Is all debt bad?  – An opinion from Missouri bankruptcy attorney Sean C. Paul

Firstly, let me state that it is generally best to stay debt free.  Even though I do firmly believe that there are “good” debts and “bad” debts.

Bad debts are obvious:  credit cards, medical bills, and collection accounts generally demonstrate an overall inability to afford routine expenses.  But even that can be overstated.  Even the most financially astute carry a balance sometimes in order to finance a temporary situation.  Pay it off quickly and it won’t become a problem.

What are “good” debts?  I like to think debts that help you gain leverage are good.  For example, if you buy into real estate, and that real estate increases in value over time, it is a net GAIN for you to have that asset.  Of course, if you can’t afford the payments on the debt, it can become a “bad” debt as well.

Are cars a good or bad debt?  Cars lose value quickly.  If you need to finance, you should do so at a low interest rate and a very short repayment period.  Again, if you can’t afford the payment, the debt will be even worse for you.  However, a short-term auto payment may help you gain leverage in that it will allow you to make more money getting to work.

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