What the money was spent for is what makes consumer debt different from non-consumer. Your bankruptcy proceedings can be affected by whether your debt is a consumer or a non-consumer.
Every case is unique. An attorney can help you evaluate your situation and determine your options. For more information on the differences between consumer and non-consumer debts and their impact on your bankruptcy, contact a bankruptcy attorney today.
What Is Consumer Debt?
Consumer debt is defined by the bankruptcy code as debt that was incurred primarily for personal, familial or household purposes. These are some common examples of consumer debt:
- Mortgage loan for home
- Child support and alimony obligations
- Use credit cards for family or personal use
- Personal or family car loan
What Is Non-Consumer Debt and How Can It Be Helped?
Most non-consumer debt can be used for business purposes. It can also include other expenses that are not business-related. These are some examples of non-consumer credit:
- Business loans
- Guaranties for commercial obligations
- Tax debt
- Tort claims
- A mortgage for a business property
- Business expenses can be paid with credit cards
- Car loans for businesses
What Is the Impact of This Type of Debt in Bankruptcy Cases?
The type of bankruptcy filed will also affect whether the type and amount of debt are relevant in bankruptcy cases. The following are some of the effects that the type of debt could have on your bankruptcy case:
- Chapter 7 – Debtors with a majority of non-consumer debt cannot be dismissed because they have used 707(b) of the bankruptcy code, to abuse their case. They can, however, have their case dismissed “for cause” according to 707(a). Chapter 7 debtors do not need to pass a means check if they have more than 50% non-consumer debts.
- Chapter 13 – For consumer debt with co-signers, the co-debtor receives a stay that requires creditors to cease collection activities. The co-debtor’s credit score is not protected by Chapter 13.
The type of debt is an important factor in determining the threshold for preference payment avoidance and disclosure.
This article was written by Alla Tenina. Alla is one of the best personal injury law attorneys in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.