If you are considering filing for bankruptcy in Littleton, Aurora or Centennial, it can be difficult to determine the differences between debt types. Some debt is consumer debt, and others are non-consumer debts. It is important to determine the difference between these two in order to determine whether you are eligible for a Chapter 7 bankruptcy.
What is the Difference Between Consumer and Non-Consumer Debt?
Non-consumer debt is relatively simple to identify – it is any debt that isn’t defined by bankruptcy law. Consumer debt is any debt that is incurred by an individual for primarily personal, household or family expenses. An example of consumer debt would be your mortgage and personal credit card debt. Non-consumer debt is most easily classified as debt that you didn’t voluntarily incur, such as taxes, some student loans, accident liabilities, some necessary medical bills, credit card debt that is derived solely from businesses expenses (it is best if you use separate credit cards for business and personal use), and some legal fees (if they were incurred after business disputes or other business legal issues). For some debt, such as student loans and medical bills, it is difficult to determine whether or not it is a non-consumer or consumer debt. Some courts view these types of debts differently. Because your financial future is at stake, it is wise to consult with an experienced bankruptcy attorney like Barry Arrington who has a thorough understanding of bankruptcy law and how the judges in Colorado bankruptcy courts think.
Why It’s Important to Know the Difference Between Non-Consumer and Consumer Debt
The Means Test: If your debt is primarily non-consumer, then you don’t have to bother with passing what is called the “means test.” The means test is used to calculate your debt in order to determine whether or not you are eligible for Chapter 7 bankruptcy. There are two ways to meet the “means test.” If your annual income falls below the Colorado median income of $86,787 (for a family of four – info referenced from the Colorado Department of Justice), then you will pass the means test automatically, and will be able to file Chapter 7 bankruptcy. If your annual income is more than the median income, it is possible to pass the means test if your “disposable income” is less than a certain amount. Because there are many factors involved in determining “disposable income,” it is wise to work with an experienced bankruptcy attorney who can help you sort through your finances.
You May Not Have to Pass the Means Test: It is important to understand the difference between non-consumer and consumer debt when you are filing for bankruptcy, because if your debts are primarily non-consumer (business debts) then you most likely won’t be required to pass the means test.
Why It’s Important to Work with an Experienced Bankruptcy Lawyer in Littleton, Aurora and Centennial
Majority of Debt Must be Non-Consumer: It is important to note that you don’t have to pass the Chapter 7 means test if your debt is primarily non-consumer debt. Determining how much of your debt is non-consumer debt is a complex process, and some courts require that any business debt be greater than half of all your debts.
You Must Provide Documentation: It is also important to understand that you must prove that your debt is non-consumer debt with documentation. This documentation is looked at very closely during your bankruptcy proceedings.
For these reasons, it is wise to work with a bankruptcy lawyer who has a thorough grasp of the bankruptcy code and can guide you through the confusing process of determining which debts are non-consumer, and whether or not you will be required to pass the means test. Barry Arrington will help you identify which documentation you will need to support those debts which are business related.
If you are considering filing for Chapter 7 or Chapter 13 bankruptcy in Littleton, Centennial or Aurora, it is important that you work with an experienced bankruptcy attorney. Call now to request your free initial consultation with Barry Arrington, a trustworthy and understanding bankruptcy lawyer at 303-205-7870 or submit the “Get Help Now” form to begin your journey towards financial freedom.