Determine whether a presumption of abuse exists

Once your disposable monthly income is calculated, it is multiplied by 60 to determine the amount of money you (the debtor) have available to pay unsecured creditors over a five-year period. This calculation is inserted in Part VI of Form B22A and Part V of Form B22C. Abuse is presumed if the debtor (you) has at least $11,725 over five years to pay unsecured creditors. It is never presumed if the total for five years is under $7,025. Between these two trigger points, abuse is presumed if the debtor can pay at least 25 percent of the unsecured claims over a five-year period. It is easier to use monthly numbers when determining a presumption of abuse. If the debtor’s disposable monthly income is less than $117.08 per month ($7,025 ÷ 60), no presumption of abuse exists. If the debtor’s disposable monthly income exceeds $195.42 per month ($11,725 ÷ 60), a presumption of abuse always arises. If the debtor’s disposable monthly income falls in between these numbers, abuse is presumed if the disposable income over a five-year period is sufficient to pay at least 25 percent of the debtor’s general unsecured debts in the next 60 months.

Example of calculations

Our debtor (this hypothetical was begun in the article on step 1 of the means test) has disposable monthly income of $13.00. We calculate the presumption of abuse as follows: $13.00 X 60 = $780.00 A presumption of abuse does not exist for our debtor since the amount is under $7,025. Our debtor’s Chapter 7 case would be filed without a presumption of abuse being triggered. Therefore, we would check the box “Presumption does not arise” on page 1 of Form B22A and proceed under Chapter 7.