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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37818
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I am married and contemplating a personal bankruptcy filing.

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I am married and contemplating a personal bankruptcy filing. (Not jointly with my spouse) We reside in Middlesex County, Massachusetts.

More than 50% of my debts are due to the failure of my business - a large balance still owed to a bank by my company for a busines LOC and business credit cards. I provided a personal guarantee when I opened both.

Due to my wife's income, I do not pass the Ch. 7 means test, but since most of my debt is related to my business, ae mny debts considered primarly "non-consumer debt," and if som does the means test apply? Would Chapter 7 still be available to me? If so, are there other qualifying requirements that could force me to go to Ch 13?

You are correct that if most of your debt is not "consumer debt," then you do not have to pass the means test (11 U.S.C. sec. 101(8)). As for the reason why your attorneys have allegedly ignored this issue:


1. They don't know the law on the subject matter;

2. They have a rationale of which neither you nor I are aware;

3. They don't want to hassle with "difficult" bankruptcy cases, because the client won't be able to pay the bill for the additional requred litigation.


My opinion is that #3 is likely the answer. Consumer bankruptcy attorneys know that the client is on the ropes financialy, and so they seek to minimize the potential legal issues. A means test calculation is easy if everything is consumer debt. But, the dividing line between consumer and nonconsumer debt is amorphic and subject to potential litigation -- and the typical bankruptcy attorney may simply tell the debtor to do something to remove the likelihood of this litigation issue -- in anticipation that if the debtor cannot do so, then he/she will just go away, leaving the attorney with easier cases that will generate the same amount of revenue.


I know of bankruptcy attorneys who will automatically turn away any case where there is a business component, because their experience is that the debtor will never pay the attorney's fees, due to their ever-mounting costs.


Hope this helps.


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