Do I need to pass the means test – I have business debts.

You  have to pass the means test if your debts are “primarily” consumer debts.  This isn’t quite as easy as it sounds. Why?  The word “primarily” is not defined in the Bankruptcy Code.

So how do we figure this out?

Well, first what’s a “consumer debt”?  That’s not so hard – “consumer debts” are defined in the Bankruptcy Code as: “debt incurred by an individual primarily for a personal, family, or household purpose.”

Here’s that word “primarily” again.

You can search all day – that word is not defined in the Bankruptcy Code.

The Supreme Court says we’re supposed to interpret the Bankruptcy Code according to its “plain meaning” which the Court says is the “natural meaning of the text.”

So what’s the “natural meaning” of “primarily“?

A search of dictionaries yields the following:

essentially; mostly; chiefly; principally; for the most part

This isn’t very precise, is it?  But parsing it out, you can see that “Consumer debt” is “debt incurred by an individual mostly for personal, family or household purposes” and that the means test applies if  your debts, for the most part, were incurred for the most part for personal, family or household purposes.”

Many small business owners can’t separate their personal life and their business life.  They are intertwined.  Some debts have both business and personal purposes.  If the debts are not mostly household, personal or family, they are not consumer debts.  And if most of the debts are not consumer debts, then the means test does not apply.

This is a vague phrase for a Code which is supposed to be precise.  However, most of the courts which have interpreted “primarily” have decided that it means “the majority” or “more than anything else”.

So, first, ask if the debt was incurred more than anything else for your personal, famly or household purposes.  If not, don’t count it as consumer debt.  Then, compare your consumer debts to your non-consumer debts.  If the consumer debts are less than the rest of your debts, the means test does not apply.

Work with your attorney on this one.  This can be tricky and it’s very important to you.