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Simple English definitions for legal terms
presumed abuse
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A quick definition of presumed abuse:
Presumed abuse is when someone tries to use bankruptcy to avoid paying their debts, but they actually have enough money to pay them back. This is determined by comparing their income to the average income in their state. If their income is higher, they may be required to file for a different type of bankruptcy or prove that they have special circumstances that make it difficult for them to pay their debts. Special circumstances could include things like a serious illness or being called to serve in the military.
A more thorough explanation:
Presumed abuse is a term used in bankruptcy law. It means that if someone filing for Chapter 7 bankruptcy has a monthly income higher than the median income for their state and cannot pass the means test, the court will assume they are trying to abuse the bankruptcy system. This means they will not be allowed to file for Chapter 7 bankruptcy unless they can prove they are not abusing the system.
For example, if someone in California has a monthly income of $7,000 and the median income for their state is $5,000, the court may presume they are abusing the system. However, if they can prove they have special circumstances, such as a serious medical condition or being called to active duty in the Armed Forces, they may still be able to file for Chapter 7 bankruptcy.
Special circumstances are unexpected situations that are beyond the debtor's control and justify allowing them to deduct additional expenses or make additional adjustments to their current monthly income on the means test. These circumstances can help the debtor prove they are not abusing the bankruptcy system.