In bankruptcy, a person that makes over a certain amount of money, based on where they live, family size, a number of factors, may not qualify to get a discharge in chapter 7. The reason is Sec. 707(b) of the Bankruptcy Code, that contains a formula or "means test" that must be computed. However, if a person's debts are more than 50% non-consumer debts, they don't have to undergo the means test.

Consumer debts are debts that you incur for personal, family or household purposes. Non-consumer debts are either business or investment-related (incurred with a profit motive), taxes, or tort claims such as money awarded against you if you harm someone and are sued for money damages, like an auto accident, or lawsuit damages for assaulting someone, etc.

Anyhow, in a recent court case in Houston, U.S. Bankruptcy Judge Marvin Isgur determined that a couple could not use time-barred business "foreclosure deficiency" claims as business debts, when figuring if their debts were more than 50% business debts. In re Martin, Bankr. SD Texas 2013.

They won the case for other reasons, but since the foreclosing lenders had not sued the debtors during the short 2 year statute of limitations that they are allowed to do so under Texas law, Judge Isgur held that the debtors could not use those debts on the "business side" of their calculations, to see if they must undergo the means test.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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