In determining whether 11 U.S.C. § 707(b) was applicable, the bankruptcy court held that despite the debtors having thirteen consumer debts totaling $296,775.43 and eight business debts totaling $294,595.56, “[b]ecause of how easily a mortgage can skew the claims in favor of consumer debt” the debt secured by real property should be excluded from this consideration. In re Jones, 2009 WL 102442, *1 (Bankr. E.D.N.C. Jan. 12, 2009) (citing In re Booth, 858 F.2d 1051, 1054 (5th Cir. 1998)). After this adjustment, the debtors had primarily non-consumer debts and 11 U.S.C. § 707(b) did not apply.
Additionally, the bankruptcy court held that only a Trustee and not a creditor had authority to bring avoidance actions under 11 U.S.C. § 548. It similarly rejected the creditors argument that it could bring a derivative suit, that the right to appear and be heard under 11 U.S.C. § 1109 conferred standing and that their was some nebulous constitutional right to bring an avoidance action.
The ability to segregate home mortgages from other consumer debts in calculating whether 11 U.S.C. § 707(b) is applicable is a powerful tool for helping debtors driven to bankruptcy primarily due to a failed business by recognizing that such debts skew the computation and could have the affect of precluding such business debtors from obtaining a fresh start merely by having a home.
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