Opinion ID: 502764
Heading Depth: 3
Heading Rank: 1

Heading: Primarily Consumer Debts

Text: 14 1. The first question we must address is whether some or all of the Kellys' debts constitute consumer debts within the meaning of the Code. As an initial matter, the Kellys argue that debts secured by real property are never consumer debts, relying on floor statements made in the House and Senate prior to the enactment of the 1978 Act. See 124 Cong.Rec. S17,406 (daily ed. Oct. 6, 1978) (statement of Sen. DeConcini) ([a] consumer debt does not include a debt to any extent the debt is secured by real property); 124 Cong.Rec. 32,393 (1978) (statement of Rep. Edwards) (same). Since approximately 85 percent of the Kellys' debt is secured by real property (their home), they contend that they cannot have primarily consumer debts and thus are exempt from dismissal under section 707(b). 15 This argument stands the process of statutory interpretation on its head, resorting to legislative history without first considering the language of the statute. As the Supreme Court has noted, legislative history, ... by traditional canons of interpretation[,] is irrelevant to an unambiguous statute. United Air Lines, Inc. v. McMann, 434 U.S. 192, 199, 98 S.Ct. 444, 448, 54 L.Ed.2d 402 (1977); accord Valentine v. Mobil Oil Corp., 789 F.2d 1388, 1391 (9th Cir.1986). Here, resort to legislative history is not appropriate because the statutory language is clear and precisely addresses this situation. 16 The Code defines consumer debt as debt incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. Sec. 101(7) (1982). Debt means liability on a claim, 11 U.S.C. Sec. 101(11) (1982), and claim, in turn, is broadly defined as any right to payment, whether or not such right is ... secured, or unsecured. 11 U.S.C. Sec. 101(4)(A) (1982) (emphasis added). A literal reading of the Code's simple language leads inexorably to the conclusion that consumer debt includes secured debt. Indeed, section 521(2) of the Code, also added by the 1984 Act, makes special provision for consumer debts which are secured by property of the estate, an unambiguous indication that Congress intended that the secured or unsecured language of the definition apply to consumer debts. 17 Nor is there any indication that debts secured by real property are to be treated differently. To the contrary, section 524 of the Code explicitly recognizes that consumer debt may be secured by real property, making different provisions for the reaffirmation of consumer debt depending on whether or not it is consumer debt secured by real property. 11 U.S.C. Secs. 524(c)(6)(B), (d)(2) (Supp. III 1985). The statutory scheme so clearly contemplates that consumer debt include debt secured by real property that there is no room left for any other conclusion. See 4 Collier on Bankruptcy p 707.06, at 707-16 (15th ed. 1987) (Collier ). 3 18 The Kellys argue that this interpretation would render petitions of most consumer debtors subject to dismissal, because most consumers have the largest portion of their debt secured by real property. Such policy arguments are, of course, beside the point once Congress has spoken. In any event, the argument is spurious. The existence of substantial consumer debt does not, in itself, result in dismissal. The court may dismiss the petition only if granting relief would be a substantial abuse. Those debtors who are, for no fraudulent or improper reasons, truly in need of a fresh start will not be subject to 707(b) dismissal. This is precisely what Congress had in mind. See pp. 913-14 infra. 4 19 2. While secured debt is not automatically excluded from consumer debt, it is not automatically included either. We must look to the purpose of the debt in determining whether it falls within the statutory definition. Of the Kellys' mortgage debts, $95,000 consists of a lien they assumed in purchasing their home and $32,000 represents a home equity line of credit incurred for home improvements and the repayment of credit card debts. ER at 102; CR 18 at 38-43. All these fit comfortably within the Code's definition of consumer debt. 5 It is difficult to conceive of any expenditure that serves a family ... or household purpose more directly than does the purchase of a home and the making of improvements thereon. 20 The Kellys also claim to have a second home equity line of credit on which they owe approximately $20,000. The sole evidence concerning the nature of this debt is Kelly's affidavit which describes it as securing a loan from VNB to his professional corporation. Debt incurred for business ventures or other profit-seeking activities is plainly not consumer debt for purposes of section 707(b). In re Bell, 65 B.R. 575, 577 (Bankr.E.D.Mich.1986). 21 The Kellys' only remaining debt is the $25,000 they owe to the Zolgs and Tucson Realty for attorney's fees incurred in the state court litigation. That lawsuit was commenced by the Kellys for the purpose of recovering money allegedly overpaid in purchasing their home. The litigation thus served primarily a family or household purpose within the meaning of section 101(7). A debt for attorney's fees incurred in attempting to further this purpose, like any other debt so incurred, qualifies as a consumer debt. 22 The ultimate question we must decide under section 707(b) is, of course, whether debtors have primarily consumer debts. Primarily means for the most part. Webster's Ninth New Collegiate Dictionary 934 (1984). Thus, when the most part--i.e., more than half--of the dollar amount owed is consumer debt, the statutory threshold is passed. Here that standard is easily met. Of the Kellys' $172,000 indebtedness, $152,000 (approximately 88 percent) is consumer debt. They have primarily consumer debts within the meaning of section 707(b).