Are Student Loans Considered “Consumer Debts” for Bankruptcy Filings?

Courts are divided on this issue.  The answer may matter as to whether a debtor in bankruptcy must pass the means test.

The federal Bankruptcy Code defines consumer debt as debt incurred by an individual “primarily for a personal, family, or household purpose.” … The court may classify student loans as either consumer debt or non-consumer debt.

Some courts, like the court in In re Gentri, 185 B.R. 368, 373 (Bankr. M.D. Fla. 1995), assume that student loans are consumer debts, but do not analyze, whether student loans are “consumer debts.” See In re Dickerson, 193 B.R. 67, 70 (Bankr. M.D. Fla. 1996); In re Chapman, 146 B.R. 411, 416 (Bankr. N.D. Ill. 1992).

But other courts have held that student loans may or may not be “consumer debts.”  See In re Vianese, 192 B.R. 61, 68 (Bankr. N.D.N.Y. 1996) which held that student loans for debtor’s son’s education were for “family purposes” and should be considered consumer debt).

The most logical view is to examine the student loan’s purpose: Student loans may be either consumer or non consumer debts, or partly both, depending on the purpose.  For example, if the debt was used to pay for living expenses, then it is consumer debt.  But if the debt was used, for example, direct professional education expenses such as tuition and books, it would be non consumer debt.  But if the student loan was used for both purposes, it could be both consumer debt partially and non consumer debt partially. In re Stewart, 175 F.3d 796 (10th Cir. 1999); In Rucker Case No. 10-53880-JDW (Bankr. MD Georgia 2011).