In re Bell, Bankruptcy No. 85-02150-R.

• Decision Date: 26 September 1986
• Docket Number: Bankruptcy No. 85-02150-R.
• Citation: 65 BR 575
• Parties: In re George BELL, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

65 B.R. 575 (1986)

In re George BELL, Debtor.

Bankruptcy No. 85-02150-R.

United States Bankruptcy Court, E.D. Michigan.

September 26, 1986.

Iris Rubin, Southfield, Mich., for debtor.

ORDER VACATING ORDER OF DISMISSAL

STEVEN W. RHODES, Bankruptcy Judge.

I.

On January 13, 1986, this Court entered an order, reported at 56 B.R. 637, dismissing the debtor's Chapter 7 bankruptcy petition pursuant to 11 U.S.C. § 707(b). The Court found that Bell's debts were primarily consumer debts and that granting him relief under Chapter 7 would be a substantial abuse of the provisions of that chapter because he was able to repay a substantial part of his debts. The finding that the debts were primarily consumer debts was based to some extent on the testimony at the earlier hearing, but to a greater extent on Bell's failure to "seriously contend otherwise." 56 B.R. at 640.

On appeal however, Bell apparently did seriously contend otherwise, and on June 30, 1986, the District Court remanded the matter to this Court for "an evidentiary hearing for the purpose of determining Bell's primary purpose for incurring his debts."

II.

That hearing has been held, and upon full consideration of the evidence the Court concludes that Bell's debts are not primarily consumer debts and that therefore the earlier order dismissing the petition should be vacated.

At the hearing, the Court and Bell's counsel reviewed with Bell each of his debts as listed in Schedule A. Bell testified that the following debts were incurred primarily for personal purposes:

                   Internal Revenue Service          5,477.12
                   Bank of Commonwealth             33,000.00
                   City of Detroit                  15,000.00
                   Chase Manhattan Bank              9,756.37
                   Citibank                          5,303.31
                   Chase Advantage Credit            1,812.55
                   National Bank of Detroit            976.20
                   Manufactures Bank                 3,627.49
                   Hudsons                          10,130.31
                   Saks                              2,101.24
                

                   Detroit Municipal Credit Union               2,152.94
                   Amoco                                          269.21
                                                              __________
                   Total (12)                                 $89,606.74
                

Bell further testified that in the time period just before he filed his bankruptcy petition, he had invested in two businesses. In February of 1984 he purchased a grocery store which he operated as a corporation under the name, "Bell's Market, Inc." He intended this to be a passive investment, but found that over time, he was required to devote more attention to it. After one year, the business failed and the corporation filed a petition under Chapter 7 at about the same time that Bell filed his own petition. Bell incurred the following debts primarily for the business purposes of Bell's Market:

                  Michigan National Bank             104,000.00
                  Detroit Edison                       3,000.00
                  Hani Najor                          35,000.00
                                                     __________
                  Total (3)                         $142,000.00
                

Bell incurred an additional debt by executing a personal guaranty of a note to Comerica Bank for a loan to Group Assoc. Management Co., a management consulting firm. Bell owned 15-20% of this firm, strictly as a passive investment. Bell became obligated on this guaranty when the firm ceased business shortly before his bankruptcy. The current obligation on this note is $43,846. In addition, Bell is obligated to Comerica Bank for $1,864.84 on a personal loan, for $2,240.06 on a personal charge card, and for $5,378.95 on a personal cash reserve account. Thus, the total obligation to Comerica is $53,329.90; although Bell incurred some portion of this debt for personal purposes, the obligation was incurred primarily for business purposes.

Thus, the total of the debts incurred primarily for personal purposes is $89,606.74 and the total of the debts incurred primarily for business purposes is $195,329.90.

III.

11 U.S.C. § 101(7) defines a consumer debt as a "debt incurred by an individual primarily for a personal, family, or household purpose." Thus, the first issue is whether the debts Bell incurred in connection with his interest in Bell's Market and Group Assoc. Management Co. are consumer debts.

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