Although Section 707(b) of the Bankruptcy Code covers a variety of grounds for dismissal of a bankruptcy case, a 707(b) action generally refers to an attempt by the U.S. Trustee, the trustee, or a creditor to ask the bankruptcy court to dismiss a Chapter 7 bankruptcy case on the ground of abuse.
A dismissal on the the ground of abuse arises when the U.S. Trustee, the trustee, or a creditor believes that the debtor earns enough to require the debtor to seek bankruptcy relief under Chapter 13 of Title 11 of the United States Code (the Bankruptcy Code). A presumption of abuse arises when the debtor’s income exceeds the median income for the state in which he lives, but it can also arise if the debtor’s income, after making allowed deductions, exceeds certain amounts.
Section 707(b)(2)(A)(i) of the Bankruptcy Code states:
In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor’s current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of—
(I) 25 percent of the debtor’s nonpriority unsecured claims in the case, or $7,025(*), whichever is greater; or(II) $11,725(*).
*this amount changes periodically.
