Consumers ended 2021 with record levels of debt, according to data released from the Federal Reserve’s New York district. Consumer debt stood at $15.6 trillion, with a large chunk coming from mortgages. Credit card balances and auto loans also increased, though student loans saw little increase.
So what is consumer debt, exactly, and why is it important? Consumer debts are debts that are incurred for personal, family or household reasons. This type of debt is one of the main factors that drives the American economy. Non-consumer debts, on the other hand, are everything else.
Let’s look closer at consumer vs non-consumer debts, as well as how they play a role when filing bankruptcy in White Plains NY. If you are still unsure about the types of debts you primarily have and how they can affect your bankruptcy case, schedule a free consultation with The Law Office of William Walder.
What is Consumer Debt in Bankruptcy?
Consumer debts generally apply when you use the money to cover a personal, family or household expense. When filing for Chapter 7 bankruptcy, you will need to pass a means test first, as this looks at your spending in relation to your household size and income.
Here are some of the most common examples of consumer debts:
- Credit cards. Using credit cards for daily expenses like groceries or gas counts as consumer debt. If you’re using your credit card for business expenses as well, you’ll need to keep detailed information of your transactions.
- Student loans. Student loans are typically handled on a case-by-case basis. Some courts count them as consumer debts, while others do not. Having an experienced bankruptcy lawyer in White Plains NY can help with this.
- Your home mortgage is a consumer debt. The only exception is when the mortgage is taken on a business property.
- Car loans. As long as the car is being driven for personal needs – getting the kids to soccer practice, running errands – the auto loan is considered consumer debt. Even if you use the car for a few business-related things, the loan is still considered consumer debt because of the car’s primary uses.
- Domestic support obligations. Child support, alimony and spousal support obligations typically qualify as consumer debts.
- Legal fees. Legal fees incurred from a family or household matter also qualify for consumer debts. Only those that are incurred from business-related matters are considered non-consumer debts.
What is Non-Consumer Debt in Bankruptcy?
Non-consumer debt is pretty much everything else that consumer debt doesn’t cover. Generally speaking, these debts refer to business related-debts, such as:
- Business vehicle loans
- Business credit cards
- Business insurance
- Business utilities
- Debt incurred for motive for profit
- Investment real estate
It’s also possible that the courts will recognize the following as non-consumer debts, depending on the details of your bankruptcy case:
- Automobile accident debts
- Student loans
- Medical debt
Does the Type of Debt Matter in Bankruptcy in White Plains NY?
Understanding the difference between consumer and non-consumer debt is an important part of the bankruptcy process. First of all, you’ll need to take a means test to make sure that you qualify for Chapter 7 bankruptcy. However, you are generally not required to take a means test if most of your debts are non-consumer debts.
Second, in a Chapter 13 bankruptcy, any co-debtors on consumer debt are protected from the automatic stay that takes effect in bankruptcy. That being said, non-consumer debts are not protected in Chapter 13. This means that there is no automatic stay protection for co-debtors when it comes to business debts.
Should I File Bankruptcy Based on My Debts?
The best way to find out if it’s worth filing for bankruptcy in White Plains NY is by speaking with a qualified bankruptcy attorney. This legal professional can help you understand the types of debts you have. It’s important that no stone is left unturned – the types of debts and where they come from will have a significant impact on the type of bankruptcy you should file.
Furthermore, a bankruptcy lawyer can help you understand the advantages and disadvantages to filing bankruptcy in NY so that you can make an informed decision. The Law Office of William Waldner will protect you and your assets immediately. If you decide to move forward, we’ll make sure that your best interests are represented at all times.
To discuss your debts with a bankruptcy attorney in White Plains, contact The Law Office of William Waldner today.