{"id":7572,"date":"2018-08-27T07:00:25","date_gmt":"2018-08-27T07:00:25","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=7572"},"modified":"2019-05-09T07:09:51","modified_gmt":"2019-05-09T07:09:51","slug":"when-facing-bankruptcy-no-debt-is-good-or-bad","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/when-facing-bankruptcy-no-debt-is-good-or-bad\/","title":{"rendered":"When Facing Bankruptcy, No Debt Is ‘Good’ or ‘Bad’"},"content":{"rendered":"

Financial-planning Web sites and other resources often distinguish between “good debt” and “bad debt.” New York bankruptcy debtors might think that this distinction will somehow help them, but I don’t see much value in it. I’ll illustrate examples of these terms and then provide an alternative framework for bankruptcy.<\/p>\n

“Good debts” are generally seen as debts that increase the debtor’s net worth in the long run. Two other factors in a debt’s favor are their low interest rates and tax deductibility. It’s somewhat counterintuitive, but the idea is to consider what benefits the debt provides in the long run. Examples include mortgages, student loans, or business loans. A mortgage is big today, but the homeowner gets to live in a nicer home than an apartment that can be resold for even more money in the future. A student loan leads to an education that increases the debtor’s earning power. Finally, business loans enable debtors to earn a living operating a business in an industry they enjoy.<\/p>\n

But what about mortgages that go underwater? Or credentials that are worthless on the job market? Or businesses that fail?<\/p>\n

It seems then that some of the best debts can become the worst albatrosses around debtors’ necks. Simply being a “good debt” is not going to rescue debtors from serious financial problems.<\/p>\n

“Bad debts,” for their part, don’t create durable assets for debtors in the long run, aren’t tax deductible, and come with high interest rates. Think credit cards, payday loans, auto loans, and gambling debts.<\/p>\n

Yes, auto loans are considered “bad debts” because cars depreciate quickly upon purchase, so the interest paid on auto loans chases an asset that requires upkeep and someday will become obsolete. Financial planners recommend paying cash if possible and to avoid purchasing new vehicles altogether.<\/p>\n

Some debts are in the middle: home equity loans used to pay off high-interest credit-card balances, investment loans, which can resemble the margin loans that contributed to the Great Depression.<\/p>\n

It makes sense that high-risk debts aren’t preferable. Obviously the opposite is rare: a low-risk debt that provides a high value. However, pigeonholing categories of debts can easily mislead people into believing that a “good debt” is a safe debt<\/i>, but this isn’t necessarily true, which is why all kinds of debts can find themselves into a New York bankruptcy case.<\/p>\n

So how should New York bankruptcy debtors look at their debts? One answer is to ask whether they’re dischargeable in chapter 7 and aren’t secured by any collateral. From this perspective most of the “bad debts” and few of the “good debts” (business loans) fit the category. Debts that are secured (mortgages) or are typically not dischargeable in a chapter 7 case (student loans) aren’t going to look so good through a bankruptcy lens. For theses, chapter 13 is probably going to be a better option.<\/p>\n

What financial experts think about debts isn’t as important as the role they’re playing in your financial problems. If you are experiencing financial difficulties, then talking to an experienced New York bankruptcy lawyer can help you strategize your options.<\/p>\n

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY<\/a> Bruce Weiner for a free initial consultation.<\/p>\n","protected":false},"excerpt":{"rendered":"

Financial-planning Web sites and other resources often distinguish between “good debt” and “bad debt.” New York bankruptcy debtors might think that this distinction will somehow help them, but I don’t see much value in it. I’ll illustrate examples of these terms and then provide an alternative framework for bankruptcy. “Good debts” are generally seen as …<\/p>\n

When Facing Bankruptcy, No Debt Is ‘Good’ or ‘Bad’<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,7],"tags":[2,3,15,51,52],"acf":[],"yoast_head":"\nWhen Facing Bankruptcy, No Debt Is 'Good' or 'Bad' | Bankruptcy Attorney<\/title>\n<meta name=\"description\" content=\"Financial-planning Web sites and other resources often distinguish between "good debt" and "bad debt." 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