Question

Jim has a home loan and a car loan. He defaults on his home loan after a year of making payments on time. However, he continues to make all of his car payments on time. Will his actions make his home debt a good or bad debt? Why?

Jim's debt becomes a good debt since it is backed by collateral.

Jim's debt becomes a bad debt since he cannot make payments.

Jim's debt becomes a bad debt since it is not backed by collateral.

Jim's debt becomes a good debt since he is making payments on his car.