What Is the Presumption of Abuse in Bankruptcy?
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You need to meet certain eligibility requirements to file Chapter 7 bankruptcy. If your income is higher than the median income for a similar-sized household in your state, this flags the bankruptcy court of a "presumption of abuse." This doesn't mean you can't file Chapter 7 or that you've abused the system. It does mean you must do more calculations as part of the means test to prove that you don't make enough money to repay your debts and that you aren't taking advantage of the bankruptcy process.
Written by Curtis Lee, JD. Legally reviewed by Jonathan Petts
Updated November 3, 2025
Many people who file Chapter 7 bankruptcy get to walk away from their debts with a financial fresh start, without losing any of their property. As you can imagine, this is a financial outcome that some people might try to take advantage of even though they shouldn’t. So, there are special rules in place to prevent people from unfairly using the Chapter 7 bankruptcy process. One of these is the presumption of abuse.
If your current monthly income exceeds the income limit for Chapter 7, then a “presumption of abuse” exists in your bankruptcy case. This article will explain what a presumption of abuse is, why it exists, and how to overcome it.
What Is the Presumption of Abuse?
When you apply for Chapter 7 bankruptcy, you’ll need to take something called the means test. This test looks at your income, expenses, and other financial details. If it shows that you have enough disposable income to pay back a portion of your debts, the court may say there’s a presumption of abuse.
This doesn’t mean the court thinks you’re trying to commit fraud. It just means the court assumes that Chapter 7 might not be the right option for you because you may be able to repay your debts through Chapter 13, which involves a repayment plan.
There are two important things to know about this presumption:
It can be challenged. A presumption is just an assumption. It’s not final.
You’ll have the chance to show the court that special circumstances apply to your situation. If you can explain why the means test doesn’t reflect your true financial picture, the court may still allow you to file under Chapter 7.
It’s about which bankruptcy chapter fits your situation, not about wrongdoing.
A presumption of abuse isn’t an accusation. It just signals that the court needs more information before deciding if Chapter 7 is the right path for you.
Why Does the Presumption of Abuse Exist?
The presumption exists to make sure that only people who truly need debt relief through Chapter 7 can use it.
That’s because Chapter 7 is meant for individuals and families who genuinely can’t afford to pay back their debts. To support this goal, Congress changed the bankruptcy laws in 2005 to help prevent fraud and misuse. One of the biggest changes was the addition of the means test.
The means test compares your income to the median income for a household of your size in your state. If your income is above that amount, the court may assume that you have enough disposable income to repay at least some of what you owe. That’s when the presumption of abuse comes into play.
If the court finds that your income is too high, you may not qualify for Chapter 7. Many people in this situation explore Chapter 13 bankruptcy instead. Chapter 13 involves creating a repayment plan to pay back a portion of your debts over time.
What Is the Means Test?
The Chapter 7 bankruptcy means test is a two-part income limit test. In the first part, you calculate your average income in the Chapter 7 Statement of Your Current Monthly Income form. You’ll then compare your income to the median income of a similarly sized household in your state.
The United States Trustee Program maintains a special database that shows median family household income by state.
If your current monthly income is equal to or less than the median income of a similar-sized household in your state, then there’s no presumption of abuse in your case. In other words, you pass the Chapter 7 means test.
But if your current monthly income exceeds this threshold, then you have to do additional means test calculations to determine whether you can file a Chapter 7 bankruptcy.
Part 2 of the Means Test: Means Test Calculation
If your income is more than the median income for your state, you can still overcome a presumption of abuse by showing you don’t have enough disposable income to repay even a portion of your debts through Chapter 13.
To show this, you have to complete the second part of the means test on the Chapter 7 Means Test Calculation form. On this form, you’ll calculate certain allowable deductions, which are expenses. Those expenses are subtracted from your income to determine how much, if any, monthly disposable income you have.
If you have a negative disposable income or a number close to zero, there likely won’t be a presumption of abuse, and you probably qualify to file Chapter 7. If you have a lot of disposable income, you’ll probably need to file Chapter 13 instead.
This part of the means test can get legally complicated, so it's best to consult an experience attorney to determine your eligibility. Most offer free consultations.
Upsolve's free filing tool is only available for those who pass the means test on income alone.
Does Everyone Have To Take the Means Test?
Most individuals who file for Chapter 7 bankruptcy must complete the means test, there are two exemptions.
If your debts are primarily business (non-consumer) debts, then you aren’t required to complete the means test.
Business debts must be debts incurred as part of starting or operating a business. This includes things like purchasing inventory or leasing office space. To claim this exemption, more than 50% of all your debts must be business debts.
Disabled military veterans whose debts were incurred while on active duty aren’t required to complete the means test. But yo
u must have at least a 30% disability rating. Also, military reservists who filed for Chapter 7 bankruptcy before being called to active duty are granted a temporary exception from completing the means test for up to 540 days or 14 days after their active duty service ends.
If you feel one of these exemptions applies, you’ll claim the exception on the Statement of Exemption for Presumption of Abuse form.
Again, if either of these circumstances applies to you, you probably won't be a good fit for Upsolve's free filing tool, as it has limits on who it can help. You can consult an attorney for help with these exemptions.
Special Circumstances That Override the Means Test
If you don’t pass the Chapter 7 means test, you might still be able to file, if special circumstances apply to your situation. These are rare, unexpected events that are out of your control but significantly affect your finances.
In this case, you’ll need to retake the means test and explain why it should be adjusted. You can ask the court to let you deduct extra expenses or change how your income is calculated because of these special circumstances. But you’ll need to show proof and get court approval before moving forward.
Common examples of special circumstances include:
A serious or long-term medical condition
Being called to active duty military service
Because this process is more complex, Upsolve’s free filing tool won’t be a good fit if you're relying on special circumstances to qualify for Chapter 7.
In this situation, it’s a good idea to consider setting up a free consultation with a bankruptcy attorney. They can help you understand your options and guide you through the next steps.
Filing Bankruptcy Under Chapter 13 Instead of Chapter 7
If you can’t pass the means test and exceptions or special circumstances don’t apply, then you can’t file Chapter 7 bankruptcy. But if you still want to file bankruptcy, then the bankruptcy court may convert your case to Chapter 13.
A Chapter 13 bankruptcy doesn’t liquidate or discharge your debt. Instead, your debts are reorganized. Reorganization typically involves consolidating all your debts, while reducing some of them. It also creates a monthly repayment plan. The idea is that you have enough disposable income that it wouldn’t be fair for you to walk away from all of your debts as part of a Chapter 7 bankruptcy.
Instead, you’re allowed to repay at least some of your debts over three to five years. During this period you’re still under the protection of the bankruptcy court with the automatic stay. So, your creditors can’t pursue their debts or harass you as long as you make all of your required payments. Then at the end of the repayment plan period, any eligible debts that remain can be discharged.
Let’s Summarize…
The presumption of abuse is something that occurs when filing Chapter 7 bankruptcy. The presumption of abuse is intended to prevent people who can afford to pay off some of their debts from using the Chapter 7 bankruptcy process. A presumption of abuse exists if you fail to pass either part of the Chapter 7 means test and special circumstances or exceptions don’t apply to your situation. If you can’t overcome the presumption of abuse, you can still file bankruptcy, but it’ll be under Chapter 13 of the Bankruptcy Code, not Chapter 7.
