Executive Office for U.S. Trustees; Washington, D.C.1
In this article, we describe how credit card debt is distributed among different characteristics of chapter 7 no-asset debtors: their location, age, gender and marital status, family size and gross income. We also tease out what we can about the relationship between credit card and medical debts. Our analysis is based on 5,203 no-asset non-business chapter 7 cases that were closed between 2000 and 2002.2 We only included bank-issued credit card debt (e.g., Visa MasterCard, Discover, etc.). Credit card debt for individual stores, which averages $2,917 per case in our population, was not included.
Credit card debt is a major issue in a substantial percentage of consumer bankruptcies. Nearly 90 percent of the cases had at least some debt listed, and it accounted for 42.8 percent of the total general unsecured debt in our sample cases. In the 49 cases with unsecured debts of more than $250,000, only 6.5 percent of the debt was from credit cards, but in the remaining cases, nearly one half (49.6 percent) of the general unsecured debt was from credit cards.
The average credit card debt reported on Schedule F for our cases was $17,738. About 1.1 million no-asset non-business chapter 7 cases will be closed nationwide this year, so we project that these cases will result in the discharge of nearly $20 billion in credit card debt.
Unfortunately, the bankruptcy petitions do not reveal much about how this debt was incurred. We have no information regarding how the credit cards were used—e.g., for medical debt, living expenses, luxury items, gambling, etc. Also, we do not know how much of the listed debt was not for purchases but consisted of annual fees, over-the-limit charges, late fees and interest charges.
The median (middle case) credit card debt level was $11,038. This is well below the average debt level ($17,738) because a small percentage of the debtors had very high credit card debt balances. Approximately 7.2 percent of the debtors owed at least $50,000 in credit card debt, accounting for nearly one-third of the total. Projecting these figures nationwide, in 2003 about 80,000 chapter 7 debtors owing at least $50,000 in credit card debt will discharge about $6 billion in such debt.
There was considerable variation in the average per-case credit card debt listed by state of residence. States with the highest levels included South Carolina ($25,901), Massachusetts ($25,055), Texas ($24,649), Kansas ($24,037) and Connecticut ($23,943). Jurisdictions with the lowest credit card debt per case included Puerto Rico ($4,835), Arkansas ($11,690), Tennessee ($11,814), Kentucky ($11,894), Oregon ($11,966) and Utah ($12,555).
By itself, family size was not a powerful factor in the amount of credit card debt. Debt tends to be a little higher for debtors with families of two and much lower for families of six or more; only a small percentage of debtors have families that large.
Credit card debt generally increases with the income of debtors. However, about four percent of chapter 7 debtors report no income at the time of filing. These debtors, on average, have higher credit card debt levels than any other income range, except for debtors with incomes of more than $5,000 per month. About three percent of debtors have gross monthly incomes of more than $6,000. Average credit card debt for these high-income debtors is more than twice as high as the average for all chapter 7 debtors.
In general credit card debt is higher for male debtors than female debtors, and even higher for joint filers. Among non-joint filers, debt levels are somewhat lower for single debtors than for those who are or were previously married.
As we have previously reported,3 credit card debt among chapter 7 debtors is closely associated with age. Only about 20 percent of the debtors in our sample listed their age on Schedule I of their petitions. Generally, credit card debt is less than average for debtors under the age of 45, and higher than average for debtors 45 or older. Elderly debtors (65 or older), on average, have nearly four times as much credit card debt as debtors under the age of 25. It was also interesting to note that the average gross monthly income of the elderly debtors ($1,714) was about 30 percent below the average for all debtors ($2,459).
More than one half of the debtors did not list any medical debt on Schedule F of their petitions.4 Their credit card debt was higher than that of debtors who reported medical debts, and was more than twice as high as for debtors who listed at least $5,000 in medical debt.
Credit card debt is a significant factor in many bankruptcy cases, and nearly $20 billion is discharged in chapter 7 cases per year. Cases where the debtor has at least $50,000 in credit card debt account for nearly one-third of this amount. Credit card debt levels are particularly high among joint filers, high-income debtors, elderly debtors and debtors with no listed medical debts. They tend to be lower among low- to moderate-income debtors, female debtors, debtors under the age of 35 and debtors with very high medical debts.
1 All views expressed in this article are those of the authors and do not necessarily represent the views of the Executive Office for U.S. Trustees or the Department of Justice. Return to article
2 Each year since 1998, the Executive Office for U.S. Trustees has obtained a large sample of chapter 7 no-asset cases filed in the 84 federal judicial districts served by the U.S. Trustee Program. Since 2000, we have recorded the amount of credit card debt listed on Schedule F of the petitions. Return to article
3 Flynn, Ed and Bermant, Gordon, "Chapter 7 Debtors from 19-92," ABI Journal, December/January 2003. Return to article
4 Of course, some debtors undoubtedly paid for their medical debts with credit cards. It is not possible to tell from the information listed in the petitions how often this occurred. Return to article