Under Section 707(b)(1) of the Bankruptcy Code, the court “may dismiss a case filed by an individual debtor under [Chapter 7] whose debts are primarily consumer debts * * * if it finds that the granting of relief would be an abuse of the provisions of [Chapter 7].” Courts have interpreted the phrase “primarily consumer debts” in several different ways. The majority view is that a debtor’s liabilities are primarily consumer debts if the aggregate dollar amount of such debts exceeds 50% of the debtor’s total liabilities.[1] Other courts, however, consider the relative dollar amount of consumer and non-consumer debt and, if those amounts are “approximately equal,” the number of consumer and non-consumer debts as well.[2] Some courts hold that a debtor has primarily consumer debts only if the dollar amount of such debts exceeds 50% of the debtor’s total liabilities and, in addition, the consumer debts outnumber the non-consumer debts.[3] Still other courts hold that a debtor has primarily consumer debts only if the amount of consumer debt actually being discharged and not reaffirmed exceeds 50% of the debtor’s total liabilities.[4]
In In re Hlavin, 394 B.R. 441 (Bankr.S.D.Ohio 2008), the court noted that §707(b)(1) was passed in part to protect creditors against abusive Chapter 7 filings. Quoting to In re Grant, 51 B.R. 385, 390 (Bankr.N.D.Ohio 1985), it stated that §707(b)(1) was intended to avoid abusive Chapter 7’s which “drive up the cost of consumer credit[,]”, to the detriment of lower and middle income borrowers who often need such credit. Id. at 447.
Based on the context in which §707(b)(1) was passed and the policy concerns it was intended to address, the Court adopts the majority view and concludes that a debtor has “primarily consumer debts” if the aggregate amount of his or her consumer debt exceeds 50% of the total debt. To hold otherwise and determine the primary nature of debts based on the relative number of consumer versus non-consumer obligations could lend itself to pre-bankruptcy manipulation.[5]
The court stated that “[b]y contrast, if the primary nature of a debtor’s liabilities is measured by the relative amount of debt, then a prospective debtor planning ahead to avoid a Chapter 7 dismissal might do so by paying down consumer debt, consistent with the policies behind §707(b)(1). Id. at 448.
In In re St. Jean, 515 B.R. 864 (Bankr.M.D.Fla.2011), the court also held that term “primarily” as it appears in §707(b) means consumer debt that exceeds 50% of the total debt. The court then went on to note that a home mortgage is a consumer debt for purposes of §707(b). Id. at 872-73.
However, in In re Garner, 2025 WL 2712758 (Bankr.D.Md. Sept. 23, 2025), the court refused to adopt a bright-line rule that a debtor has primarily consumer debts if at least 51% of the total dollar amount of the debt consists of consumer debts. Rather, the court found that a more fluid approach to determining whether a debtor’s debts are primarily consumer debts is the better approach, stating that the court would consider the totality of the circumstances and assess the debtor’s overall financial situation. Still, the court found that the debtor’s debts were not “primarily consumer debts.” Id. at *12.
Having determined that the Mortgage Loan is a consumer debt that is required to be included in the Section 707 analysis, the Court concludes that the Debtor’s debts are primarily consumer debts because the amount of the Debtor’s debt incurred for a personal, family, or household purpose ($388,164.61 or 72%) is substantially higher than the amount of debt not incurred for a personal, family, or household purpose ($144,381.00 or 27%). The percentage breakdown of consumer versus business debt, combined with the relatively small difference in the number of consumer creditors (five) versus non-consumer creditors (eight), ultimately swayed the Court. The Debtor’s arguments that the Court should not consider debts that will not be discharged or secured debts that the Debtor intends to repay are simply too speculative. The Debtor could decide at any point that he no longer wants to retain his residence and then any remaining personal liability would be included in the Debtor’s discharge. The Court is basing its decision on all of the Debtor’s debt as of the date of filing (aside from the relatively small IRS Claim) without looking to how such debt will potentially be treated by the Debtor in the present or future.[6]
[1] See, Zolg v. Kelly (In re Kelly), 841 F.2d 908, 913 (9th Cir.1988); Stewart v. United States Tr. (In re Stewart), 175 F.3d 796, 808 (10th Cir.1999) (holding that a debtor has “primarily consumer debts” if the aggregate amount of consumer debt is more than 50% of the total debt); In re Hoffner, 2007 WL 4868310 at *2 (Bankr.D.N.D.) (“The majority of courts that have considered the issue have found that ‘primarily’ means more than half of the total dollar amount owed.”); In re Beacher, 358 B.R. 917, 920 (Bankr.S.D.Tex.2007) (same); and In re Naut, 2008 WL 191297 at *7 (Bankr.E.D.Pa.) (same);.
[2] See, In re Bell, 65 B.R. 575, 577–78 (Bankr.E.D.Mich.1986) (“[W]here the total amount of the consumer debt is substantially less than the total amount of non-consumer debt, the debts cannot be considered primarily consumer debts, even if there is a greater number of consumer debts. On the other hand, when the amount of the consumer debt is substantially greater than the amount of the non-consumer debt, the debts must be considered primarily consumer debts even if there is a greater number of non-consumer debts. Finally, when the consumer debt and the non-consumer debts are approximately equal, the Court should consider the relative numbers of consumer and non-consumer debts.”).
[3] See, In re Vianese, 192 B.R. 61, 68 (Bankr.N.D.N.Y.1996).
[4] See, In re Restea, 76 B.R. 728, 734 (“Overall, therefore, consumer debt is approximately 53 percent of all applicable debt in this case. Mindful of the statutory presumption in bankruptcy of granting debtors relief and the underlying ‘fresh start’ policy basis, the Court cannot find that 53 percent constitutes the ‘principal’ debt.”)
[5] Id. at 447-48.
[6] Id.
Matthew T. Gensburg
mgensburg@gcklegal.com