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What is the Presumption of Abuse When Filing for Bankruptcy?

Filing for bankruptcy can be a daunting prospect, especially when the legal jargon starts to get confusing. One key term you might come across is the “presumption of abuse” when filing for Chapter 7 bankruptcy.

This legal concept can influence whether you are eligible for bankruptcy and what type of debt relief you can receive. If you want to learn more about the presumption of abuse and how it affects your ability to file for Chapter 7 bankruptcy, contact the Law Offices of Melanie Tavare. Our Oakland Chapter 7 bankruptcy lawyer to discuss what debt relief options you may have in your particular case.

What is the Presumption of Abuse?

The presumption of abuse is a legal presumption that arises when someone files for Chapter 7 bankruptcy. When you file for bankruptcy, you will be required to complete a “means test,” which calculates your disposable income.

If your disposable income is above a certain threshold and you do not qualify for certain exceptions, the court can presume that you are abusing the bankruptcy system by attempting to discharge debts that you could reasonably repay. This presumption can make it more difficult for you to qualify for Chapter 7 bankruptcy and might limit the amount and types of debt that can be discharged.

Fact: According to the U.S. Department of Justice, citing the Federal Bureau of Investigation (F.B.I.) data, an estimated 10% of all bankruptcy filings involve fraud.

Why the Presumption of Abuse Matters

The presumption of abuse matters because it can limit your access to debt relief. If the court presumes that you are abusing the system, it might require you to file for Chapter 13 bankruptcy instead of Chapter 7. Chapter 13 involves setting up a repayment plan that lasts for three to five years and paying off a portion of your debts over that time. This can be more difficult and expensive than a Chapter 7 bankruptcy, which discharges your debts without requiring any sort of repayment plan. Additionally, if the presumption of abuse applies, you might only be able to discharge certain types of debt or none at all.

Filing for Chapter 7 Bankruptcy if You Failed the Means Test

If you failed the means test and are facing the presumption of abuse, there are still options available to you. First, you might be able to challenge the presumption of abuse by demonstrating that you have special circumstances that justify your expenses or income.

For example, if you have significant medical expenses or a change in job that reduces your income, you might be able to argue that you deserve an exception. Additionally, you might benefit from consulting with a bankruptcy attorney who can help you navigate the legal system and address any concerns that the court might have.

In some cases, you might be ineligible for Chapter 7 bankruptcy altogether because of the presumption of abuse. However, this does not mean that bankruptcy is not an option for you. You might still be able to file for Chapter 13 bankruptcy, which can provide significant debt relief and a path toward financial solvency. It is important to consult with a qualified attorney to determine what options are available to you and which path is the best for your unique circumstances.

Contact a Bankruptcy Lawyer for Legal Guidance

The presumption of abuse can significantly impact your ability to file for bankruptcy and receive debt relief. It is important to understand this legal concept and what it means for your financial future. If you are facing the presumption of abuse when filing for bankruptcy, contact the Law Offices of Melanie Tavare to get legal guidance. Call 510-255-4646 to set up a free case evaluation. 

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