Chapter 13 to a Chapter 7 Nonconsumer

[jamesd271]

Good Day-

I have currently filed a chapter 13, as the result of a judgement creditor that has been relentless. This guy garnished my wages and my wifes wages and has been after me for about four years. The Chapter 13 has been no different. He is the only creditor objecting and contunues to file motions for adversarial hearings. I am represented by counsel, but she is heistant to convert this filing to a Chapter 7. We have inbcreased the plan to 25% wich is well beyong what I can afford and still the hearings keep coming. Here is the thing: 99% of my debts are past taxes and this judgement. The research that i have been doing suggests that these are NONCONSUMER debts and that in a chapter 7, I would not have to worry about the means test. I believe that the thing I would have to worry about is the issue of pootential dismissal for abuse du eto high income. But is that a consideration when almost all of teh debt is nonconsumer? Hep!

[justbroke]

The Judgment may be a consumer debt. What is that judgment for? If it was based on something you purchased for you or for your family, then that is a consumer debt.

I am actually a Chapter 13 converted to a Chapter 7 non-consumer -- over the median. I have successfully been discharged in my case. I can help you review if that is ACTUALLY consumer debt or not. If your attorney is thinking that the judgment is consumer debt, then your attorney may be right. However, I'd be happy to give my "personal" thoughts on the matter.

FWIW, a "non-consumer" Chapter 7 is very difficult to get dismissed. None of the provisions regarding income in 11 USC 707(b) even apply. Thy only real way for the UST to get a Chapter 7 dismissed, is for fraud or bad faith and even those are difficult unless they are true.

[researchnerd]

A consumer debt is "debt incurred by an individual primarily for a personal, family or household purpose." Non-consumer debt is generally distinguished as a debt incurred with a profit motive -- but as you know, it's bigger than that (most people don't profit from paying income tax). Domestic support is considered consumer debt, but student loans could go either way.

What kind of debt is your judgment for? If it's a business expense, personal injury or investment property, you might have a case. If not, you will still need to worry about the means test. High income does not, in itself, disqualify you from Ch7.

[jamesd271]

It was a lease for an office that I used for two months and moved out. The other guy that was using it apparently abandoned, it years later, but I didn't get notice until it was too late. It was definitely a commercial lease...I know this because the title o fteh documnet I signed was "commer lease"!

[jamesd271]

It was for a commercial lease...

[biotechsolution]

+1 on the dismissed. I was well over the mean, 2.5X, and it wasn't a problem. Included tuition (elementary) at 18K a year didn't get questioned. Just stay away from listing Country Club memberships.
You can even have disposable income in a non-consumer case to some degree. I think I was close to 1K positive on my schedules but wasn't questioned.

[jamesd271]

Wow! That is great news! I am filing alone and my wife DOES have a time share, but it is underwater and we have proof of that. The schedules are zero!

[justbroke]

If this was from a commercial lease, then it was in fact non-consumer. Please be sure that, if you have a primary residence, that the mortgage on that residence doesn't put you over 50% of consumer debt. This is where most people FAIL the consumer/non-consumer test. Many assume that their mortgage is not a consumer debt but it is a consumer debt in 99% of the Districts.

Do you have a home mortgage?

[jamesd271]

Thanks! I do, but I transferred my interest to my wife 10 years ago. I live in the house, but the mortgage is in her name only.

[jamesd271]

Does anyone know why a distinction is made between consumer and non consumer debts?

[tcreegan]

Hi jamesd24,

I think the difference is consumer = means test nonconsumer = no means test

...but not sure...hopefully someone more experienced can chime in...

Tom in Colo

[biotechsolution]

Does anyone know why a distinction is made between consumer and non consumer debts?

Because if there was no distinction between to the two who would take the risk of starting a business if there was no silver bullet??

I believe it was to give the business debtor different standing.

[justbroke]

Does anyone know why a distinction is made between consumer and non consumer debts?

I'm assuming you mean, for the purposes of receiving a discharge.

To that extent, a consumer is subject to the Means Test, statistical reporting, and a lot more scrutiny under 11 USC 707(b). That also includes "bad faith" and "totality of circumstances".

On the other side, a non-consumer is not subject to the Means Test or statistical reporting. The UST can't get the case dismissed under 11 USC 707(b) which includes the Means Test and the "bad faith" and "totality of circumstances". The only way to get a non-consumer case dismissed is for substantial abuse. That would mean both bad faith and something else. In practice, the only way would be to find that the debtor lied on his forms, didn't cooperate with the process, didn't hand in required paperwork, committed fraud, and other things like that.

There are non-consumer debtors who had $1,000 in disposable income, and still received a Chapter 7 discharge. I am over-the-median and I received a non-consumer Chapter 7 discharge, albeit that my disposable income was in the negative.

[jamesd271]

I hadn't thought of that! Thanks!

[jamesd271]

Thanks! I am really starting to feel that Chapter 7 is a viable option for me. I really don't have any consumer debt and the way this Chapter 13 is going (several adversarial hearings) 2004 examination, etc, I see no reason not to "go for it" !