What Is a Non-Consumer Debt Means Test?

Non-consumer debt isn't means-tested when filing for bankruptcy.

Americans are increasingly saddled with debt that they are increasingly unable to repay. "Consumer debt" is defined as personal, unsecured debt such as credit cards. "Non-consumer debt" refers to secured loans such as home mortgages and business loans.

No Means Testing

Generally speaking, non-consumer debts are not eligible for relief under the new bankruptcy laws, and therefore they are not means-tested. Because most debtors have a combination of consumer and non-consumer debts, a threshold of at least 50 percent of non-consumer debt is required to file for Chapter 7 (business debts) bankruptcy.

Form 22

Forms 22A and 22B must be filed with the Internal Revenue Service to declare non-consumer debt and monthly income and expenditure. After the final tax assessment, a net loss can be posted.

Which Debt is Better

Although non-consumer debt isn't means-tested, it is less damaging to your credit score when filing for Chapter 7 bankruptcy. Filing for Chapter 13 (personal debts) bankruptcy suggests irresponsible, profligate borrowing.

References

• Bankruptcy Law Network: Primarily Business Debtors Exempt from Means Test
• Expert Law: Forum, Bankruptcy Law, Bankruptcy Issues, Using Form 22A for Non-Consumer Debt
• American Bar Association: Bankruptcy Boot Camp, Understanding Form 22
• Best Case.com: Means Test Guide