F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N R E P A U L R I C H A R D C H E R R E T T ; C O L L E E N C O U R T N E Y C H E R

R E T T , Debtors

,

A S P E N S K I I N G C O M P A

N Y , Appellant

,

v

.

P A U L R I C H A R

D C H E R R E T T ; C O L L E E

N C O U R T N E Y C H E R

R E T T ; A R T C I S N E R O S , Chapter 7 Trustee,

A ppellees. N o. 14-60079

B AP No. 14-1056

OPI NI ON

Appeal from the Ninth Circuit B ankruptcy

Appellate Panel Kirscher, Dunn, and Tay

lor, B ankruptcy

J udg es, Presiding

Arg u ed and Submitted November 8, 2016

Pasadena, California

F iled October 16, 2017

B efore: Marsha S. B erz on, Morg an Christen, and J acqueline H. Ng

uy en, Circuit J u d g es.

Opinion by

J u d g e Christen; Dissent by J udg e Ng uy enI N R E C H E R R E T T 2

SUMMARY *

Bankruptcy

The panel affirmed the B ankruptcy Appellate Panel’s decisi o n a f

firming the bankruptcy court’s denial of a creditor’s motion to dismiss a Chapter 7 bankruptcy petition for abuse under 11 U.S.C. § 707(b)(1).

Ag reeing with other circuits, the panel he l d t hat the bankruptcy court’s order was final and appealable because it

c o nclusively resolved the debtors’ ability to file a Chapter 7 bankruptcy petition and conclusively determined the discrete issue whether a debt was prim a r i ly non-consumer a nd therefore subject to discharg e under Chapter 7.

The panel held that the debtor’s housing loan, made b y an employ e r to an employ ee as a key part of a compen s a t ion packag e, q

ualified as non-consumer debt. The p anel held that the bankruptcy court did not clearly err in f i n d ing that the debtor incurred the housing loan pr i m arily for a nonconsumer purpose connected to furthering his career. According ly

, § 707(b)(1), which allows the bankruptcy court to dismiss a case filed by

a debtor whose debts are primarily consumer debts, did not apply

. Dissenting

, J udg e Ng uy en wrote that the correct standard of review was de novo because the case involved undisputed facts and the o nly issue was the leg al conclusion to be drawn from those facts, and the panel majority created an intra- a nd

* T h is su m m ary co n stitu

tes n o p art o f th e o pin io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E C H E R R E T T 3

inter-circuit split by reviewing for clear error. J udg e N g uy en wrote that under de novo review, it was c lear that the housing l o a n was consumer debt incurred b y an individual primar i l y for a personal, family , or household purpose.

COUNSEL

Scott Talkov (arg

ued) and Michael G. Kerbs, Reid & Helly er APC, Riverside, California, for Appellant.

Kathl e en J

. McCarthy ( arg ued) and Thomas H. Casey
, L aw Office of T homas H. C a sey I nc., Rancho Santa Marg arita, California; L eslie K eith Kaufma n , L aw Offices of Kaufman & Kaufman, Santa Ana, California; for Appellees.

OP INION

CHRI STEN, Circuit J udg e:

This case c alls for the court to decide whether a housing loan, made by

an employ er to a

n employ ee a s a key part of a compensation packag e, qualified as a n on-consumer debt. I f
t h e loan was a non-consumer debt, the bankruptcy co u r t properly denied Aspen Skiing Company ’s motion to dismiss the Cherretts’ Chapter 7 bankruptcy petition under 11 U .S.C. § 707(b)(1). On the other han d

, i f t h e loan was a consumer debt, t h e bankruptcy court erred by deny ing the motion to dismiss. The B ankruptcy Appellate Panel (B AP) affirmed the bankruptcy court, ruling that the b ankruptcy court’s order was final a nd appealab l e and that there was sufficient evidence that the Cherrett s i n curred the loan f or a n on-consumerI N R E C H E R R E T T 4

purpose. We have jurisdiction under 28 U.S.C. § 158(d), a nd we affirm the B AP.

I. BACK G R OUND

A. Cherrett’s Em ploym e nt w ith Aspen

Paul Cherrett (Cherrett) beg an working in the h o spitality industry in 1979. He spent approx imately twenty

- f ive y ears with the F our Seasons hotel chain, including five y ears at the F our Seasons in J acks o n Hole, Wy oming

. I n December 2006, while Cherrett lived and wo r k ed in J ackson Hole, he heard about an open manag erial position at Aspen Skiing Company (Asp e n ) i n C olorado. He did not apply for the position b ecause it did not o f fer any new responsibilities compared to his job at the F our Seasons. M o n t h s later, in 2007, Cherrett learned that Aspen had cre a t e d a new uppermanag ement position with ex panded res p onsibilities. He

e xp r essed interest to a

n ex ecutive search f

irm and interviewed for the job.

Aspen offered Cherrett a position leading i ts h o spitality division as a senior vice president heading up the ex pansion of Aspen’s “ L ittle Nell Hotel” brand, Aspen ’ s prestig ious “flag ship property .” Cherrett u nderstood that if the L ittle Nell Hotel ex pansion cont i n u e d, he mig ht h ave the opportu n i t y to oversee brand development in J ackson Hole and move b a ck to his h ome ther e

. Cherrett a lso u nderstood that if he accepted the position with A spen, he would need to live near Aspen’ s o f

f i c e in Colorado, at least initially

. This represented a challeng e b ec a u se his daug hter had two y ears of hig h school left, Cherr e t t an d h is wife did not want to relocate her to a new school, and in Cherrett’s view

, the salary p r o p o s ed by Aspen d id not cover the hig h cost o fI N R E C H E R R E T T 5

l i v ing in the Aspen area nor offer sufficient incentive t o disrupt his family ’s l i f

e i n W y oming

. The salary was not enoug h for him to a fford to buy a home in Aspen, and rentals there were “few and far between” and also very ex pensive.

I n n e g o t i a t i o n s r e g a r d i ng compensation, A spen eventually offered a $500,000 housing loan ( Housing L oan) in addition
to an annual salary of $ 3 0 0,000. The Housing L oan was interest-only

for the first ten y ears and it was coupled with a bonus plan providing Cherrett a g uaranteed annual bonus o f
up to $ 33,750 to cover the interest p ay ments on the loan. The annual bonuses were timed to coincide with the date the annual interest pay

ments were due, ensuring that, for the first
ten y ears, Cherrett woul d h ave no out-of-pocket ex penses related to the loan. I f Cherrett left his position for any reason other than d eath or disability within two y ears, he w ould have
to r epay the loan and pay Aspen an a dditional $140,000. He would have to pay $120,000 for leaving within three to four
y ears; $100,000 for leaving within fiv e t o s i x y ears; a nd $80,000 for leaving within seven to ei gh t y ears. Cherrett would not have to repay a ny a d ditional interest on the loan if he continued to work for Aspen throug h 2015. Aspen estimated the v alue of the p l a n a t $ 330,750 over a period o f ten y ears.

Only with the Housing L oan d id Cherr et t find Aspen’s offer attractive enoug h to a ccept. He left his job a n d family in J ackson H ole, and purchased a c o ndominium near Aspen for $995,000. The Housing L oan cover e d $ 500,000 o f the purchase price, and Cherrett f i n a n ced $417,000 with a loan from a market-rate lender.

Cherrett’s wife and daug h ter remained at the family home in J ackson Hole so that his daug h ter could finish hig h schoolI N R E C H E R R E T T 6

there. The condominium in Colorado was s m aller than the family home in J ackson Hole and did n ot have enoug h space to accommodate Cherrett’s wife and two chil dren. W ith hopes o f relocating back to J ackson Hole to develop the L ittle Nell Hotel brand, Cherrett c o n sidered the Colorado condominium a “ place holder” and only moved c lothing a nd
per s o n al i t ems there. H e v isited his home and family in J ackson Hole “ at every

opportunity ,” returning for holiday s, birthday s, anniversaries, and his daug hter’s prom a n d hig h school g raduation. He continued using financial institutions in W y o ming , and kept his vehicle reg istration there.

I n 20 0 8, the economy crashed a nd Aspen abandoned plans to ex pand the L ittle Nell H otel brand. I t became clear that Aspen would not be relocating Cherrett back to J ackson Hole. So in 2009, after Cherrett’s daug hter g radua t e d from hig h school and moved away to colleg e, his wife joined him in Colorado a

nd they sold their home i n J a c kson Hole. I n 2011, four y e ars after joining Aspen, Cherrett resig ned from his position.

B. Bankruptcy P roceedings

Cherrett and his wife filed a voluntary Chapter 7 b a n kruptcy petition o n Aug ust 30, 2013. They owed Aspen $550,000 under the terms of the Housing L o a n. Aspen filed

a motion to dismiss the Chapter 7 p e t i t ion for abuse under 11 U.S.C. § 707(b)(1). The statute allows a court to “ dismiss

a case filed by an individual d ebtor under this c hapter whose debts are primarily c onsumer debts

. . . if it finds that the
g ranting of relief would be an a buse of the provisions of this chapter.” 1 1 U .S.C. § 707(b)(1). A spen arg ued that because the Cherretts incurre d the Housing L oan to purchase a personal residence, the debt was a consumer debt, and theyI N R E C H E R R E T T 7

were not e ntitled to Chapter 7 relief in lig ht of their ability to pay their creditors in a hy

pothetical Chapter 13 plan. 1

The bankruptcy court held an evi d e n t i ary hearing to determine w hether the debt owed to A s p en qualified a s

c onsumer debt. After hearing testimony from Cherret t , t h e bankruptcy court fo u n d that Aspen offered Cherrett the Housing L oan to entice him “to leave a secured position,” a nd that Cherrett purchased the C o l o rado property so he could “make more money ” and “work a t a very prestig ious, top o f the line” r esort. The bank ru p t c y court thus determined that the Housing L o an “was incurred for a business purpose” a nd did not cons t i t ute consumer debt. The bankruptcy court denied Aspen’s motion to dismiss.

Aspen appealed to the B A P. The B AP concluded that the order deny ing Aspen’s motion was f inal and appealable, a

nd also c oncluded that the bankruptcy c o u r t ’s f inding that C h e r rett incurred the Housing L oan f or a n on-consumer purpose was subject to clear error review. B ased on the testimony and facts presented to the bankruptcy court, the B AP ruled that there was sufficient evide n c e t o find that Cherrett obtained the Housing L oan primarily “for a business
p u r pose with r espect to his employ ment with Aspen.” T h e B AP therefore affirmed the bankruptcy c ourt’s order deny ing Aspen’s motion to dismiss under 11 U.S.C. § 707(b)(1).

1 T h e Ch erretts d o n o t d isp u te th at th ey w o u ld b e in elig ib le to f ile a Ch ap ter 7 b an k

ru p tcy p etitio n b ased o n m ean s if th ey in cu rred p rim arily

co n su m er d eb ts.I N R E C H E R R E T T 8

II. STANDARD OF REVIEW

“Decisions of the B AP are reviewed de novo. ” Carrillo

v. Su ( I n re Su)

, 290 F .3d 1 1 40, 1142 (9th Cir. 2002). “W e independently review a bankruptcy court’s ruling on a p p e al from the BA P

. ” Id. “W e review the bankruptcy court’s conclusions of l aw de novo and its factual finding s for clear error.” Id.

III. DISCUSSION

A. We Have Jurisdiction Over This Appeal.

The bankruptcy court’s ruling must b e final for this court t o ex ercise jurisdiction under 28 U.S.C. § 158(d). Zo l g v. Kelly ( In re Kelly)

, 841 F .2d 908, 9 11 (9th Cir. 1988). Here, the bankruptcy court denied Aspen’s motion to dismiss, and the B AP affirmed. Ordinarily

, orders d e n y i n g a motion to dismiss w ould not constitute final, appealable o rders because they do not “end[ ] the litig a tion o n the merits and leave[ ] nothing f o r the court to do but ex ecute the judg ment.” Sahagun v. L a n d

mark Fence Co. (

In re Landmark Fence Co.)

, 801 F .3d 1099, 1102 (9th Cir. 2015) (quoting F irestone Tire & Rubber Co. v

. Risjord

, 4 49 U.S. 3 68, 373–74 (1981)).

I n bankruptcy appeals, however, we have re c og niz ed “that the fluid and sometimes c haotic nature of bankruptcy
p r o c e e d i n gs n e c essitates a deg ree of j u r i s d i c t i o n al flex ibility .” Id. A bankr

u p t c y court’s o rder that is affirmed

or reversed by t h e B AP is final a nd appealable where the order: “ 1) resolves and seriously affects substantive rig hts and 2) finally determines the discrete issue to which it is addressed.” SS Farms, LLC v

. Sharp ( In re SK Foods, L.P.)

,I N R E C H E R R E T T 9

676 F .3d 798, 802 (9th Cir. 2 012) (quoting Dye v

. Brown ( I n re AFI Holding) , 530 F .3d 832, 836 (9th Cir. 2008)).

W e have not e x p r essly decided whether a bankruptcy court’s order d eny ing a m o tion to dismiss under 11 U .S.C. § 707(b) c onstitutes a final, appealable o rder. The majority of circuits that have addressed the issue have concluded that orders o n motions to dismiss for abuse of C h a p t er 7 a re appealable. S

e e Morse v. Rudler (

In re Rudler)

, 576 F

. 3d 37, 43 (1st Cir. 2 0 0 9 ) ( collecting c ases); but see Barben v

. Donovan (

In re Do n ovan )

, 532 F .3d 1134, 1137 (11th Cir. 2008) ( holding that an order deny ing a motion t o d i smiss a Chapter 7 case under an earlier version of § 707(b) was not appealable). These circuits r ecog niz e that the current v ersion of § 707(b), p art of the B a n k r u p t cy Abuse Prevention a nd Consumer Protection Act o f 2 0 0 5
, “manifest[ s] a cong ressional policy to police all Chapter 7 c ases for abuse at the outset of a Chapter 7 proceeding ” as well as “prag matic considerations that indicate that the d e nial of a § 707(b) motion to dismiss is different from the denial o f other motions to dismiss.” McDow v. Dudley

, 662 F

. 3 d 2 8 4, 288 (4th Cir. 2011).

W e h ave o ften concluded that other ba nkruptcy court orders are final and appealable based on “policies of judicial efficiency and finali t y

. ” Kelly

, 841 F .2d at 911; see also Meyer v. U.S. Trustee (

I n re Scholz)

, 699 F .3d 1 1 67, 1170 (9th Cir. 2012). These policies apply in this case. As the F ourth Circuit ex plained:

Secti o n 707(b) c reates a statutory g ateway based on whether the c ase is abusive, and an order deny i n g that motion to dismiss a s abusive, in e ffect, finally and c onclusivelyI N R E C H E R R E T T 10

resolves the issue. I f the denial of a § 707(b) motion to di s m iss cannot be appealed immediately

. . . , the Chapter 7 pro c eeding s would have to be completed before it could be determined w hether the proc e eding s were abusive in the first place.

McDow
, 6 6 2 F. 3d at 289–90. Here, the bankruptcy court’s order resolved the Cherretts ’ a b i l ity to file a Chapter 7 bankruptcy p etition. The o rder conclusively determined the discrete issue whether the Cherretts’ debt was primarily nonconsumer a

nd therefore subject to d ischarg e under Chapter 7. W e th us hold that the bankruptcy court’s order deny ing Aspen’s moti o n t o dismiss u n der § 707(b) was f inal a nd appealable to this court. 2

B. The Bankruptcy Court Did Not Err b y Fi nding t hat the Housing Loan Was a Non-Consum e r Debt.

1. We Review for Clear Error the Bankruptcy Court’s F indings Regarding the P urpos e o f the Debt.

2 On Decem

b er 3
, 2 01 4
, af

ter A sp en f

iled a n o t i ce o f ap p eal in th is

co u rt, t h e b an k ru p tcy co u rt issu ed a disch arg e o f th e Ch erretts’ d eb ts. A sp en arg u es th at th e b an k

ru p tcy co u rt d id n ot h av e j u risd ictio n to en ter th e d isch arg e an d th at th is co u rt sh o u ld v acate it. B u t A sp en d id n o t ap p eal th e d isch arg e t o t h e BA P
, seek a stay o f p ro ceed in g s p en d in g ap p eal, o r am en d its n o tice o f ap p eal. T h e reco r d d o e s n o t sh ow an y

ex cep tio n al circu m stan ces f o r f ailin g to ap p eal th e issu e to th e B A P o r a d istrict co u rt. T h u s, w

h eth er th e d isch arg e w as erro n eo u sly issu ed is n o t p ro p erly b ef

ore u s. S ee In t’l Un io n o

f Brickla yers & Allied Cr a

f t s m a n Lo ca l Un io n No

. 2 0 v. Ma rtin Ja ska

, In c. , 75 2 F.2 d 1 4 0 1
, 1 4 0 4 (9 th Cir. 1 9 8 5 ).I N R E C H E R R E T T 11

I f the bankruptcy co u r t applied f act to law in a way that “‘requires an inquiry that is e ssentially f a ctual,’ we review it

as if it were a factual finding

, ” but if the b a n k ru p t cy court applied fact to law in a way that “re q u ires reference to ‘the values that a

nimate leg a l principles,’ we r eview it as if it were

a leg al finding .” Uni t e d States v. Hinkson

, 585 F .3d 1247, 125 9 ( 9 t h Cir. 2009) ( quoting United States v. M cConney
, 728 F .2d 1 195, 1202 ( 9th Cir. 1 984) (en banc), abrogated on other g r ounds as recognized by Teutscher v. W oodson

, 8 3 5 F .3d 936, 942 (9th Cir. 2 016)). I nquiries that a r e essentially factual “include[ ] questions such as motive, intent

, and neg lig e nce.” Id. at 1260. “ [ M] ix ed questions of law a nd fact” are those “in which the historical facts are admitted or established, t he rule of law is u ndisputed, and the issue is whether the facts satisfy the statuto r y standard, o r to put it another way , whether the r ule of law as applied to the established facts is or is not v iolated.” Pullman-Standard v. Swint
, 456 U.S. 273, 289 n.19 (1982). “Mix ed questions a re ty pically reviewed de n ovo, but, depending o n t h e n ature o f th e i n quiry involved, may be reviewed under a more deferential clearly e rroneous standard .” United States v

. Lang
, 149 F

. 3d 1044, 1047 ( 9 th Cir. 1998), amended by 157 F .3d 1161 (9th Cir. 1998) (emphasis added).

A spen arg ues that b ecause the parties do not dispute the underly ing facts concerning the use of the Housing L oan, de

novo review applies. Aspen further arg ues that a d ebt incurred to purchase a personal residence is a c onsumer d ebt

as a matter of law. A spen cites our holding i n Z o l g v

. Kelly ( In re Kelly)

, 841 F .2d 90 8 (9th Cir. 1988), in support of its
arg uments.

The debtors in Kelly filed a Chapter 7 bankruptcy petition with multiple mortg ag e s ag ainst their home. Id. at 910. TheI N R E C H E R R E T T 12

bankruptcy court found that the d e b t was primarily consumer, but the B AP r eversed on the basis that debts secured by real
estate mortg ag es catego rically d o n ot qualify as consumer d e b t. I d. at 911. On appeal to this court, the d e b t o rs continued to arg ue that debts secured by real property can never be consumer debt. I d. at 9 12. W e disag reed and h eld that consumer debt can include mortg ag es. I d. at 9 12–13. I n doing so, we reviewed the B A P’s ruling de novo because the question whether mortg ag es could ever qualify as consumer debt was purely one o f law. Id. a t 9 11; see also id. at 911–12 (concluding that leg al issues predominated where “the Kelly s arg ue[ d] that debts secured by real property are n ev e r

consumer deb t s , rely ing on floor statements made in the House and Senate prior to the enactment of the 1978 Act”).

W e did not hold that a ll debts secured by real property a re

consumer debt. I n fact, we ex pressly left open the possibility that some a

re not: “W hile secured debt is not autom atically

ex c luded from consumer debt, it is n ot a utomatically i n c l u d ed either

. W e must look to the purpose o f t h e d ebt in determining whether it falls within the statu t o r y definition.” Id. at 913 ( emphasis added). Kelly a c knowledg ed t h at in

mos t ca s e s “the purchase o f a home and the making o f improvements thereon” w ill m e e t the statutory definition o f

consumer debt, b ut it did not fashion a brig ht line rule. Id. Aspen’s arg ument—that because most debts used to purchase homes are consumer debts, all mortg ag es must b e consumer debts—is contrary

to our case law.

W e have never, as Aspen and the dissent sug g est , h eld that debts used to purchase homes are consumer deb t s a s a matter of law, and unlike in Kelly

, where there was n o dispute

r e ga r d i ng the purpose of the loan, the parties here dispute whether Cherrett incurre d t he Housing L oan primarily for aI N R E C H E R R E T T 13

business purpose. W hether Cherrett’s primary purpose satisfies the statutory requirem e nts for a Chapter 7 bankruptcy filing is a mix ed question of la w a n d fact. Althoug h w e w ould ty

pically review such a question d e novo, the b ankruptcy court’s weig hing of Cherrett’s multiple motives fo r incurring the H ousing L oan was primarily a factual, rather tha n leg al, inquiry

. See Ornelas v. United States
, 517 U.S. 690, 702 (1996) (“W here a trial court makes

. . . commonsense determinat ions based on the totality o f circumstances, it is ordinarily a ccorded deference.”). I n this
case, the purpose of the Ho u s i n g L oan is the sort o f “essentially factual” inquiry that we review f or c lear error, United State s v

. H

inkson

, 585 F .3d 1247, 1259 (9th Cir. 2009), 3 but we would reach the same result on de novo review.

3 Co u rts are sp lit o n t

h is stan d ard o f rev iew

. T h e Eig h th Circu it BA P is in acco rd w ith o u r co n clu s i o n t h a t th e pu rp o se o f a d eb t is a f actu al f in d in g rev iew ed f

o r clear erro r. S

ee L a p ke v. Mu t. o

f Oma h a Ba n k (

In r e La p ke)

, 4 2 8 B .R. 8 3 9
, 8 4 2 (B

. A. P. 8 th Cir. 2 0 1 0 ). T h e T en th an d Fif th Circ u i t s h av e reach ed th e o p p o site co n clu sio n

. S ee Stewa rt v. U

.S

. Tru stee ( I n re S t ewa rt)

, 1 7 5 F.3 d 7 9 6
, 8 0 3 (1 0 th Cir. 1 99 9 ); Ma tter o f Bo o th

, 8 5 8 F.2 d 1 0 5 1
, 1 0 5 3 n .5 (5 th Cir. 1 9 8 8 ). B u t lik e o u r d ecisio n in Kelly

, t h e Fif th Circu it’ s d ecisio n in Bo o th tu rn ed o n w h eth er an en t ire categ o ry o f d eb t m

u st a lwa ys b e co n su

m er o r n o n

- co n su

m er, a l eg al rath er th an f actu al q u estio n

. S

ee Bo o th

, 8 5 8 F.2 d at 1 0 55 (“ Sim ilarly

, t h e d istrict

co u rt erred in its d eterm in atio n th at a sig n atu

re lo an , n o ma tter wh a t use to w h i ch it is p u t , is a l w a y s c o n su m er d eb t.” (em

p h asis ad d ed )). T h e

sam e is tru e o f IRS v. W

estb erry ( In r e W estb erry)

, 2 1 5 F.3 d 58 9 (6 th Cir. 2 0 0 0 ) an d C

yp h er Ch iro

p ra ctic Ctr. v. Ru n s ki (

In re Ru n ski)

, 1 0 2 F.3 d 7 4 4 (4 th Cir. 1 9 9 6 ), u n illu m i n atin g cases th e d i ssen t su g g ests w e

o v erlo o k

. T h e so le issu e presen ted in W estb erry w a s l e g a l: “ w

h eth er f ed eral in co m e an d self

- em p lo y m en t tax es sh o u ld b e co n sid ered co n su m er d eb t” categ o rically

. W

estb erry , 2 1 5 F.3 d at 5 9 0

. Ru n ski also ad d ressed

a categ o rical q u estio n : w h eth er m ed ical eq u ip m en t u sed at th e d e b t o r ’ s b u sin ess w as n ev erth ele ss in ten d ed p rim arily f o r p erso n al u se so lely b ecau se it w as titled in th e d eb to r’ s n am e. Ru n ski , 1 0 2 F.3 d at 7 4 7

.I N R E C H E R R E T T 14

2. The Bankruptc y C o urt Did Not Clearly Err by F inding That Cherrett Incurred the Housing Loan P rim arily f

or a Non-Consum er P urpose.

“Consumer d ebt” is d efined a s “ d e bt incurred by an individual primarily for a personal, family

, or h ousehold purpose.” 11 U.S.C. § 101 (8 )

. W e have held that “ [ d] ebt incurred for business ve n tures or other profit-seeking

ac t ivities is plainly not consumer debt.” Kelly

, 841 F .2d at 913. Courts determine the d ebtor’s purpose as of the time the debt was incurred. See Bushkin v. Singer ( In r e B u s h k i n

)

, B AP No. CC-15-1285-KiKuF

, 2016 W L 4040679, at *7 (B .A.P. 9th Cir. J uly

22, 2016). 4

Evidence that a d ebtor incurred a d e b t “ p urely o r primarily as a business investment, albeit an inves t m e nt in herself or h imself, much like a l o a n incurred f o r a new business,” can serve as an important factor in determining the debtor’s purpose. Stewart v. U.S. Trustee ( In re Stewart)

, 215 B .R. 456, 465 (B

. A.P. 10th Cir. 1 9 9 7 )

, a ff’d

, 175 F .3d 796 (10th Cir. 1999) ( discussing how courts should determine

a d ebt’s purpo s e i n t h e contex t of student loans). T o determine the purpose o f a home loan, it is not sufficient that

a debtor hoped that the asset purchased with i t w o u l d
ap p r e c iate in value. See Cox v. Fokkena ( In re Cox)

, 315 B .R. 850
, 8 5 5 (B .A.P. 8 th Cir. 2004) (holding that it is insufficient that debtors “ s u bjectively hope[ ] that [ a] Residence [will] appreciate in value” w hen “the o b j ective evidence in the record a mply supports the bankruptcy court’s finding that Debtors incurred the d ebts primarily fo r fa m ily

or household purposes under § 101(8)”). I nstea d

, it is

4 T h e ap peal in Bu s h kin is cu rren tly stay ed pen d in g reso lu tio n o f th is

case.I N R E C H E R R E T T 15

appropriate to consider all the c ircumstances indicative o f the debtor’ s primary purpose. W estberry

, 215 F .3d at 593 (“[ W ] hile the profit motive a naly sis may as s i st in the determination of which debts are n ot consumer debt, it does
not prohibit other d ebts from falling outside of the categ ory of consumer debt.”); Kestell v

. Kestell ( In re Kestell)

, 99 F .3d 146, 1 49 (4th Cir

. 1 9 9 6 ) (determining that a debt owed
pursua n t to a divorce judg ment was consumer debt because it was not incurred “with a profit motive or in c o n n e c t i on with a business transaction ” (emphasis added)) .

Here, the bankruptcy

court found that Cherrett p rimarily had a business purpose—not a personal, family

, or h ousehold purpose—for incurring the H ousing L oan. Cherrett testified that he a ccepted Aspen’s o f fer and the Housing L oan so that he could “g row in salary and respon s i b i l ity ” and have the opportunity to oversee e x pansion of t h e L ittle Nell Hotel brand. T he bankruptcy court found that Cherrett incurred the d ebt “so he could work a t a very prestig ious, top of the line, equal to the F our Seasons, equal to th e b est hotels in the world,” resort. The record leaves little doubt that the Housing L oan helped entice Cherrett to “leave a secured position.”

Cherrett furth e r testified that when he incurred the Housing L oan, his family did n ot in t e n d to relocate to Colorado with him, a

n d he considered the c o n d o minium a “place holder.” He lived alone i n t h e condominium for two
y ears, moving only his c lothing and some p erson a l e f fects from W y oming . I t is clear that the Housing L oan did not g o toward the purchase o f a primary residence, or e v e n a secondary v acation r esidence, for his f amily

. I ndeed, the condominium did not even accommodate his family o f four. At the time Cherrett incurred the deb t , he did not intend to remain in Colorado for a

n y substantial leng th of time. I n fact,I N R E C H E R R E T T 16

he hoped that he wou l d get the chance to relocate back to J ackson H o l e to spearhead the L ittle Nell Hotel brand development there.

Cherrett purchased the Colorado condominium using the Housing L oan and relied on the annual bonus of $33,750 for interest pay

ments. 5 The H ousing L oan was a below-marketrate loan that Cherrett likely could only h a v e obtained from his employ er. The lender th at orig inated the loan was an affiliate of Aspen, controlled b y o ne of Aspen’s principals, and later trans f

er r ed the debt to Aspen itself. W ithout Aspe n ’s a ssistance, Cherrett c ould n ot h ave afforded to buy real estate close e noug h to work at Aspen’s Colorado o ffice. Cherrett also testified that renting a home was not an option based on b oth availability a nd price. The Housing L o an was

a key component of Cherrett’s compensation, made throug h his employ e r, w hich covered all of his a nnual out-of-pocket

ex p enses related to its financing for the first ten y ears throug h bonuses and continued employ ment. No evid e nce sug g ests the Housing L oan would have been commercially a v ailable

on the terms Cherrett received. This is n o t t he ordinary situation where a person takes out a loan to move closer to a job for convenience or bett e r s c h o ols, f or ex ample. This is

5 Co rresp o n d en ce co n f

irm i n g Ch errett’ s accep tan ce o f A sp en ’ s j o b

o f f er m em o rialized th at C h errett’ s co m pen satio n in clu d ed a “ d ef erred

co m pen satio n /ex ecu tiv e b o n

u s p lan ” th at w as g u aran teed to p ro v id e

an n u al bo n u ses tim ed to co in cid e w ith “ th e d ate u p o n w h i ch an n u al in terest o n th e [Ho u sin g L o an ] [ w a s ] d u e.” T h is arran g em en t w as d esig n ed “ to en su

re th at [Ch errett h ad ] n o an n u al o u t o f p o ck et ex p en ses related to th e f

i n an cin g o f [th e] lo an ” f

o r i ts f irst ten y ears. B e fo r e th e b an k ru p tcy co u rt, A sp en ’ s law

y ers ch aracterized th is arran g em en t as th e

em p l o y er “ p ro v id [in g ] a b o n u s t o th e em

plo y ee eq u iv alen t to th e in terest

o n th e lo an , p ay [in g ] itself

th e in terest f

ro m th at b o n

u s, an d p ay [in g ] th e

em p l o y ee th e tax es o n

th at in co m e at th e assu m ed tax rate o f

3 5 %.”I N R E C H E R R E T T 17

the unusual situation where a person accepts a loan from his employ e r as part of a larg er transaction to f urther his career. On these facts, the b ankruptcy court did not clearly err when it found the Housing L o an and the annual bonus were part o f Cherrett’s neg otiated compensation packag e, undertaken for

a business purpose connected to furthering his career, rather than a personal, family

, or household ex pense. S ee Bushkin

, 2 016 W L 4040679, at *8 (ex plaining that in this ca s e, “ t h e home l o a n had a business purpose” because “it was an integ ral p art of the busin e s s arrang e ment between the parties”).

IV. CONCLUSION

W e a ffirm the B AP’s judg ment on th e o rder deny ing Aspen’s motion to dismiss.

AF F IRMED.

NGUYEN, Circuit J u dg e, dissenting :

The majority applies the wr o n g standard of review, creating a circuit split in the p r o c ess, and with undue deference to the B ankruptc y A ppellate Panel’s (“B AP”)

erroneous decision, affirms it. W h e n a case involves undisputed facts and the only issue is the leg al conclusion to be dra wn from those facts, review is d e novo. A s for the substantive law, it’s clear: W hen y o u take out a loan to buy property at which y ou plan to r eside for at least two y ears without renting it out or otherwise profiting from it, the loan is consumer debt. I

therefore dissent.I N R E C H E R R E T T 18

I.

According to the majority

, “ whether Cherrett incurred the Ho u s i n g L oan primarily f or a business purpose” is an “essentially factual” dispute. Maj. Op. at 12–13. That simply isn’t true. The parties ag ree that there are no factual disputes, including Cherrett’s subjective intent in obtaining the Housing L oan. Compare Aspen’s Opening B r. at 7 ( asserting that “ [ t] he only facts found t o be relevant by any prior court

are undisputed” while acknowledg ing Cherrett’s contention “that other, undisputed facts

. . . are a lso rele v a n t ” )

, with Cher re t t ’s B r. at 6 ( “None of the facts in this c ase are in contention

. . . . Aspen has not asserted that any mistake was committed by the B ankruptcy Court in its finding s of fact.”).

W h at the parties c o n test is wh ether these undisputed facts—including

, to the ex tent r elevant, Cherret t ’ s v arious

reasons for obtaining the Housing L o an—render the L o an “debt incurred by an individual primar i l y for a personal, family

, or household purpose.” I n re Kelly

, 8 41 F .2d 908, 912 (9th Cir. 1988) (quoting 11 U.S.C. § 101(8)). Kelly h eld in no uncertain terms that when “ the u n derly ing facts are not dispute d

, ” the q

uestion of “whether [ a particular debt] qualifies a s a ‘consumer debt’ under” the Ba n k r uptcy Code “is one in which leg a l issues predominate and is thus subject to de novo review.” Id.

As a three-judg e panel, we a r en’ t free to disreg a

rd our prior holding s. See Miller v

. Gammie
, 335 F .3d 889, 899 (9th Cir. 2003) (citing the “unassailable” proposition “that a threejudg e panel may

not overrule a prior decision of the court”). Not only that, it’s bey o nd debate that “where no facts are in dispute our entire r eview is de novo.” Norcia v. Sa m sung Telecomms. Am., LLC
, 845 F .3 d 1279, 1283 (9th Cir. 2 017)I N R E C H E R R E T T 19

(quoting Davis v. Nordstrom, Inc.
, 755 F .3d 1 089, 1091 (9th Cir. 2 014)); see also In re Crawford

, 194 F .3d 954, 957 (9th Cir. 19 9 9 ) (“B ecause the r elevant facts h ere are undisputed,

our review f

o c u s e s on the bankruptcy court’s leg al conclusions, which a

re subject to de novo review.”). This firmly settled standard i s a n outg rowth of the principle, fundamental to Ang lo-American jurisprudence, that “it is the province of the trial court to decide questions of fact, [ and] o f the appellate court to decide questions of law .

. . .” R e ay v

. Butler

, 30 P. 208, 209 ( Cal. 1892); see Bose Corp. v

. Co n s u m ers Union of U.S., Inc.
, 466 U.S. 485, 501 (1984) (recogniz ing “an appellate court’s power to correct errors of law, including those that may infect a so-called mix ed finding of law and f

act, or a findin g o f fact that is predicated on a misunderstanding of the g overning r ule of law”); W

isca rt v

. D’Auchy

, 3 U.S. (3 Dall.) 321, 329 (1796) (“[ T] he law directs that in cases of appeal, part shall be decided by one tribunal, and part by another; the facts b y the c ourt below, and the law by this court. Such a distribution of jurisdic t i on has long been established in E ng land.”); cf. In re McLinn
, 739 F .2d 1395, 1400 (9th Cir. 1984) (en banc) (rejecting as “unsound” the “assumption that the d istrict judg e has some particular knowledg e or ex perience in the field of law in issue that is to be g iven g reat weig ht apart from the authorities presented b y the parties or articulated by the district judg e”).

This principle is, f

o r e x ample, the reason why “[ d] ecisions of the B AP are reviewed de novo.” Maj. Op. at 8 (quoting In re Su
, 290 F .3d 1 1 4 0
, 1 142 (9th Cir. 2002)). The B AP a cts in an appellate capacity

, deciding questions o f law based on facts determined in the bankruptcy court. B ecause we also review leg al q uestions de novo, it makes no differenc e whether we f ormally review the B AP’s d e t e r minations or the bankruptcy court’s, for “we are in a sI N R E C H E R R E T T 20

good a position as the B AP to review bankruptcy cou r t ruling s.” In re Findley

, 5 93 F .3d 1048, 1050 ( 9th Cir. 2 010) (quoting I n re Taggart
, 2 49 F .3 d 9 8 7, 990 (9th Cir. 2 001));

see In re Burley

, 738 F .2d 981, 986 (9th Cir. 1984).

“[ B ] ecause the application of law to fact will g enerally require the consideration of leg al principles, .

. . most mix ed questions will b e re v i ewed independently ,” i.e.
, under a de

novo standard. United State s v. McConney
, 728 F .2d 1195, 1204 (9th Cir. 1984) (en banc), abrogated on other grounds by Pierce v. Un d

e r wood

, 487 U.S. 552, 557–63 (1988). An “application of the rule of law to the facts” is an “essentially factual” inquiry if it is “founded ‘on the application of the fact-finding tribunal’s ex perience with the m a i nspring s o f human conduct,’” id. a t 1202 (quoting Comm’r v. Duberstein

, 363 U.S. 278, 289 ( 1960)), or if “some of the eleme n t s t hat bear upon [ the leg a l question] m a y b e known only to the district c o u r t,” Pierce
, 487 U.S. at 5 60. That isn’t the case here. L ike the B AP, we are determining wh e ther c ertain
ag reed-upon facts fall within a statutory definition.

Nor is this a case that involves “a multifarious and novel question, little susceptible

. . . of useful g eneraliz ation,” id. at 562. The majority isn’t pub lishing our decision today because of its importance t o C herrett—thoug h he will undoubtedly b e relieved to avoid his debt oblig ation. Rather, the majority underst a n d s that other debtors will find themselves in similar circumst a n c e s and will need g uidance as to the leg al characteriz ation of their debt.

The majority a sserts that “[ c] ourts a re split on this standard of review.” Ma

j

. O p

. at 13 n .3. They aren’t, aside from the way

ward E ig h t h Circuit B AP decision that the majority cites. Every

circuit (including our own in Kelly ) toI N R E C H E R R E T T 21

r e v i ew a bankruptcy court’s ruling on whether a p articula r oblig ation is “consumer debt” h as done so de novo. The majority acknowledg es two such cases: In re Stewart
, 175 F .3d 7 96, 803 ( 10th Cir. 1 999), and In re B o oth

, 858 F .2d 1051, 1053 n.5 (5th Cir. 1988)

. There a re others. See In re W estberry

, 2 15 F .3d 589, 590 (6th Cir. 2000) (“The issue presented here, whether federal income tax es should be considered consumer debt for p urposes of 11 U.S.C. § 1301, is a question of law, which we review de novo.” ) ; I n re Runski

, 102 F .3d 744, 745, 747 (4th Cir. 1996) (“determining whether debt is for ‘personal, family

, or household purposes’ under § 101(8)” to “aid in determining the proper meaning o f
t h e n early identical lang uag e found in § 722” and appearing
to treat the question as a matter of statutory construction, “subject to plenary review”). Today the majority

needlessly creates an intra- and inter-circuit split. 1

II.

“I t is d ifficult to conceive of any ex penditure that serves

a ‘family

. . . or household purpose’ more directly than does the purchase of a h o me

. . . .” K e l l y , 8 4 1 F. 2 d at 913. The condo t hat Cherrett p urchased with the Housing L o an may

n o t h ave felt to him like a “home” in an emotional sen s e g iven that his wife and c h ildren were living in a different
state for much of the time. That Cherrett’s h e a r t was in W y o ming shows only that his Colorado condo may not have been his leg al domicile, i.e.
, tha t “ t ru e, fix ed, principal, a nd permanent home, to which [a] p erson intends to r et u rn a nd remain even thoug h currently residing elsewhere.” Domicile

,

1 T h ere’s n o reaso n f

o r th e m aj o rity ’ s o d d ly d ef eren tial ap p ro ach

. T h e m aj o rity ack

n o w led g es th at it w o u ld reach t h e sam e resu lt u n d er d e

n o v o rev iew . Maj . Op . at 1 3

.I N R E C H E R R E T T 22

Black’s Law Dictionary ( 10th e d. 2 014). I t was, however, his “home” in the leg al sense of being his “dwel ling place,” Home
, Black’s Law Dictionary (10th ed. 2014), or “principal residence,” 11 U.S.C. § 101(13A). A “temporary home” (as Cherrett described it), p e r h a p s—but still a home. Cherrett intended to live there for at least two y ears. Cf. S t o l k v

. Comm’r
, 40 T .C. 3 4 5
, 356 (1963) (holding that New York apartment where tax p ay er moved to be near his office was his “principal residence” for a y ear notwithstanding weekend a nd holiday trip s t o his Virg inia farm where he and his wife planned to settle).

I a g ree with the majority that the Housing L oan’s classification a s consumer or n on

- c o n sumer debt should be based on the purpose of the debt at the time Cherrett incurred it. And the majority p roperly r ejects any contention that the debt was for a business purpose m e r e l y because Cherrett

e xp e cted e ventually to profit from the “sky rocketing ” housing prices in the Aspen area. In re Cherrett

, 523 B. R

. 660, 672 (B .A.P. 9th Cir. 2014). Virtually all hom e b u y e rs in c ertain
reg ions o f the country ex p ect to prof i t when they sell their homes.

B u t the majo rity conflates Cherrett’s purpose in moving
to Colorado with his purpose in taking out the Housing L oan. The fact tha t h e moved to Colorado primarily if not

ex c lusively for business purposes proves too little. Under the majority ’s analy sis, a person c o u ld move her family across town in order to be closer to a new job and, if she takes o u t a home loan to finance h er new residence, it would b e f o r a business rather than a personal, family

, or household purpose. I t makes n o difference that this hy potheti c a l m o ve is out o f convenience and Cherrett’s was arg uably out of necessity

. A person’s prima r y purpose in making a decision isn’tI N R E C H E R R E T T 23

dependent on the ex istence of a lternative options. Moreover, h o w is a court even to determine whether it’s necessary t o purchase a new home for work purposes? Here, for ex ample, there’s no e vidence that Cherrett needed to take a new job out of s t a t e

. He made $225,000 a y ear in W y oming and “was
very happy in [ his] position.”

This line of reasoning ig nores the statuto r y t e x t

. The
statute defines “consumer debt” as “ d ebt incurr ed b y an individual primarily for a p e r s onal, family

, or h ousehold purpose.” 11 U.S.C. § 101(8) (emphasis added). I t is the
purpose of the deb t

— i

. e. , what the debt is used for—that matters. The debtor’s indirect purposes are irrelevant.

Until now, this is the approach we have taken. See In re Price
, 353 F .3d 1135, 1139 (9th Cir

. 2 0 0 4 ) (“Under Kelly

, whether or not a p articular secured d ebt is ex cluded from inclusion as ‘consumer debt’ under § 707(b) depends on the
purpose of the debt.”). I n Price
, we e x plained that “ P rice’s personal residence was secured by two mortg ag es. The first

. . . [ was] incurred to purchase the h o m e ; t h e second

. . . incurred to f

inance household improvements.” I d. Thus, there was “no question that the secured de b t a t i ssue was incurred ‘pr i m a r i ly for a personal, family or h ousehold purpose’ and must be considered ‘consumer debt’ for the
purposes of § 707(b).” I d

. W e did not ex amine Price’s motivation for purchasing a personal residence and making improvements to it.I N R E C H E R R E T T 24

The leg islative history supports this int e rpretation. 2 Cong r ess adapted the B a n kruptcy C ode’s definition o f “consumer debt” from the consumer protection laws—in particular the Truth i n L en ding Act (“TI L A”), 15 U .S.C. § 1602(i), which contains a similar definition. See I n re Booth

, 858 F .2d 1051, 10 5 4 ( 5th Cir. 1988). Compare 11 U

. S.C. § 101(8) (“The term ‘consumer debt’ means d ebt incurred by an individual primarily for a personal, family

, o r household purpose.”), with 15 U.S.C. § 1602(i) (“The adjective ‘consumer,’ used w i t h reference to a credit transaction, characteriz es the transaction as o ne in which the party to whom cred i t i s offered or ex tended is a natural
person, and the money , p roperty , or services which are the subject of the transaction a re p rimarily f

or p e rs o n a l, family

, or h ousehold purposes.”). F or that reason, courts interpreting the B ankruptcy Code’s definition of “consumer debt” look to TI L A a nd cases interpreting it. See Booth

, 858 F .2d a t 1054; In re Almendinger

, 56 B .R. 97, 99 (B ankr. N.D. O hio 1985).

I n determi n i n g whether a transaction is commercial o r personal for the purposes of TI L A, we g enerally consider the factors e mp l o y ed by the F ederal Reserve B oard under Reg ulation Z
, 12 C.F .R. pt. 226 supp. I
, subpt. A, § 226.3(a). See B loom v. I

.C. Sys., Inc

. , 972 F .2d 1067, 1069 ( 9th Cir. 1992). Crucially

, “[ c] r e d it ex tensions by a company to its employ e es” are “consumer- purpose” loans u nder the
reg ulations “if the loans are used for personal purposes.” Id.

2 T o b e f air, th ere is s u

p p ort in th e leg islativ e h i sto ry th at “ co n su m er d eb t d oes n o t in clu d e a d eb t to an y ex ten t th e d eb t is s e c u r ed by real
p ro p erty

. ” 1 2 4 Co n g

. Rec. 3 2 ,3 9 3 (1 9 7 8 ) (statem en t of Rep

. Ed w ard s). Ho w ev er, Kelly an d “ m o st [o th er] co ur t s h a v e d eclin ed to f o llo w th is leg i slativ e h i s to ry an d i n stead i n clu d e h o m e m o rtg ag es in th e d e term in atio n o f w

h eth er a d eb to r h as p rim arily co n su m er d e b t s

. ” 6 Co llier o n Ba nkru

p tcy ¶ 7 0 7 .0 4 [2 ][b ] (1 6 th

ed . 2 0 1 7 ).I N R E C H E R R E T T 25

p t

. 2 26, supp. I
, subpt. A, § 226.3(a)(3)(iii)(A). That’ s precisely the situation here. Aspen subsidiz ed Cherrett ’s condo loan, but the condo itself was used for a p er s o n al purpose—Cherrett lived there. “ [ D] ebt incurred to purchase the debtor’s p rincipal re s i d e n c e

. . . is a ‘consumer debt’ under [ 11 U.S.C.] § 101(8 )

. ” I n r e Fadel

, 492 B .R. 1
, 15 (B .A.P. 9th Cir. 20 1 3 ) (c i ting Kelly

, 841 F .2d at 913); see also 1 5 U.S.C. § 1602(x ) (defining “residential mortg ag e transaction” as “a transaction in which a

. . . consensual security interest is created or retained a g ainst the consumer’s dwelling to finance [its] acquisition”); cf. Slenk v. Transworld Sys.

, I nc. , 236 F .3d 1072, 1076 (9th Cir. 2001) ( looking to “the actual use to which [ a] backhoe w as put” in concluding that its financing was c o nsumer debt under the similarly worded F air Debt Co l l e ction Practices Act, 15 U .S.C. § 1692a(5), because “the b a c k h o e w as used strictly for personal use, a

nd was n ever used b y [ the owner’s
company ] ”).

The majority theoriz es that Cherrett’s d e b t is work-related because he incurred it as an incident of his employ ment; even th o ug h the loan money was directly used to purchase his residence, it was indirectly used a s a means of ex tracting

more income f

rom his employ er in the form of subsidiz ed interest. The majority emphasiz e s t h a t Cherrett c ould not have afforded to live c lose to his new job without this housing assistance. Maj. Op. at 16.

The Tenth Circuit rejected a similar a rg ument about a loan’s ultimate p u rp o s e in Stewart

. The debtor borrowed $320,000 from his former in-laws, which “his ex -wi fe u s e d

. . . to support their family

, including use for h ouse pay ments, g roceries, p re-school, children’s activities, moving ex penses, and f amily v acations” w hile he p ursued a medical deg ree soI N R E C H E R R E T T 26

t h a t h e c o uld earn more money for his family

. 175 F .3d at 807. T he Tenth Circuit c oncluded that “the main purpose o f these loans was [ not] to finance [ the debto r ’ s] actual educational ex penses. Rather, [ he] used the money to support his family because he did n o t e a rn enoug h for his family to live comfortably .” I

d. The Tenth Circuit also concluded that “a substantial portion of [ the debtor’s $ 200,00 0 i n ] student loan debt is indeed ‘ consumer debt’” because it “went toward his family ’ s ex penses.” Id. I n short, Stewart r epudiated the idea that a loan could be f or a particular purpose just because it indirectly

facilitated that g oal.

To see the difficulties the majority ’s analy sis entails, o ne need look no f

urt h e r than the instant c ase. Cherrett’s
purposes were several: He needed a p lace in Colorado to live and sleep when not at work or v i s iting h is family in W y o ming

. That’s a consumer p urpose. Cherrett’s reason for being in Colorado was to take a new job, which is a business
purpose. B ut the “primary driver” f or Cherrett in accepting the new job was that he mig ht “ e nd up” in J ackson Hole with his family “for the mid to long term” if and when Aspen

ex p anded its operations there. That’s a personal purpose. Under the majority ’s h olding

, any of these p u r poses could have been found controlling

. The characteriz a t i o n o f Cherrett’s loan as business debt turned only on the w hims o f the bankruptcy

court.

The majority contends that th i s w as not an “ordinary ” home loan because Cherrett’s employ er “covered a l l of his annual out-of-pocket ex penses related to its financing for the first ten y ears” so long as Cherrett remained in his job. Maj. Op. at 16. That is enormously inaccurate.I N R E C H E R R E T T 27

Aspen d i d n ’ t pay the interest that Cherrett owed on the debt. Aspen merely compensated him for the interest
pay ments that he was contractua l l y oblig ated to make to the lender—a third party

—on commercially reasonable terms. 3 Althoug h from Cherrett’s p e r spective, Aspen’s bonuses m a d e his oblig ation to make interest pay ments relatively painless, the two were leg ally unrelated. Home m o r t g ag e interest
pay ments potentially reduce one’s tax liab i l i t y , whereas the bonuses f rom Aspen increased Cherrett’s tax burden. F or that
very r eason, Aspen provided Cherrett with additional compensation to cover most (but not all) of his assumed 35%
tax liability

on the bonuses. 4

This com p e nsation for interest a n d tax es, a total o f $33,750 per y e ar, isn’t a t issue. W hat’s at issue is Cherrett’s indebtedness o n the loan. Cherrett w asn’t entitled to the housing compensation u nless “[ t] h e p r oceeds of the loan [ were] u sed to acquire [ the] condomin i u m

. ” And so they

were.

The majority ’s hold ing today does not help d e btors so much as create massive u n certainty for lenders in g a ug ing the riskiness of home loans, there by imposing g reater financing
costs o n homebuy e rs. T he majority replaces Kelly ’s straig htforward standard—all loans to purcha se a home a re

consumer debt—with an unworkable o n e t h a t r e q uires lenders

3 T h e $ 5 0 0 ,0 0 0 n o te, s ecu red b y a s eco n d d eed o f tru st i n f av o r of A relj ay , L .P
., th e len d er, req u ired in terest p ay m en t s a t a rate o f 5 % per y ear d u rin g th e lo an ’ s 10

- y ear term

. Ch errett ag reed to rep ay th e p rin cip al
at th e en d of th e lo an term o r it w o u ld b e s u b j ect to a 1 0 % an n

u al in terest rate th ereaf

ter.

4 Ch errett w as o u t o f p o ck et ab o u t $ 3,0 0 0 p er y ear in u n co m p en sated
tax es b ased o n

th e assu m ed tax rate o f

3 5 %.I N R E C H E R R E T T 28

to assess a homebuy er’s amorp h ous purposes in chang ing residences. Since lenders canno t e a sily make this determination, interest rates fo r a ll homebuy ers w ill rise. L enders u nable to predict whether particular homebuy ers can potentially abuse the b ankruptcy p r o c e s s to write off mortg ag e debt will fac e hig her risks for which they must be compensated.

III.

Properly classifying the Housing L oan as consumer debt would not preclude Cherrett from obtaining b a n k ruptcy relief. “[ T] he ex istence of primarily consumer debt a l o n e does not result in dismissal under § 707(b), because t h e bankruptcy court must still make a finding of substantial abuse.” Price
, 353 F .3d a t 1139. This factual finding is based on a number of case-specific factors, and the ba n k r u ptcy c ourt is appropriately afforded considerable discretion in ma k i n g it. See id. at 1140. “Consequently

, a debtor truly i n n e e d of a fresh start will not be subject to dismissal” just bec ause the majority of his debt is a home loan. Id. at 1139 (citing Kelly

, 841 F .2d at 913).

I respectfully

dissent.