The thought of maintaining debt is often not a welcome one for many Colorado residents. Instead, many are usually trying to think of ways to obtain debt relief.
Yet, many types of debt are not bad in and of themselves. Some debt is good debt that allows individuals to obtain certain tax advantages and acquire assets sooner than they would otherwise be able to.
For instance, a mortgage makes it possible for individuals to own a home while having deductible interest. Student loans permit people to get an education, while deducting interest from the loans on tax returns.
Moreover, even loans that do not carry deductible interest, such as car loans, are often good debt because it allows individuals to obtain assets that better their lives. However, the same loan can turn into bad debt if it eats up a substantial portion of a person's gross income.
Also in the bad debt category are the usual culprits, such as credit card debt. Such debt carries high interest rates, unlike mortgages or student loans. Moreover, while some credit card debt may be positive in that a person can establish good credit, once the payments become overwhelming, individuals may need assistance.
Once debt becomes too unmanageable, individuals may find relief by filing for bankruptcy. Through personal bankruptcy, individuals can obtain a fresh start and discharge their bad debt. Moreover, through Chapter 13 bankruptcy, for instance, individuals can often keep their house and car while paying down debt through a repayment plan.
Accordingly, individuals should educate themselves on how to properly manage debt, including which types of debt are good and which are bad. Moreover, if debt becomes too heavy to bear, individuals should be aware of their options for debt relief.
Source: Gazette, "It's your money: not all debt is bad," Linda Leitz, Dec. 23, 2012