We occasionally hear this from frustrated clients:
“I was told I can’t file Chapter 7 or Chapter 13 because I have too much personal unsecured debt. How is that possible? What are the limits? What are my options?”
It sounds backwards. Bankruptcy is supposed to help people with large debt — so how can you have “too much”?
Let’s break this down clearly.
📌 Chapter 7: There Is No Debt Limit
First, the good news.
There is no maximum debt limit to file Chapter 7.
You could have:
- $50,000 in credit cards
- $500,000 in personal guarantees
- $2 million in unsecured business-related debt
There is no cap.
So if someone says you can’t file Chapter 7 because you have “too much debt,” that is usually not accurate.
The real issue with Chapter 7 is typically one of these:
- You don’t pass the means test (income is too high)
- You have significant non-exempt assets
- You recently filed bankruptcy
- There are fraud concerns
- Your income is too irregular or business-heavy
But not “too much debt.”
📌 Chapter 13: There Are Debt Limits
Chapter 13 does have statutory debt limits.
As of current federal limits (which adjust periodically):
- Unsecured debt limit: approximately $465,000
- Secured debt limit: approximately $1.4 million
If your noncontingent, liquidated unsecured debt exceeds the limit, you may not qualify for Chapter 13.
Unsecured debt includes:
- Credit cards
- Personal loans
- Medical bills
- Personal guarantees
- Deficiency balances
- Lawsuit judgments
If someone has extremely high unsecured exposure — especially from business guarantees — they can exceed the Chapter 13 limit.
🤔 How Do People End Up Over the Limit?
Common scenarios include:
- Failed small business with large personal guarantees
- Multiple lawsuit judgments
- Significant unsecured lines of credit
- Large personal loan defaults
- Investment losses
Many business owners are surprised to learn that personally guaranteed business debt counts toward their Chapter 13 unsecured limit.
❓ If I Don’t Qualify for 7 or 13, What Are My Options?
If Chapter 7 and Chapter 13 are unavailable, there are still potential paths.
1️⃣ Chapter 11 (Individual Chapter 11)
Chapter 11 is often thought of as “corporate bankruptcy,” but individuals can file it.
In fact, there is now a streamlined version called Subchapter V designed for small business debtors.
Pros:
- No strict unsecured debt cap like Chapter 13
- Flexible restructuring
- Ability to reorganize large debt
Cons:
- More complex
- Higher legal costs
- More court oversight
For high-debt individuals, Chapter 11 may be the correct path.
2️⃣ Debt Settlement / Negotiation
If bankruptcy is not feasible:
- Creditors may negotiate lump sum settlements
- Lawsuit exposure must be managed carefully
- Tax consequences of forgiven debt must be considered
This works best if there is access to settlement funds.
3️⃣ Strategic Asset Protection & Planning
In some cases:
- Debts may be partially contingent or disputed
- Some claims may not count toward limits
- Timing may change eligibility
A detailed legal analysis is critical before concluding you “don’t qualify.”
4️⃣ Wait and Reevaluate
Sometimes:
- Lawsuits are resolved
- Claims are reduced
- Debt amounts change
Eligibility is determined as of the filing date.
Strategic timing can matter.
🚩 Important: Don’t Assume You’re Ineligible
We often see situations where someone was told:
“You have too much debt for bankruptcy.”
But upon review:
- Some debt was contingent and didn’t count
- Some claims were disputed
- The means test was miscalculated
- Chapter 11 wasn’t discussed
- Filing strategy wasn’t explored
Bankruptcy eligibility is technical. Small details matter.
📌 The Bottom Line
You cannot have “too much debt” for Chapter 7.
You can exceed Chapter 13 debt limits — but that doesn’t mean bankruptcy is off the table.
It may mean:
- Chapter 11 is appropriate
- A different restructuring strategy is needed
- The debt needs to be analyzed more carefully
If you’ve been told you don’t qualify, get a second opinion from an experienced bankruptcy attorney who handles higher-debt cases.
Bankruptcy law is full of nuances — and sometimes the door isn’t closed. It just requires a different key.
