Some courts consider these to be consumer, while others do not. Several bankruptcy courts have recently addressed the question of whether student loan commitments are consumer or non-consumer debts.
What is a consumer debt?
According to the Bankruptcy Code, “consumer debt” is “debt incurred by an individual principally for a personal, family, or home purpose.” 101st Section (8). A non-consumer debt is one that was not incurred for any of these reasons.
Consumer debt refers to personal indebtedness incurred as a result of the purchase of items for personal or household consumption. Consumer debt includes credit card debt, school loans, auto loans, mortgages, and payday loans.
Debtors with high student loan obligations are not uncommon. It will be beneficial to classify these student loan loans as non-consumer debt.
You should consult with an expert bankruptcy lawyer in your area. Collecting evidence to demonstrate what the student loan was used to pay for (tuition and books, or living expenses and meals) may be beneficial.
If student loan debt is considered non-consumer debt, a person with significant student loan debt may be eligible to file for Chapter 7 bankruptcy without having to worry about the means test.
In many bankruptcy courts, the question of whether student loan debt is consumer or non-consumer debt is unresolved, with judges considering a range of variables on a case-by-case basis.
After all, every student can claim that he or she chose to seek an education for the sake of long-term benefit. However, some people pursue an education for motives other than profit.
Some people return to school in order to be smarter than they were before (I’m not suggesting this is the end outcome, just that it’s the intention). Others do so in order to avoid a difficult job market.
Student Loan Payments as a Deduction for Means Testing
You may be permitted to remove student loan payments from your means test in Chapter 7 bankruptcy. This can help you qualify for Chapter 7 bankruptcy even if your income is higher than the median.
We cannot subtract those contributions from the means test in New York bankruptcy cases.
If you live elsewhere and are considering filing for bankruptcy, your lawyer can provide information regarding your local practice.
Non-consumer debts are frequently purchases undertaken for investment purposes. They are commonly referred to as “commercial debts,” and they include, but are not limited to, the following:
- Obligations to invest
- Medical expenses that are unavoidable
- Guarantees made by individuals
- Tort lawsuits
Depending on the court, the fundamental intention of most purchases frequently affects their classification. Student loans, for example, are one kind of debt that may be considered consumer or non-consumer debt, although student loans are rarely discharged in bankruptcy cases.