A bad debt is a debt that is not collectible and therefore worthless to the creditor. This occurs after all attempts are made to collect on the debt. Bad debt is usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect.[1]  There are ways to avoid bad debt, however.


You may find yourself in a horrible financial position right now.  In fact, you may find yourself in so much debt that you don't see how you'll ever be able to repay it.  You may even have debt collectors sending you nasty letters in the mail or even calling you!  Don't get discouraged – there is no debt that is unsolvable.


Regardless of how you got into so much debt – credit cards, a new car, student loans, mortgage – there is a way out for you.  There are several ways to avoid bad debt.


One way to avoid bad debt as relates to credit cards is called debt renegotiation.  In this case, you call the credit card company and renegotiate for a smaller balance on the credit card debt.  If they are agreeable, you may even be able to renegotiate for a smaller interest payment as well.  Then you negotiate for a smaller monthly payment, and you agree to make that monthly payment until the debt is paid off.


Make sure that you make this monthly payment a priority and do not default on it, or all bets are off!  The creditor is then under no obligation to honor the renegotiation, and you will then find the bill collectors after you again or worse – the creditor may even sue you for the complete balance!


Do this with each of the credit card companies to which you owe money.


Another way to avoid bad debt is called debt consolidation.  With this method, you consolidate all your unsecured debt (like credit card debt) into one monthly payment.  You can find information on how to do this yourself on the Internet for free.  If necessary, you can hire a debt consolidation company to help you with this. 


Just make sure that you hire a reputable company.  You need to be careful, as many of them have hidden fees and charges, and it may just end up hurting you more than helping you in the long run.  You may even be able to find a low-cost or no-cost debt consolidation company if you hunt for one, though.  Again, just make sure that they are a reputable company.


Still another way to avoid bad debt for you might be to take out a personal loan.  Yes, your credit might be bad, but if you have been with your bank for a long time and are a good customer and you have a good job with a good employment history (and have steady employment now), they still might consider giving you a loan.  Especially if, after totaling all your credit card debt, you find that you really don't need all that much money to erase your debt.  You won't know until you ask!


[1] http://www.answers.com/topic/bad-debt