South Carolina bankruptcy attorney Ben Matthews breaks down what you need to know
There’s good debt and bad debt.
Debt is just part of life.
We hear these lies and dozens more all the time, and they’re exactly how creditors keep you trapped in debt for years. We’ve also seen over and over again how stressed and miserable debt can make hardworking people who bought into these myths.
That’s why attorney Ben Matthews created the Debt Sucks Podcast to bust myths like this one. Let’s dive in.
Really, there’s bad debt and less bad debt
Debt can be a useful tool for some purposes. But to be clear, there is no “good debt” – all debt is money that you owe to someone else, with potentially severe consequences if you can’t pay. It’s more accurate to say that there is “less bad” debt. For example:
Mortgages
Buying a house can help you build wealth, but be careful, especially in the current housing market. If you can’t afford the payments, a mortgage can trap you in debt just as easily as any other type of loan.
Starting a business
Financing a business venture with debt can be a winning financial move, but only if you have a solid, realistic business plan and the skills and resources needed to pull it off.
Student loans
If getting an education opens new doors and allows you to achieve a higher or more stable income, taking on some student debt may be worth it. But borrowing six figures for a degree that will never pay off is financially disastrous, especially because student debt is one of the hardest types of debt to get rid of.
And then there’s really bad debt
On the other hand, some types of debt are laser-targeted to ruin your finances over the long haul, including:
Credit cards
These are vampires sucking the money out of your paycheck every single month. Minimum payments on credit cards are a scam – they keep you on the hook for years, and you’ll end up paying double (or more) in interest.
Retail payment plans
These are the junk food of the debt world. Individually, they may seem harmless – just a $50 impulse buy here, and $100 split into five easy payments there – but before you know it, you owe money to a dozen different retailers, with fees every time you miss a payment.
Payday loans
Payday lenders promise quick cash when you’re in a tight spot. The only problem is that they charge interest rates that would make a mob boss blush – and if you can’t pay, they’re more than happy to roll your balance over and charge you twice as much. It’s legalized loan sharking, no baseball bat required.
Title loans
Like payday loans, except if you can’t pay, they can also take your car, which makes it that much harder to get to work and find your way out of debt.
Strategies to avoid the debt treadmill
The 24-hour rule
Before making a non-essential purchase, wait 24 hours. In our experience, nine times out of ten, you’ll realize you don’t even want it that much.
Use cash (or debit) only
Handing over physical cash hurts – you see the money going out of your wallet, so you’ll think twice about doing it. Plus, once you’re out of cash, that’s it. No overdrafts, no additional debt.
Establish your emergency savings
Life will always throw curveballs at you, and you have to be ready to hit them. Even as little as $500 socked away can be the difference between dealing with an emergency without disrupting your finances and getting deeper into debt.
Is it time for a financial reset?
If you’re drowning in debt and don’t know where to turn next, bankruptcy can be the lifeline you need. Filing for Chapter 7 bankruptcy can get your debts discharged (wiped out) in as little as four months, while Chapter 13 bankruptcy will put you on an affordable payment plan for three to five years. Either way, you’ll get a fresh start and a path to financial freedom, without the stress and anxiety that comes from being in debt.
For many years, we’ve been helping South Carolinians move forward by navigating the bankruptcy process. Give us a call or contact us online for a free consultation with Benjamin R. Matthews & Associates, LLC.
"Very helpful in all aspects of our case. Understanding the stress of filing a case. Answered all our questions and put us at ease. Highly recommend them!" – William G., ⭐⭐⭐⭐⭐