The issue of whether a debtor is a “consumer debtor” or a “business debtor” occasionally comes up in an individual debtor’s bankruptcy case. First of all, why does it matter? And the answer is that, in certain cases, this determination can make all the difference in determining whether the debtor can ultimately get a chapter 7 discharge.
The issue revolves around the “means test” in bankruptcy. Simply put, the means test looks at a debtor’s income to determine whether that particular debtor’s income is above or below the “mean” income for other debtors in a similar situation – i.e., the same geographic region and the same number of dependents.