Presumption of Abuse in Bankruptcy

The presumption of abuse guidelines were established when Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. One of the reasons for the act was to prevent people who make too much money to file Chapter 7 bankruptcy and eliminate their debt when they have more than enough income to pay for.

Means Test

The BAPCPA was passed to discourage people filing Chapter 7 bankruptcy when they could afford to pay their debt and instead file Chapter 13 and make court approved repayments.

The means test uses your states median income and compares it to your last six months of income minus your living expenses. If you make more than your state’s median, you will not be able to file Chapter 7 unless you can prove your debt is more than you can pay.

Allowable Expenses

You are allowed to deduct certain expenses from your income when determining if you qualify for Chapter 7 bankruptcy:

• Housing
• Utilities
• Food
• Clothing
• Insurance
• Care of disabled, ill or elderly family member

If your income exceeds your expenses, the Trustee will notify the creditors that the bankruptcy is presumed to be abusive. You can dispute it by providing documentation to prove your claim.

Common reasons why your income may appear to be more than your debt is overtime was available at one time during the last six months but is no longer available. Unexpected expenses could also help you qualify for Chapter 7, such as an increase in rent, high medical bills or recent unemployment.

If you do not qualify for Chapter 7, your bankruptcy case will be converted to a Chapter 13 bankruptcy, and you will be put on a court-approved repayment plan.

If you have questions whether you will qualify for Chapter 7 bankruptcy to have your debt wiped away, contact a Fort Worth bankruptcy attorney to discuss what options you may have.