Can Consumers Have Too Much Debt to Be Eligible for Bankruptcy?
Did you know that consumers in America now have an average of more than $100,000 in debt? The total amount that debtors carry, on average, varies by age group. Yet on the whole, according to a new report from CNBC, Americans on average are carrying $105,056 in debt, which total to $17.57 trillion and represents a 2.4 increase from last year. Generation Z, or those younger adults currently aged 18-27, have a total average debt of $288,879. That average increases through Millennials and into the Generation X age group, and then it begins to decline with Baby Boomers, who are currently aged 60-78. Older adults who are part of the Silent Generation and now aged 79 and up carry the least amount of debt on average. Yet even their debt average remains high.
If you are struggling with debt and considering a consumer bankruptcy filing, you may be concerned about debt limits. In other words, can a consumer have too much debt to be eligible for bankruptcy? The overarching answer is no, but there are debt limits on particular types of bankruptcy filings. Our West Palm Beach bankruptcy lawyers can explain in more detail below, and we are here to speak with you today about the specifics of your bankruptcy case and your eligibility.
No Limit on Chapter 7 Debt for Individuals
Chapter 7 bankruptcy is a type of liquidation bankruptcy that consumers in the United States can file. As a type of liquidation bankruptcy, all of an individual debtor’s non-exempt assets will be liquidated so that creditors can be repaid as wholly as possible. Once assets are liquidated and creditors receive payments, along with other steps in the bankruptcy process, the debtor can be eligible to have their eligible debts discharged.
This type of bankruptcy does not have a debt ceiling or debt limit, so your eligibility will not be restricted by the amount of debt you have. However, there are other requirements you must meet in order to file for Chapter 7 bankruptcy, including passing the “means test.”
Understanding the Chapter 13 Debt Limit
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy eligibility does involve debt limits. It does not, however, require the filer to pass the “means test” or to have limited assets (as Chapter 7 does) in order to be able to file.
What are the debt limits for Chapter 13 bankruptcy? Every three years, the limits tend to increase. Between April 1, 2025 and March 31, 2028, the debt limits for Chapter 13 bankruptcy are $1,580,125 of secured debt and $526,700 of unsecured debt. You cannot combine the totals in order to be eligible if you have, for example, secured debt that is above the threshold but unsecured debt significantly below the threshold. Both of your types of debt must be below the appropriate secured or unsecured debt ceiling in order to qualify for Chapter 13 bankruptcy.
If you do not qualify because you have too much debt, you still have bankruptcy options. Many people in this situation will end up filing for Chapter 11 bankruptcy, which is similar to Chapter 13 in that it is also a form of reorganization bankruptcy rather than liquidation bankruptcy.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Do you have questions about your bankruptcy eligibility based on the amount of debt you currently have? An experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC can speak with you about your financial circumstances and how you can file for bankruptcy in Florida. Contact our firm today for more information.
Sources:
law.cornell.edu/uscode/text/11
cnbc.com/select/average-american-debt-by-age/
