The new bankruptcy law which took effect in 2005 brought two new concepts. One is the “means test”. The other is the “PRESUMPTION OF ABUSE”. The two go hand in hand. The “means test” is a method of computing the disposable income of debtor to determine whether debtor is eligible for a bankruptcy, and specifically what kind of bankruptcy, a Chapter 7 or 13. If the “means test” analysis shows that debtor has some disposable income, a debtor may be tagged as abusing bankruptcy law, if the “PRESUMPTION OF ABUSE” is applicable to debtor’s bankruptcy case. 11 U.S.C. ∫ 707(b)(2)(A) states that the “court shall presume abuse exists if the debtor’s current monthly income reduced by the amounts determined …and multiplied by 60 is not less than the less of: (I) 25% of the debtor’s non-priority unsecured claims in the case, or $6,575, whichever is greater; or (II) $10,950. What happens if there is a “PRESUMPTION OF ABUSE” in the case? The U.S. Trustee will file a motion to dismiss your case because you are deemed to be abusing bankruptcy law.

To respond to the motion to dismiss, you can either convert your Chapter 7 case into Chapter 13 where you will pay a portion of your unsecured debt over a period of 60 months, or you can oppose the motion by rebutting the ‘presumption of abuse’ with ‘special circumstances’ that ‘justify additional expenses or adjustments of current income for which there is no reasonable alternative”. For instance, if you are able to show that you have cancer and do not have enough insurance to cover medical expenses, you will be able to rebut the ‘presumption of abuse’ and your Chapter 7 case will go though. How about age? Are senior citizens able to rebut this presumption just because they are older and want to retire without debt?

《楊清泉律師專欄》REBUTTING THE PRESUMPTION OF ABUSE IN BANKRUPTCY WITH AGE (PART II)