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Understanding Consumer and Non-Consumer Debt

To get a full understanding, we’ll define what consumer and non-consumer debt are.

Consumer debt:  Debt that has been incurred by an individual for personal, family, or household purposes.

Anything else is Non-consumer debt. Within the realm of non-consumer debt, it’s also important to define Business debt. While Business debt is not defined under bankruptcy law, it is anything that does not qualify under consumer debt, and is thus, also referred to as Non-consumer debt.

The Chapter 7 Bankruptcy Means Test

The Chapter 7 means test is a lengthy financial calculation that is done to determine if your debts meet Chapter 7 bankruptcy requirements. The Chapter 7 means test does not apply to you if your debts are not mostly consumer debts. If more than half your debts are business debts (not-consumer debts) then you are free to file for Chapter 7 without having to take or pass the means test. And if most of your debts qualify as business debts, your bankruptcy trustee and the court will review the business debts closely.

Determining Consumer and Non-Consumer Debt

While it might seem that determining between business/non-consumer debt and consumer debt would be easy, it isn’t. In fact, this issue often becomes the subject of disputes in bankruptcy cases. In bankruptcy law, a good way to determine the debt is to look at what the money was put towards instead of looking to where it came from or what the name of the transaction was. For example;

  • The debt is most likely consumer debt if money was used to pay a personal, family, or household expense or for the purchase of personal, family, or household goods.
  • The debt is most likely non-consumer/business debt if it was used to pay something else.

The determination is based on the time the debt was incurred. For example, if a person purchased a personal computer and later used it for business purposes, it would still be considered a consumer debt.

A bankruptcy attorney can help you determine which type of debt you have, as well as what type of bankruptcy you should file. They will also be able to help you with the actual bankruptcy process, as well as advise you on how to bet exit bankruptcy.

Source:, Consumer v. Non-Consumer Debts for the Bankruptcy Means Test, 2014

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