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Non-Consumer Debts in Bankruptcy

Many people considering filing personal bankruptcy know that they're in serious debt and need to take action to address. But, because of the variety of credit and loans a person can encounter, it's difficult to know if bankruptcy is the right solution.

Chapter 7 and Chapter 13 bankruptcy, the two types most commonly filed by individuals, are designed to address consumer debts, or those taken on by an individual for personal use, rather than business.

However, in some circumstances, an individual can include non-consumer debts in their filing.

Consumer Debt

Consumer debt is defined as money that is owed as result of personal, family or household needs. This could include:

  • Credit card debt
  • Personal loans
  • Child or spousal support
  • Medical or dental bills
  • Personal insurance
  • Mortgage loans

Non-Consumer Debt

While consumer debt is centered on personal usage, non-consumer debt focuses on business-related debt such as:

  • Investment real estate
  • Real estate loans
  • Car loans
  • Utilities
  • Insurance
  • Taxes

Chapter 7 Bankruptcy for Non-Consumer Debt

Chapter 7 bankruptcy, which is used to liquidate debt, is typically the simplest and the quickest form of bankruptcy protection. It's available to individuals, married couples, corporations and partnerships. Therefore, people who go into business for themselves may be able to use Chapter 7 to eliminate their debt and get a fresh start while also retaining their exempt assets.

This can happen because some of the rules that apply to consumer debt under Chapter 7 do not necessarily affect non-consumer debt. So a business owner may not need to worry about passing the standard means test if 50% or more of his debts are classified in the non-consumer category.

Real estate investors, for example, might turn to Chapter 7 bankruptcy because they are unable to rent or sell their various properties. By filing bankruptcy, they could get rid of the negative equity even though they might have a significant income.

Connect with an Attorney Today

Consumer and non-consumer debt can complicate any bankruptcy case. If you are thinking about filing bankruptcy with substantial non-consumer debt, you don't have to go through this complex procedure alone.

Just fill out the form below to be connected with a bankruptcy lawyer near you who's familiar with your state's bankruptcy laws. Arrange a free, no-obligation consultation with a local attorney today.

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