How Much Debt is Too Much Debt?

If you’re an adult, you probably have some form of debt. Whether it’s a credit card, student loan, or mortgage payment, having debt is pretty normal. But how do you know if you have too much debt?


The Debt-To-Income Ratio (DTI) is used by the consumer lending industry to determine how much debt someone has and therefore whether they might qualify for a loan. To determine DTI, you’ll need two important pieces of information:

  1. Recurring Monthly Debt: These are the things you must pay every month, like your mortgage, car loan, student loan, credit cards, etc.
  2. Gross Monthly Income: This is how much you make every month before taxes are taken out of your paycheck.

The Debt-To-Income Ratio equation is relatively simple:

Example: If your recurring monthly debt is $3,000 and your gross monthly income is $6,000, then $3,000 / $6,000 = .50. Your DTI is 50%.

Many financial advisors state that a DTI higher than 35% means you have too much debt.


If you have too much debt, there are a lot of steps you can take to get it under control:

  • Get Organized. Know how much you owe and to whom. If you are feeling overwhelmed by this task, just take a look at your credit report, it’ll do the majority of the work for you. You can get a free credit report from
  • Make a Budget. Next, make a budget and pay your bills on time each month. Decide which debts to pay off first and make more than the minimum payment if possible.
  • Debt Relief. If you still find it hard to pay all or some of your bills each month, consider debt relief. Settlements are negotiated with the creditors. Often, the creditor will forgive a large part of the debt in return for a one lump-sum payment. Then the debt is considered cancelled and the matter closed. Keep in mind, debt relief applies only to unsecured debt, which is a debt that is not secured by collateral.

If you find yourself owing more money to creditors than you have, or can foreseeably earn, it may be time to consider bankruptcy. Most individuals will file one of two types of bankruptcy:

  • Chapter 7: The assets you own will be liquated and used to pay off your debts.
  • Chapter 13: Your finances are reorganized into a plan that allows you to pay back creditors over three to five years while maintaining control and ownership of your assets.


Hiring a lawyer to assist you is one of the most important steps in successfully settling a debt, filing for bankruptcy, and avoiding legal consequences. If you are interested in learning more about debt relief, contact a bankruptcy lawyer Phoenix, AZ trusts from Kamper & Estrada, PLLC. for a free initial consultation.


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