Substantial Abuse ( Bankruptcy) Law and Legal Definition

Substantial abuse in the context of bankruptcy is used to describe a petition filed under chapter 7 of the Bankruptcy in which the court finds that the granting of relief would be an abuse of Chapter 7 of the Bankruptcy Code. For example, if the court is of the opinion that the debtor who has filed the bankruptcy petition under chapter 7 for his/her primary consumer debts is capable of paying his/her debts then the court will not grant the relief guaranteed under Chapter 7. Such petitions will be considered as substantive abuse of chapter 7.

Generally courts use "totality of the circumstances" test as the measure of substantial abuse under the Bankruptcy Code. This is a flexible standard adopted by Congress to allow bankruptcy courts to consider the factors involved in each case and to prevent abuse of Chapter 7 filings.