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When Does a Debtor Have“ Primarily Consumer Debts”
JASON S. RIGOLI
For most people their house is their biggest asset. It also turns out to be the biggest debt obligation on their books. Is a home mortgage a“ consumer debt?”
This question is important for some individuals considering or filing a chapter 7 bankruptcy because 11 U. S. C. § 707( b) requires an individual debtor who’ s debts are“ primarily consumer debts” must satisfy the“ means test” or a presumption of abuse exists which could result in dismissal or conversion of the debtor’ s chapter 7 bankruptcy case. 11 U. S. C. § 707( b). With such a presumption the Debtor carries the burden of rebutting the presumption of abuse and is limited to the“ special circumstances” set forth in 11 U. S. C. § 707( b)( 2)( B).
In non-consumer cases, the presumption does not apply, and the Debtor’ s chapter 7 case can only be dismissed or converted“ for cause,” 11 U. S. C. § 707( a), and the moving party carries the initial burden to establish a prima facie case of“ cause,” which is determined by the“ totality of the circumstances.” See Piazza v. Nueterra Healthcare Physical Therapy, LLC( In re
Piazza), 719 F. 3d 1253( 11th Cir. 2013).
Is a Home Mortgage a Consumer Debt?
Section 101( 8) of the Bankruptcy Code defines“ consumer debt” as“ debt incurred by an individual primarily for a personal, family, or household purpose.” 11 U. S. C. § 101( 8).
In a creative argument, a debtor in Maryland recently argued that the mortgage on his home should not be considered a consumer debt because he was anticipating the home to appreciate in value and a create a profit. Cheney v. Garner( In re Garner), Case No. 24-16770- MCR, 2025 Bankr. LEXIS 2378, 2025 WL
2712758( Bankr. D. Md., Sept. 23, 2025). The bankruptcy court did not buy this argument and found the debtor’ s home mortgage was a consumer debt under the definition in 11 U. S. C. § 101( 8). 2025 Bankr. LEXIS 2378 at * 8-9. This is consistent with the case law of bankruptcy courts in the Eleventh Circuit. See e. g., In re St. Jean, 515 B. R. 864, 873( Bankr. M. D. Fla. 2011).
What Does“ Primarily” Mean?
In § 707( b) consumer debts is qualified by“ primarily,” which is undefined. So, what does“ primarily” mean? Some courts interpret“ primarily” as meaning is the dollar amount of the consumer debt is greater than 50 % of the debtor’ s overall debt then it is a consumer case and § 707( b) applies. See St. Jean, 515 B. R. at 872-73. The Garner Court took a different approach, not applying a brightline rule but looking at the overall nature of the debtor’ s debts. Garner, 2025 Bankr. LEXIS 2378 at * 28-29.
Rather than applying a rigid formula of more than 50 % based upon dollar amount of debt, bankruptcy courts should look at the overall nature of the debt. For example, in a case where the home mortgage makes up 50.5 % of the overall debt, but is the only consumer debt obligation, with a substantial number of non-consumer debts, including some of unknown amounts, why would this case be primarily consumer? The application is significant for individuals who are looking to file for bankruptcy and determining whether to file a chapter 7 or have to file a chapter 11 or 13.
This article was submitted by Jason S. Rigoli, Esq., Furr and Cohen, P. A., 2255 Glades Road, Suite 419A, Boca Raton, FL 33431, jrigoli @ furrcohen. com
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