Business Debtor or not?

[signal]

I have just completed my interviews of attorneys. I picked 3 prominent well known attorneys who are not mills and are not cheap either.

I am confused about something however, and that is my classification as a business debtor. On this forum people said that when calculating whether you are a business debtor you must factor in all debits, unsecured and secured such as mortgage and autos. When I look at that I have:

Consumer: 417k
Business: 125k

So I figured I was not a candidate to "skip ahead" on the means test and go directly to a chapter 7. I have now had my 3rd lawyer insist that only my unsecured debt needs to matter in this calculation. My consultations were around 1.5 hours each, and we got into a good bit of my debt discussion. I mentioned I have read in many places that it counts all debt, not just unsecured debts, and I have been told this is not the case. They mentioned that the Chapter 7 could still be dismissed under several things, but that I would be exempt from the means test.

With just unsecured debt (backing out my cars and home), I look like:

Consumer: 40k
Business: 125k

I really want to be sure, so I ask the attorney(s) and they say they are sure, but then I hear something different hear, does anyone have anything that can tell me that would make sense of this contradiction? I am pretty confident in two of these attorneys and would like to make a decision on an attorney, but I would hate to find out that I interviewed with 3 very prominent BK attorneys (each of them only do BK), only to find out they are incorrect on something that is BK 101. One of them actually is certified in both business and consumer bankruptcy, and told me flat out, only my unsecured debt will matter.

Its very confusing to me, as I am not a lawyer, so please understand I want to trust and put 100% (ok well, 99.9%) faith into my attorney, but this is a big part of my case and it just has me apprehensive.

[biotechsolution]

Better find a new attorney because all of your debt is included.
Home, car, student loans, everything.

What disqualifies some when a business failures is there home, because your home mortgage is always considered 'consumer'.

[biotechsolution]

http://www1.ncmb.uscourts.gov/opinions/docs/Woodward.pdf

the above is recent case but it cites all the previous cases that have determined your home is 'consumer' debt.

I would look at some new attorney's.

A simple question is to ask them what trustee would object under, if they answer 707(b), then definitely get a new one.

[HHM]

It is ALL debt. Your mortgage is a consumer debt for purposes of determining whether you are a consumer chap 7 (subject to means test) or business chapter 7 (not subject to means test). That issue is fairly well settled.

Where you might have some leeway, but not very much, is the original intent of the mortgage. Most courts are now holding that if you take out a mortgage as "primary residence" but later convert it to a rental property, the mortgage is still a "consumer debt" because of the original intent of the loan. But, if you took out the loan as "primary residence" but all parties involved knew the home was never to be used as a primary residence (you were merely making the designation for better lending terms), you at least have an argument that the debt is non-consumer (but you open the door to mortgage fraud).

If your intent is to surrender the home or let it go to foreclosure, then you have an argument that your debt is primarily business. But, in this scenario, you probably need to let the home actually foreclose before filing your case so as to eliminate the secured portion of the claim and only have the deficiency.

[lostindebt]

I am in a similar situation, and I have been advised to let my home foreclose first THEN file. That amongst other things , as my situation is soooo complicated.

[signal]

If your upside down on your house though, and you foreclose, isn't it possible you end up with a judgement for the difference? And then if you file BK, this judgement would be a consumer debt, so your back in the same place right?

[HHM]

If your upside down on your house though, and you foreclose, isn't it possible you end up with a judgement for the difference? And then if you file BK, this judgement would be a consumer debt, so your back in the same place right?

It would be, but the idea is that the deficiency is much less than that total mortgage so hopefully you would be a non-consumer case at that point.

Based on your numbers, if the deficiency was $84,000 or less, you would be a non-consumer case. It really just depends on the numbers.