When there is a presumption of abuse

If your monthly disposable income (also known as net CMI) is less than $117.08 per month ($7,025 ÷ 60), then no presumption of abuse exists. On the other hand, if your disposable monthly income exceeds $195.42 per month ($11,725 ÷ 60), a presumption of abuse always arises. If the disposable monthly income falls in between these numbers, abuse is presumed if the disposable income over a five-year period is sufficient to pay at least 25 percent of the debtor’s (your) general unsecured debts in the next 60 months. Therefore, if the disposable monthly income falls between $117.08 and $195.42, the amount of the debtor’s unsecured debt is considered. If the trustee suspects abuse in a Chapter 7 case after reviewing the debtor’s (your) documents, the trustee will notify the clerk of the court that abuse is suspected. The trustee must notify the clerk of the presumption of abuse within ten days after the first meeting of creditors. The clerk then must notify all creditors of the suspected abuse within seven days.

Rebutting a presumption of abuse

The presumption of abuse may be rebutted by demonstrating the existence of special circumstances that justify additional expenses or adjustments of the net CMI for which there is no reasonable alternative. The Bankruptcy Code includes a serious medical condition or a call to active duty in the Armed Forces as examples of special circumstances. To illustrate the special circumstances, the debtor must provide detailed documentation and itemization of the special circumstances that justify an adjustment to the CMI. If the presumption of abuse exists, the debtor (you) must file a statement describing the special circumstances that give rise to the abuse. If the debtor does not file the statement, the clerk will notify all creditors of the presumption of abuse within ten days of filing the petition. A Chapter 7 case may be dismissed for abuse if the presumption does not exist or has been rebutted. The second basis for finding abuse is if a debtor filed the case in bad faith or the totality of a debtor’s financial circumstances indicates abuse.