of the ruling below will lead to abuse of the bankruptcy code of permitting high income debtors otherwise abusive chapter seven bankruptcy every court in every circuit has agreed with the kelly rule which came from the ninth circuit fact there is personal residence for what the debtor intends to be their personal residence is consumer debt period period drama that's that's not the  case this cox case i think is most on point here and the cox case the debtor say that the source of the funds changed his motive and his subjectively hope to make a profit out of investing in his personal residence cox case cited kelley as the sole source of authority that argument must be rejected every court sense that has addressed any debtor who asked for a subjective interpretation why they incurred the debt to this was referred to as a bonus or a deferred compensation then it was part of the deal that was cut with regard to the his employment and he says he would have taken the circumstances are such that one can say as a backup said that this was a business purpose your honor you're making an argument that even the debtor doesn't make on page two eighty three of the record  received titian's on the front page it's a check whether they're primarily consumer primarily not consumer that's almost always driven by mortgage debt or debt incurred to purchase their residence there's all kinds of reasons people take equity out of their homes right all kinds of reasons that it might be a business person purpose and it might not and what kelly says is well secured that is not automatically excluded from current consumer debt it's not automatically included either we must look to the purpose of the debt and you seem to be it would be consumer debt one hundred percent of the money went to the seller of this home ok so sometimes you will buy homes and they buy them from rental property sometimes people buy them to live in is your is your argument really that in this case it's not just that he bought a home b but that he real resided there himself not just that he resided there but he intended to reside there when he purchased the home your your argument is that under kelly you're conceding that we that it's not automatically consumer that you knew look at the purpose of that but that this purpose was to purchase a house for him to live and not ass famed to like use it as a business or profit of any sort that you know exactly my argument this is much more helpful and so in that i don't think that's where you started today so it's we've taken several minutes to get there but i but i agree i think that's what your brief at least generously construed argues i think is what you have to argue given that kelly's on the books and it says something different so in this case this family we all know what the facts are but but you seem to take issue with the court having had a hearing to determine what the what the real purpose was and you're arguing it's not an issue of fact the question is what the purposes is the purpose of the use of the funds in the baptists already construed  evident during here because this is not an issue of fact the only issue of fact would be if the debtor said i wanted to run it and then i decided to move on and that's the davis case that i say talks about a debt or can change their intent they could buy it as a rental property  area well go ahead and increase your salary by twenty percent and then he takes that twenty percent and buys a home with it the purpose remains the same it was to buy a home to live in is that's what you are doing ok so what about the fact that in this particular case as we all know there were whether you intended for that ten house to solely be for your personal occupation that the mixed use questions that would be fascinating if this were the case are the nerds or case where it's somebody bought the property twenty percent of it had a house on  where the debtor lived in one of the four units then we would say well it was twenty five percent for a business for consumer purpose and seventy five percent for a non consumer purpose one hundred percent of the house was solely for his personal occupation or can you tell me what is it that you want us to do what happened because because of the procedural posture of the case we agree with you that the primary purpose here is for him to live in the house and therefore it's consumer the means test if the means test applied and with regard to a stay this court in two thousand and seven and i apologize i'm forgetting the name of the case set forth that there is no state required to stop skiing company would like you to think in order to determine the purpose of a loan the only thing you look at is the use of the loan proceeds believe it's a much broader and more factually intensive investigat so what exactly do you think makes this not a consumer when you look at the totality of the facts i don't want to know what it is part of an employment employer contract a written contract sarette an ass been interviewed in two so that they could go on to the business opportunity of expanding the little nail hotel chain though it's not not the fair i mean at points you seem to be saying the best may be the bankruptcy a job there and he was he would want to do to take this job when the first job was first offered it wasn't sufficient it was the same same task same opportunity that he already had he had been with the four seasons for twenty five years it was a bad thing and that's what that has to do with the purpose of the long in this case because what kelly says is that incurred for business ventures or other profit seeking  plainly not consumer debt and so you look at the purpose of the loan and whether it's for business venture or a profit seeking activity so to get back to judge first answer earlier question if they'd increased his salary and he went out and bought a in that scenario let's say they did his salary and somehow they mistakenly overpaid him and he turned around and had to pay them back that would be a debt that would be a business debt but one of the things i've been trying to unpack here is is are we talking basically about a five hundred thousand dollars principle is that what the loan that we're talking about not the interest both the employment contract provided for both payments but at this point at this point what is it that has been paid there is not what is the debt what is the debt that is something for the thousand dollars there was no way the shreds would be able to buy a home in aspen and take advantage of the fact that there was an up tick in the real estate market at that time he would have been a renter and he didn't want to be a renter in order to to buy a house in aspen the five hundred thousand dollars allowed him to use that money would be like being able to use that money in the in the stock market he was able to participate in the market because of that five hundred thousand dollars the fact that it was interest free was the bonus part of it which was significant it worked out to about thirty three thousand dollars a year in additional compensation but is that th matter analyzing the purpose of that that this is a debt that was created in the contents of an employer employee contract this right but is that the wrong focus so when you look at the purpose of the debt for purposes of determining whether it's considered consumer debt do you look at the back to get to the source of the loan and the clavicle benefit by having it be a part of this employer contract or do you just look at the fact that the stat was essentially used to buy a home that was to live and not for business purposes i don't think you limit it to any one of those elements but you add all of them together i think the purpose of a loan is a factual determination which you add everything together and so they did the the bankruptcy judge and the bat both looked to everything involved in the case helped immensely the purpose of the loan from the point of view of both the lender and the bar  without the compensation was for the purpose of buying a house it was and it was not that's why i am trying to look at the lower the principal and the forgiveness of the interest as somewhat separate but the provision of the princip thousand dollars was to buy the house was a very important element because he would not have been able to participate in the market but for that's what i'm describing as a bunkhouse because it seems to me that these aren't necessarily linked right it wasn't just by any old house it was a house in order to do this job right i mean say it seems to me that's your best argument it's really your only it was to buy a house to enable him to be in that job and to have the compensation package sufficient to entice him to come join this business opportunity but we have to be very concerned about the abuse of chapter seven and one of the arguments the council makes is that in this particular case which is certainly an a one off case this is an unusual case that there's a there's a debtor here who is a high income earner and is able to pay this back and he also argues that this type of employee benefit or employee compensation package is increasingly common so what about that you have to look at the fact that the constitution of the united states allows for congress to enact laws bankruptcy universal and the reason why we have that is to encourage business risk so the reason that seven zero seven b is limited to only consumer doubters is because we want to encourage economic risk by businessmen and this was a business opportunity to expand the little no a situation where a homeowner took a bunch of equity out of a home to open a flower shop i'd agree with you absolutely but this really is a little bit different right it's a little bit different because he lived there himself so if you can embrace that's that's council's argument what's your best response to that argument this isn't an entrepreneur who's going out and setting up shop this is a person is going to live there and this was a means to have compensation that was adequate without having the use of the five hundred thousand dollars to be able to invest in the real estate in aspen mr sure it would have never taken the job is this sort of like it sounds to me like you're asking us to to to any way to that somewhat and when you go into the student loan cases with regards to seven zero seven b and dismissals they often talk about whether this is a new venture or whether this is too  ongoing career right it's not a black and white rule no it's not about rule and i think that one of the key elements of this appeal is the standard of review and this is the determining the purchase purpose of a loan is a factual determination and there is no clear air but if the facts are not in dispute and we're only evaluating the legal consequences that flow from those fact know review with regards to did you apply the correct legal standard and in this case we all agree the correct legal standard is determine whether the loans and i merely am sooner non consumer that's sort of at a level of generality that's not terribly helpful i mean in fact we need to know what we're looking at with regard to the purpose question on i e are the four before we can answer the question so it seems to me the judge did was point is  given the way he used it no because use of the loan proceeds is not the only factor that is considered and not the only fact that was considered by the bankruptcy court in making the factual finding as to purpose there i think that's that's what i'm really struggling with is that the i think the back put too much focused on the start of stances under which the terms of the small room were really negotiated so let me give you a hypothetical and see if will if you would agree that it changes the analysis so let's say that i wanted to take a new job but it's the commute is doable it's l a so oh an hour and a half drive but as part of compensation package i want to have a house a little closer to the ocean and it's a second home a weekend house and so i tell my employer you know what i don't want to drive for an hour and a half i'm going to be driving mainly with then the busiest traffic hours in los angeles so as part of my compensation package give me an interest free half a million dollar home loan so that i can purchase the second property by the beach and i'll drive back i live there during the week and on the weekends my family can join me  occasionally with that change the analysis in any way that we look at the fact that this home was not basically rented out or it was not basically used for home office is basically a second home the fact that the proceeds were used to purchase a home is only one factor in determining whether it was for this purpose let's go back to the beginning so if that's one factor the factor in fact that he was i assume we have to back out the notion that he was buying this house in order to take a job in aspen because  are we then we're jam to the fact that this was part of a negotiation that the fact that the employer was the one who gave him the loan and that it wasn't it essentially in in lieu of other possible forms of compensation they could have given him is that the key factor yes your honor that is a very significant factor if you think about it as this is actually asking them to repay over compensation no one would say that that  helpful i don't understand that at all wouldn't that be a business debt if you owed money back to your employer is to me that it's your best argument is that this is not just employer provided housing but that it was done a done deal at the time the negotiation was made that he was going to take this total employment package or not now that was it was essential to the i'm and i'm not sure it's enough but i think it has to have been essential as opposed to just another ornament on the christmas tree or it that strikes me as really critical because that goes back to the student loan analogy and again i'm not sure it's enough but it can have an analogy was that this person wanted to advance his career you want to do the little no hotel hotel chain he's analogy it would be more of you are not eligible to take this position unless you are seeking your graduate degree or something and so you must be enrolled in this program and so that student positions the student loan context much stronger under those circumstances than this one because what they're ultimately using the money for is a business related purpose i e to go to work what they're going to use the skills at work what he's ultimately using the money for us to live someplace when you go to the student loan cases they talk about personal satisfaction from i understand that but the ones that are allowed as non consumer loans are the ones in which you're being trained specifically to do something if the employer gave you a loan to train us and get a master's degree in mechanical engineering because you're working as a mechanical engineer  then that is much more comfortable to me as a business purpose then giving you a long to live someplace this is without this loan this business arrangement would not existed without this loan he couldn't do the job right just like without the degree the advanced degree that our hypothetical engineer can't do the master's level engineering i think correct he he would've taken the job it wouldn't have community we're talking about a commute that's unworkable not just in convenience you're right it's wyoming versus that but plenty also could have in fact he could take the job if they had just given him more money and he had gone out on the market and bought and got more so and then we all agree as i understand that mortgage would be a consumer loan i would agree with you on that but this is part of the compensation package they wouldn't give him the more money they couldn't in their compensation for their other employees have provided him with enough funds just straight salary to entice him to come there he was successful in his career he had they wanted somebody of his caliber to come in and expand the little nail hotel chain cancel your significantly over your time i did not even see i was that's ok and actions record five eighty one the court explicitly found quote he could have rented this was not a business requirement and in fact the debtor stated in his deposition it wasn't just any apartment he was looking for  had to be nice enough for his a nice neighborhood or an appropriate size and that's it experts of record three one nine the case was looking for earlier was surely in ways that i don't so i mean we were talking about whether this is a business requirement whether he could have worked and rented a house well he used the maximum amount that they made available to him but they chose to make it available to him and you know the aspens so i'm not sure is how does that take away from his case well if  purchasing a house is not a requirement for this gentleman to live in aspen and work at this job but he says he couldn't afford to rent there oh no that was not and that's not on the record he said he did not want to that's an actress of record comes of this is this use your time the way you want to but i think this is a the court found that so long as it is a final ruling no stay is needed to prevent the bankruptcy court further effectuating the order and the debt is three hundred forty five thousand dollars in this s a ruling about whether you're going to go through the process that's exactly right and with regard to if the employer an increase in salary he would have gone out and purchased a market rate loan would he still be arguing that this is a no consumer debt your problem is that he says if they hadn't given the loan he would have taken the job right he does say that and then we turn right back to the credibility of a witness to an issue that so central to every bankruptcy  use the cars for sometimes i suppose for business purposes or maybe just make their commuter earlier easier you would take the same position i take and that's a consumer be a ford is in the business of creating their managers to be in spiffy cars yes and if they did if they did impose such requirement that would be a lot closer case i mean a lot better fax for the debtor there is no such requirement you know you just need to show up on monday morning like just like every other employee ok and that's the problem with this case the facts are so ordinary there's no evidence of any tax returns that were claimed as a business during the time at any time or in this case everything looks post hoc so we're looking at a floodgate which any