Consumer Debt Definition:

Debts which can be distinguished from business debts or debts incurred with a profit motive.

The United States Code, at Title 11, Bankruptcy (§101(8)), defines consumer debt as debt incurred by an individual primarily for a personal, family, or household purpose.

In Re Westberry, Justice Cole of the US Court of Appeals assessed whether a tax debt was a consumer debt:

"... tax debt should not be considered consumer debt for the purposes of a codebtor stay....

"[A] tax debt is incurred differently from a consumer debt.... We can certainly hope to choose to incur consumer debt; its certainly being nothing like death and taxes."

Other examples:

• In Booth, lawyer fees were held to be consumer debt because the fees were incurred to recover an alleged overpayment on a house deal;

• In Burns, loans taken out to invest in the stock market were held to not be consumer debts;

• Kestell: alimony, child support and lump-sum awards are considered consumer debts as they were not incurred with a profit motive or in connection with a business transaction; and

• In Stewart, a debtor's funds were used towards household living expenses and were, on that basis, consumer debt.

REFERENCES:

• Burns v Citizens National Bank, 894 F. 2d 361 (1990)
• Duhaime, Lloyd, Duhaime's Legal Dictionary
• Duhaime, Lloyd, Duhaime's Legal Citations & Abbreviations
• In re Booth, 858 F. 2d 1051 (1988)
• In re Westberry, 215 F. 3d 589 (2000)
• Kestell v Kestell, 99 F. 3d 146 (1996)
• Stewart v United States Trustee, 175 F. 3d 796 (1999)