Chapter 7 Non-Consumer filing and personal liability question

[psears123]

Hello,

I have filed a personal Chapter 7, with a majority (>51%) of my current debt business related. I am personally liable for the business debt, as well as (of course) my consumer debt. As such, from the extensive research I have done, I filed my Chapter 7 and DID NOT do the Means Test; my plan is to argue that there is no presumption of abuse, and that I should be able to proceed with Chapter 7 regardless of any disposable income Schedules I & J should reveal (which is currently showing negative, anyways).
My question is this: A lawyer I talked to on the phone today, after I explained the above to her, said that since I am personally liable for the business debt, the above strategy won't work, I have to file a Means test (which I will fail), and the trustee will probably try to convert me to a Chapter 13.
I have seen NOWHERE that being personally liable or not for business debt has anything whatsoever to do with the above (common) strategy. Everything I have read, including NOLO books, this website, the internet, Justia, etc. has said that (barring any fraud or obvious abuse) I should be able to proceed under Chapter 7 as a non-consumer debtor.

What say you? Is she full of it? Or am I screwed?

Thanks!

[jcj112562]

Off the top of my head, the answer is...

Find an attorney that has actual experience in non-consumer BK. From the sound of it, the attorney in question just told you the same thing they tell everyone that calls and kicks the tires. Of course, as I am not an attorney, I could be wayyyy wrong.

John

[tcreegan]

Hi psears,

The way I understand it, non-consumer gets you out of the means-test but Schedule I minus Schedule J needs to be less than ~$150 to stay out of Ch 13.

jcj has the best advice, find an attorney who has done a few non-consumer Ch 7s

...and some people here have done nonconsumer Ch 7, hopefully they will chime in here!

Tom in Colo

[despritfreya]

If you are a non-consumer case, Means Testing DOES NOT apply - there is a box to check stating that your debts are not primarily consumer debts.

If you are a non-consumer case, it DOES NOT matter what Schedule I and J states. I have had cases where my non-consumer clients have had over $4k in positive cash flow - never been an issue.

If you are a non-consumer case you CANNOT be forced out or into a Chapter 13 (or a Chapter 11 if you are over the debt limit of a 13) based upon a “707(b)” issue as 11 U.S.C. 707(b) (by virtue of the language contained in (b)(1)) only applies to consumer cases.

Des.

[psears123]

If you are a non-consumer case, Means Testing DOES NOT apply - there is a box to check stating that your debts are not primarily consumer debts.

If you are a non-consumer case, it DOES NOT matter what Schedule I and J states. I have had cases where my non-consumer clients have had over $4k in positive cash flow - never been an issue.

If you are a non-consumer case you CANNOT be forced out or into a Chapter 13 (or a Chapter 11 if you are over the debt limit of a 13) based upon a “707(b)” issue as 11 U.S.C. 707(b) (by virtue of the language contained in (b)(1)) only applies to consumer cases.

Des.

Thanks for the reply, Des.
I'm mostly concerned about the personal liability for my business debts that this attorney brought up, and its effect on my non-consumer case. Is she simply wrong?



Thanks Des for the reply,

But what about the personal liabilty for my debts issue that this attorney mentioned; is that the case or does she not know what she is talking about?

[despritfreya]

I'm mostly concerned about the personal liability for my business debts that this attorney brought up, and its effect on my non-consumer case. Is she simply wrong?

Either you misunderstood her or she has no clue. You personally guaranteed entity debt - that is why you are not a consumer case. Your personal exposure is included in the bk. The amount of the personal guarantees (regardless of whether or not the entity is paying for it) is what most likely tips the scale to the non consumer side.

Des.

[magua2]

Either you misunderstood her or she has no clue.

I suspect she has no clue. After meeting with two attorneys there was no mention of such a thing as a non-consumer filing. The attorneys wasted my time discussing the means test when it did not apply to me; not to mention adding another layer of stress wondering how I would live without an income for three months to try to meet that means test number. And in both interviews I was very clear that if I was going to file, I would be filing BK because of personal guarantees on a business, not because I have any substantial personal debt. I called one of them back after I found out about the non-consumer category to inquire why the non-consumer category wasn't mentioned to me. His clerk told me I would have to show 65% business debt, instead of 51%, and that personal guarantees do not count towards business debt. I feel sorry for those who are receiving such poor advice and don't know how to research to find the correct answer. You should be able to trust what your attorney tells you, but this area of law appears to be filled with attorneys who don't have a minimal competence in their area of practice.

[justbroke]

I was going to say what Des wrote. While the Means Test does not apply, it must still be filed. There is a checkbox at top. Also, there is a checkbox on one of the Statistical Summary forms and you need to check that too. I almost got into an argument with my Case Manager, one whom you should never "argue" with, over the requirement for the Statistical Summary forms, but somehow, the form I submitted didn't have the box checked! Ooops! So I resent it with the box checked.

Best of luck. I did a non-consumer Chapter 7 as well, and the Means Test wasn't even looked at by the Trustee or the UST. Of course, they're looking for real abuse in non-consumer cases, but I had been in a Chapter 13 for 20 months so it wasn't like I was hiding from creditors. LOL

[magua2]

And to add to this, the latest attorney, the one that did appear minimally competent, just charged me for a meeting to go over my Schedules I & J and was concerned about my ability to get my DMI to 0. She specifically told me the Trustee would convert my case to a Chapter 11 (13 does not apply) if I showed a positive DMI. And yes, she does know that my case is a non-consumer case.

Depritfreya, you have stated that you have personally seen clients remain in a Chapter 7 with positive DMI. I am assuming the Trustee's inability to convert a 7 to a Chapter 11 is not a jurisdictional/state issue, and is uniform across all states? I want to be sure there is nothing specific to my area of the country which would lead my attorney to make such a statement.

[despritfreya]

His clerk told me I would have to show 65% business debt, instead of 51%

The only thing I can think of here is if there is Case law in your District (1st Circuit)that uses 65% as the "bright line" between consumer and non-consumer. If I have time tomorrow I may do some quick research on this. Maybe another member of the board has some experience in the 1st Circuit.

I am assuming the Trustee's inability to convert a 7 to a Chapter 11 is not a jurisdictional/state issue, and is uniform across all states?

If you look at the Bk Code 11 U.S.C. 707(b) you will see that it is spelled out that this section applies to individuals whose debts are "primarily consumer debts". This means the section does not apply in any other circumstance. And, yes, this would be the same throughout the country.


Des.

[biotechsolution]

Thanks for the reply, Des.
I'm mostly concerned about the personal liability for my business debts that this attorney brought up, and its effect on my non-consumer case. Is she simply wrong?



Thanks Des for the reply,

But what about the personal liabilty for my debts issue that this attorney mentioned; is that the case or does she not know what she is talking about?

I would be just concerned if you are close to that 51%. Make sure you have a clear distinction between business and personal debts, make sure they do not co-mingle.
And remember to include any car loans and mortgage in the personal category.

[psears123]

Unbelievable. How did your case turn out?

[angles]

Most attorneys don’t seem to understand non- consumer filing since is not the majority of their business. We were non consumer and uneducated at the time and our attorney wanted to place us in the consumer category.

It’s strange how we see these different requirements or policies across different districts. In CA 51% is all you need and you can go as high as 4-5K positive income before the Trustee considers looking at your case. Seems almost an unfair levy of the laws from area to area.

[frogger]

You need to find a bk lawyer that is not the normal bk mill. I too had to fill out the means test, but it just didn't matter, for mine was non-consumer.

Find the right lawyer.....