ask for one. Their phone number is: 800-827-0648 (TTY: 711). If you're outside the U.S., call +1-612-713-6415. They're open Monday through Friday, 7:30 a.m. to 7:00 p.m. ET.

Do I have any other options?

In rare cases, the VA will agree to "compromise" your debt—that is, to reduce the total amount you'll have to repay. This often involves a process of negotiation with the VA Debt Management Center, so it would be wise to seek assistance from a Veterans Service Organization (VSO). A VSO can also help you prepare a waiver request or a Notice of Disagreement.

Disclaimer

This memorandum provides general information only. It does not constitute legal advice, nor does it substitute for the advice of an expert representative or attorney who knows the particulars of your case. Any use you make of the information in this memorandum is at your own risk. We have made every effort to provide reliable, up-to-date information, but we do not guarantee its accuracy. The information in this memorandum is current as of May 2026.

© Copyright Swords to Plowshares 2026. These materials are the property of Swords to Plowshares and are made available at no charge. For parties interested in using or distributing these materials, please note that no alterations are permitted and proper attribution must be given to Swords to Plowshares.

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