substantial abuse

substantial abuse

a term that refers to the abuse of the privilege to file a petition. It usually describes fraud in cases of personal bankruptcy (Glossary of Common Bankruptcy Terms)

The court may dismiss a Chapter 7 bankruptcy of an individual whose debts are primarily consumer oriented, when it believes the petition is a substantial abuse of the provisions of the code. Often the court will permit the debtor to convert to a Chapter 13 rather than face dismissal. In considering whether the granting of relief would be an abuse of the provisions of the code, the court shall presume that abuse existed in a Chapter 7 context when the debtor's income exceeds a minimum threshold, as defined in 11 USC 702(b) of the code. For example, if the debtor's current monthly income exceeds allowable expenses multiplied by 60 (which is the maximum existence of a Chapter 13 plan), exceeds the lesser of (a) $10,000 or (b) the greater of 25 percent of unsecured nonpriority claims or $6,000, abuse is presumed.

An individual with $50,000 of disposable income will probably be prevented from discharging his debts. (Bernstein's Dictionary of Bankruptcy Terminology)

The characterization of a bankruptcy case filed by an individual whose debts are primarily consumer debts where the court finds that the granting of relief would be an abuse of chapter 7 because, for example, the debtor can pay its debts. (BankruptcyAction.com)

United Glossary of Bankruptcy Terms 2012.

substantial abuse

The court may dismiss a Chapter 7 bankruptcy of an individual whose debts are primarily consumer oriented, when it believes the petition is a substantial abuse of the provisions of the code. Often the court will permit the debtor to convert to a Chapter 13 rather than face dismissal. In considering whether the granting of relief would be an abuse of the provisions of the code, the court shall presume that abuse existed in a Chapter 7 context when the debtor’s income exceeds a minimum threshold, as defined in 11 USC 702(b) of the code. For example, if the debtor’s current monthly income exceeds allowable expenses multiplied by 60 (which is the maximum existence of a Chapter 13 plan), exceeds the lesser of (a) $10,000 or (b) the greater of 25 percent of unsecured nonpriority claims or $6,000, abuse is presumed. An individual with $50,000 of disposable income will probably be prevented from discharging his debts.

US Bankruptcy 2012.