presumed abuse
Presumed abuse or presumption of abuse is a concept associated with bankruptcy . In 2005, the presumption of abuse guidelines was established by the Congress when it enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
In a Chapter 7 bankruptcy , when the debtor's current monthly income exceeds the family median income for his or her state, and the debtor cannot pass the means test , the court will presume the debtor is attempting to abuse the bankruptcy code , and that the debtor has enough money for a Chapter 13 bankruptcy plan. In this situation, the debtor will not be allowed to proceed with a Chapter 7 bankruptcy unless the debtor can prove that he or she is not abusing the Chapter 7 bankruptcy remedy.
The presumption may be rebutted by providing documentation that special circumstances exist to receive a chapter 7 remedy. Special circumstances are unanticipated situations beyond the debtor’s control that justify allowing the debtor to deduct additional expenses or make additional adjustments to his/her current monthly income on the means test.
A serious medical condition or a call to active duty in the Armed Forces are two specific examples of special circumstances listed in the bankruptcy code.
[Last reviewed in September of 2021 by the Wex Definitions Team ]
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