Debt Limitation Law and Legal Definition

Debt limitation refers to a limit placed on borrowing by an individual, business, or government. Debt limitations are prohibited by many constitutions of the states. These constitutions prohibit the states from incurring debt in excess of a stated amount. However, other state constitutions allow states to incur debt above a stated amount only through a vote of the people. A debt limitation may take a variety of forms, depending on the circumstances of the debt issue. In United States v. Dallas, 157 B.R. 912, 913 (S.D. Ala. 1993), it was held that the applicability of the debt limitation is to be determined on the debtor's good faith filings alone. Debt limitation is also known as limitation on indebtedness.