A story written on Forbes a while back questioned whether there is a distinction between good and bad credit card debt. For millions of American consumers who needed the assistance of a bankruptcy attorney to eliminate overwhelming credit card debt through personal bankruptcy, credit cards represent delinquent payments, creditor harassment and financial challenges they would prefer not to revisit.

The good credit card debt the author has in mind is related to the purchase of products or services that improve productivity and enhance future income. Repayment is not an issue because of the availability of additional income.

Bad debt, on the other hand, results from purchasing decisions made without proper thought and planning. Because credit cards allow people to buy goods and services without feeling the same immediate drain on wealth that comes from paying for things with cash, people tend to spend more on things they do not need. The impact of a credit card purchase is not felt by the consumer until the bill arrives, but even then the true impact is lessened by the ability to repay the debt in monthly installments.

Minimum monthly payments make credit card debt easy to manage, but financial challenges such as unemployment, medical expenses and unexpected life changes can quickly lead to delinquent payments and creditor harassment. A bankruptcy attorney can offer suggestions to resolve the financial challenges overwhelming consumer debt can create.

Chapter 7 bankruptcy offers an individual the opportunity to eliminate debt, but may not be available for consumers whose incomes are above a qualifying threshold. Chapter 13 bankruptcy permits consumers struggling with debt payments to repay their debt under a plan that offers them manageable payments. If the consumer makes the payments according to the plan, the balance of the debt can be excused.

Source: Forbes, “Good debt bad debt,” Panos Mourdoukoutas, Nov. 24, 2012

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