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Reading an excerpt from a bankruptcy case (2)

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IN RE: Tamika Wright Sudderth, Debtor.

UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA, GREENSBORO DIVISION

57 Collier Bankr. Cas. 2d (MB) 710; 2007 Bankr. LEXIS 115
(2007)
.

* * *

Both the current version and previous version of section 707(b) limit the applicability of section 707(b) to individual Chapter 7 debtors whose debts are primarily consumer debts. Thus, it is a prerequisite that the debts in a Chapter 7 case be ‘primarily consumer debts’ before dismissal can occur pursuant to section 707(b)…Because the evidence presented in this case was insufficient to show that the debts in this case are primarily consumer debts, the court must deny the portion of the motion relying on section 707(b).

Under section 101(8) of the Bankruptcy Code, a consumer debt is defined as a debt ‘incurred by an individual primarily for a personal, family, or household purpose’. In determining whether debt is for a ‘personal, family, or household purpose’ under section 101(8), courts look to the purpose for which the debt was incurred. Debt incurred for a business venture or with a profit motive does not fall into the category of debt incurred for ‘personal, family, or household purposes…’ In re Runski, 102 F.3d 744, 747 (4th Cir. 1996). Applying this test in Runski, the court held that debt incurred by an individual to purchase medical and office equipment for use in the Debtor’s chiropractic practice was not consumer debt because such debt was incurred with a profit motive, i.e., to earn a living. Id. at 747…In the present case, over 70% of the total debt listed in the schedules is debt arising out of a failed business in which the Debtor was a principal. This court agrees with the courts who have concluded that the ratio [*4] of the dollar amount of consumer debt to non-consumer debt should be controlling in determining whether the indebtedness is primarily consumer debt for purposes of section 707(b)…Here, the Debtor operated a business named Wright’s Pharmacy up until approximately six months before filing her petition. Of the forty-two unsecured creditors listed on the Debtor’s Schedule F, thirty of them are business creditors. Those thirty creditors have claims totaling $ 408 611.96, out of a total of $440 480.70 unsecured debt. Even if the Debtor’s secured indebtedness of $130 839.00 is regarded as consumer debt, the Debtor’s debts are still primarily business debts. Accordingly, section 707(b) does not apply to this Debtor.

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