668 B.R. 493
Bankr. W.D. Wis.2025Background
- Debtor Eric Bizeau filed for Chapter 7 bankruptcy, listing a significant SBA loan—guaranteed by his wife, Melissa (who had received her own Chapter 7 discharge months earlier)—as a non-consumer debt on his schedules.
- The SBA debt originated from a loan linked to Melissa’s insurance agency business, not signed or guaranteed by Eric.
- Eric and Melissa had a marital property agreement aiming to shield Eric from Melissa’s business liabilities, but the SBA was not informed of this agreement when issuing the loan.
- After Melissa’s discharge, Eric amended his schedules to include the SBA loan as his own debt, attempting to change the character of his liabilities from primarily consumer to non-consumer in order to avoid dismissal for abuse under 11 U.S.C. § 707(b).
- The U.S. Trustee moved to dismiss Eric’s case for abuse, challenging whether the SBA debt could validly be considered his liability (or that of his property) under Wisconsin marital property law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Eric liable (personally or via property) for the SBA debt? | Marital property law makes him liable for wife’s business debt incurred during marriage. | Neither Eric nor his property is liable: no contractual obligation, wife's debt was discharged, and the SBA had no right to collect from Eric or his property. | Eric is not personally liable; neither his individual nor marital property is liable after spouse's discharge. |
| Can the SBA debt be classified as Eric's non-consumer debt? | SBA debt should be counted, thus making Eric’s debts not primarily consumer debts. | SBA debt does not attach to Eric; his remaining debts are consumer debts. | SBA debt is not Eric's; his debts are primarily consumer, subjecting case to § 707(b) review. |
| Does Melissa’s discharge prevent the SBA from reaching marital property? | Discharge does not affect Eric’s own potential liability. | Discharge removes SBA’s ability to reach marital property post-discharge. | Melissa’s discharge blocks any attempt by SBA to collect from marital property, including Eric’s share. |
| Is Eric’s Chapter 7 case subject to dismissal under § 707(b)? | Not subject because debts are not primarily consumer. | Subject because debts are now primarily consumer. | Yes; Eric is now subject to the means test and case can be dismissed for abuse. |
Key Cases Cited
- In re Stewart, 175 F.3d 796 (10th Cir. 1999) (addresses profit motive vs. consumer debt in bankruptcy)
- St. Mary’s Hosp. Med. Ctr. v. Brody, 186 Wis. 2d 100 (Ct. App. 1994) (on marital debts and the duty of support)
- Bothe by Gross v. Am. Fam. Ins. Co., 159 Wis. 2d 378 (Ct. App. 1990) (scope of marital liability for one spouse’s torts)
- Smith v. Capital One Bank (USA), N.A., 845 F.3d 256 (7th Cir. 2016) (Wisconsin marital property law does not render non-incurring spouse personally liable for spouse’s debt)