Month: July 2016

When a living expense is a business expenses

Once again, as with all my posts, this is not legal advice, and applies only to California, and sometimes only to the Northern District of California.

The Ninth Circuit Bankruptcy Appellate Panel (which is persuasive but non binding, but oftentimes is) issued a difficult to apply decision which characterized living expenses as business expenses when there is an underlying profit motive.  A similar opinion was issued regarding mortgages in Aspen Skiing Co. v. Cherrett (In re Cherrett)  (2014) and which the current case is based.

In the present case, the debtor borrowed money to write a book, and had an agreement that the money made from the book would be split with the lender if the book made money.  If it did not do well, then the loan would be repaid in full to the tune of $150,000.  11 USC 523(d), which concerns nondischargeable debt, addresses “consumer debt” which is defined as a debt incurred “for a personal, family, or household purpose.  The lender objected to the discharge of the debt and lost because he did not file the complaint on time- however, attorneys fee’s could not be recovered because it was consumer debt.

The case however may be less about the classification of debts and business or consumer, and more regarding the antagonism of courts to award attorneys fees and the shifting of fees from Debtor to Lender.

 

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