Dr Richard Stephens
Most Jamaicans use the phrase “bad debt” to refer to a lot of debt, or just owing a lot of money. This phrase has a very specific meaning when it comes to financial issues. “Bad debt” in this case is a debt that cannot be repaid. This usually happens when the person who owes the money is facing financial difficulties and does not have the ability to pay toward the debt. If you are a creditor and the person who owes you money declares bankruptcy or other financial crisis, this bad debt can be a problem. Even though that person’s security will probably be separated to pay the many different creditors, you will probably not get all of the money that you are owed. For this reason, most creditors try to work with the debtor in order to make it possible to pay back the debt, that way they will get all of the money back, instead of just some. If you owe money and you do not have the ability to pay it, it might be best to talk with your creditors and try to work out a solution and maybe a different payment plan. Being in debt and working to pay off your debts can actually be beneficial in the long run. When you have a bad debt that makes it bad for your credit history, this can be a big problem, especially if you need to get a credit card or a loan. In fact, your credit history can affect pretty much anything you do in the financial world, including mortgages, buying a car, and being able to take out a much needed loan. Therefore, you should do whatever you can to make sure that you will be able to pay off the debts you have. To prevent bad debt, you should first minimize the number of debts you incur to begin with. For instance, if you can possibly avoid buying something, then you should wait until after you have saved the money for it, instead of buying on credit. If you already have a lot of debt, then you should look at some of the debt solutions, for instance, debt consolidation. Seek professional advice, a CPA or CFC can give you the advice that you need when you want to clear a bad debt. You can also speak with your creditor and try to find out the best terms for repaying a bad debt which can harm your financial life and future.
