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 updated in September of 2021 by the Wex Definitions Team]