Posted on Dec 07, 2013

To qualify for chapter 7 bankruptcy and discharge most of your debt without any repayment, your income cannot exceed certain limits, or there is a presumption in law that your case is an "abuse" of the Bankruptcy Code. But if your debts are not primarily consumer debts, then this "means test" does not apply, and you can file chapter 7 bankruptcy.

If there is a presumption of abuse, and you don't have any other satisfactory explanation, the U.S. Trustee's office, which is the "watchdog" agency over the U.S. Bankruptcy system, will likely file a motion to dismiss the bankruptcy. That is what happened recently in a chapter 7 bankruptcy case filed in Houston.

In a bankruptcy court case decided in Houston on Dec. 6, 2013 by U.S. Bankruptcy Judge David R. Jones, the Court ruled that a dentist's student loans that he took out for his dental school tuition, books, fees, and other school materials were not "consumer debts." In re De Cunae, Case No. 12-37424, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

This amount made the difference, so that more than 50% of his total debts were "non-consumer." The court found that some of the student loan money was used for the dentist's living expenses during dental school, and that amount was consumer debt. So, since the dentist's debt was primarily considered "non-consumer," he was permitted to go on with his chapter 7 case and receive his discharge. The Court denied the U.S. Trustee's motion to dismiss.

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