Household Debt Loads: Free & Clear Households

In 1962, 8% of US households had negative net worth (average of -$538 per household in this group). If they sold everything they had in order to pay off their debt, they'd still have some unpaid debt.

If you take their net debt and pass it to the next-most indebted household--passing the debt from household to household until it is finally paid--then you reach a point where the remaining US households are all free and clear of net household debt (even the net debts of other households).

When you pass the "free & clear" point, the net household worth of any new household is true net worth which is unburdened by any excess debt of other households.

In 1962, all net household debt was paid off at the point where you reached 22% of all households. Adding the next 14% of households brought aggregate debt to zero.

This point might be called the "Zero-Point Net Worth" (ZPNW) of a nation, and it let's you know not just what fraction of households have net debt (no positive net worth)--but also how deep their debt burden actually is. Here is a bell curve image showing this proportion (blue is debt-burdened; orange is "free & clear"):

In 2014, 16.2% of US households had no positive net worth--twice the fraction of US households who did in 1962.

Not only did more households have net debt, but their "per-household" debt burden was deeper as well ($40,230 per household in this group), requiring more "help" from the net worth of other households in order to get paid off.

In 2014, it took 46.5% of US households to reach this "free & clear" point; the Zero-Point Net Worth (ZPNW). Instead of reaching the zero-point with just an additional 14% of the households, it took an additional 30% of the households.

Here is a bell curve image showing this proportion (blue is debt-burdened; orange is "free & clear"):

Reference

[1] Federal Reserve Bulletin. (March 1964). Survey of Financial Characteristics of Consumers. https://www.federalreserve.gov/econres/files/6263_bull0364.pdf

[2] United States Census Bureau. Wealth, Asset Ownership, & Debt of Households Detailed Tables: 2014. https://www.census.gov/data/tables/2014/demo/wealth/wealth-asset-ownership.html

[Note: In "Wealth and Asset Ownership" spreadsheet, see % distribution at top in Table 4; and combine these data with those given in the intersection of the Household Net Worth rows and mean Net Worth column in Table 5; use similar method for Federal Reserve data above as well]