IS there such a thing as “good” debt? Sure there is. Debt can get you a higher education and get you a profession. By higher education, I mean college and graduate school, including the professions. Let’s say you’re about to graduate from high school and you want to become a medical doctor, a physician.
You have to hurdle two steps. First, get into college and get the minimum requirements to apply for med school. You need to get credits for several science subjects like chemistry, physics and biology, among other prerequisites. Get a respectable college GPA and science GPA. About a 3.5 would do for both. Try to get a higher science GPA if you can, maybe a 3.7. That helps a lot in getting into U.S. med schools. The problem of course is that lots of guys who get into college get a taste of freedom that they never had before. They don’t live in their parents’ house because they get to live either in a dorm or an apartment near the university. Every day there’s a party with lots of drinking and drugs. That’s just the way it is.
This is genius among us
So amidst so much temptation it’s really not easy to get the GPA you want even if you have the brains for it. But if you want to get into med school here, you have to discipline yourself and focus. Sure you can have all the fun you want, but don’t neglect studying hard. You may not want to be a physician. You might want to be an engineer, or a CPA or an IT guy. You can’t just “wing it,” unless you’re a certified genius. There are actually geniuses around you know. I know our class valedictorian is a genius. I mean, he has a mutant brain. He got straight A’s in grade school, high school, and college (summa cum laude) in Physics. Then he went on to get a doctorate degree in a computer-related field. His father lived to 105, and his mother is still going strong at 105 right now. I mean, he’s got great genes. There’s research that shows that in the year 2088, the average height of people on earth will be 6’10” and people will have smaller mouths. How come? I don’t know. Maybe with smaller mouths, people eat less so obesity will be a thing of the past. With small mouths, people will drink food with straws. Basketball players will have an average height of 10 feet.
‘Good debt’
You can get student loans to pay for college and med school. By the time you graduate from med school, you will probably owe $250,000 to $300,000 of student loans. But once you are done with your specialization, you can easily pay the $300,000 in a year or two. But not all medical specializations are created equal. Surgeons make a lot more than GPs or pediatricians, especially specialized surgeons like for example, neurosurgeons.
Then, student loans are an example of “good” debt because they let you become productive and set you up for life on the right track. Don’t ever make the mistake of trying to get into med school if you don’t have the talent for it. You will end up with a lot of loans that you can’t pay back because you can’t pass the medical board exam. So, assess your talents objectively.
Getting a mortgage to buy a house is also “good” debt. It gives your family shelter and the value keeps going up.
‘Bad debt’
So when I say how do you put a handle on too much debt, I’m talking about “bad” debt. Credit card debts are “bad” debts without question. Their interest rates are way high at over 20%. They don’t serve any purpose except to satisfy impulse satisfaction.
More income to pay down bad debt
How do you handle $50,000 of credit card debt? You need $1,500 a month to keep them current. One way is to make more money and pay them down significantly every month. If you make $2,000 more net a month, you can pay the principal down by $6,000 a year. So in 9.5 years, after paying about $200,000 of interest and principal, you will owe zero on year no. 10. The problem is it’s not that simple to make another $2,000 of income a month. Maybe you can drive Uber for six hours after work every day to make $2,000 more a month. But maybe you’ll have to buy another car because your old car won’t keep up and we don’t know if your not that young body anymore can keep up either.
Chapter 7 and 13
Or, you can file a Chapter 7 and just wipe out the $50,000. Or, you can file Chapter 13 and pay a portion of the $50,000 over three to five years. They have differing eligibility qualifications.
Seriously, if you don’t put a handle on the $50,000 now, you will have a miserable future. If you can’t get more income, the $50,000 will grow at the rate of $20,000 a year of new debt if you just borrow from Peter to pay Paul. So by the end of 2022, you will owe $70,000 of credit cards, not $50,000. For $70,000, you will need $2,100 a month of minimum interest payments to keep them current. Your credit cards will mutate into something harder to handle. Indeed it will become a money-eating virus that will be fatal to your financial stability. Not good at all for you and your family.
If you have debt problems, set an appointment to see me but mask up and get the booster first. I got the booster and always double mask when I see clients. Court hearings have been done telephonically and by zoom since 2020.
It also helps to pray to our God, Jesus and the Blessed Mother Mary for divine protection against the virus, and financial problems, because we have a God who loves us and showers us with infinite mercy. All we have to do is humble ourselves and pray.
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Disclaimer: None of the foregoing is considered legal advice for anyone. There is absolutely no attorney-client relationship established by reading this article.
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Lawrence Bautista Yang specializes in Bankruptcy, Business, Real Estate and Civil Litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 20274 Carrey Road, Walnut, CA 91789 or 1000 S. Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.
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