In today’s economy, debt is a common factor in both our personal lives and the business world that can sometimes lead to bankruptcy. But what exactly is debt? Here are the answers some to common questions about debt and its role in our finances:
What Are the Different Types of Debt?
1. Personal Debt
Personal debt, also called bad debt, results from purchasing assets that will be worth less in the future. Examples include purchasing clothing or furniture with a credit card or buying a car. However, not all personal debt is bad. If a purchase helps you gain better financial standing, such as buying a car to get you to school or work, then personal debt may be necessary and even beneficial. Be conscious of the purchases you make using a credit card and evaluate their necessity, or you may find yourself burdened with debts that require declaring bankruptcy.
2. Investment Debt
Investment debt, known as good debt, is from the purchase of assets that will be worth more in the future. Some examples of investment debt are student loans, borrowing for a home, or starting a new business. These can be highly intelligent business moves if the market is anticipated correctly.
How Do I Decide Which Debt Payments to Make First?
Debt repayments can be generalized into two categories: essential and nonessential. Some essential payments include mortgage payments, car payments, school loans, and utility bills. Some nonessential payments include credit cards, subscriptions, and membership dues. Make sure to pay the essential debts before the nonessential debts. If you are struggling with an overwhelming number of debt payments, then finding an attorney to help you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy may be the route to relief.
What is Debt Consolidation?
Debt consolidation is the merging of your different sources of debt into one general debt payment. Rather than keeping track of multiple payments, you will then only have a single payment to consider. By consolidating your debt, you can reduce the interest rates of your debts and save money over the long-term.
If you have become overwhelmed with debt, then contact the bankruptcy experts at Cutler & Associates, Ltd for guidance.
Our attorneys in the Chicago suburbs can help you declare Chapter 7 or Chapter 13 bankruptcy and get your life back.