What is Debt?
It’s a simple question but the word “debt” is one that can affect a person’s entire life. You may have too little debt or you may have too much debt. It seems there is a fine line between too little and too much. There is good debt and there is bad debt. What you have is entirely up to you?
The Meaning of Debt
According to Webster’s Online Dictionary, the meaning is very simple. It simply means “something owed” or “a state of owing.”
According to the Fair Debt Collection Practices Act, debt goes into a little more detail than Webster’s definition. The Fair Debt Collection Practices Act says that
The term “debt ” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
This makes everything a lot clearer, right?
Simply put — debt is an obligation. Debt is not necessarily always money. It can be a service that you owe someone. It can be an object or a goods or service promised in exchange for something. The something that is promised could be money or it could be working for someone for a day or a week.
Examples of Debt
Someone pays you in advance for your car stereo that is still in your car. You are in debt to the person until you have the car stereo taken out of the car and give it to them.
Another example — You do work for someone and they promise to pay you in a week. The other person is in debt to you until he or she pays you for your work.
One more example — you take your car into the mechanic and promise to pay him by Friday. You are in debt to the mechanic until you pay him.
Are debt and credit the same thing?
Check back for our next post for the answer!!!
Till next time,
JT Locke
Junk Debt 101
