Knowing when it's really time to file for bankruptcy doesn't come without anguish. Because of the general perceptions about filing for bankruptcy, many fear they're permanently destroying their financial future, finding themselves unable to get a loan or purchase a home post-bankruptcy.
However, in many cases, bankruptcy is the sole choice available. You must stop and assess whether the debt you are carrying is controllable or completely unmanageable. If it's out of control, you should consider the bankruptcy option. How do you know if you are in control of your debt?
Determine Your Debt to Income Ratio
Debt to income ratio is a number that can reveal the amount of debt you accrue in a month versus the amount of income you contribute. You must consider all debts in this calculation; consider asking your Minneapolis bankruptcy lawyer for assistance. At times, lenders do this calculation without inputting major expenses such as rent or mortgage payment. You should include the following monthly expenses in your calculations (if they apply) and bring the resulting number to your Minneapolis bankruptcy law expert:
* Car lease or loan payments.
* Student loan payments.
* Alimony and child support.
* Mortgage or rent.
* Personal loan payments.
* Payments to credit cards (multiple your minimum times two).
* Revolving credit payments.
Once you've calculated the amount of debt you incur per month, it's time to look at your monthly income for comparison. Include:
* Paycheck after taxes.
* Bonuses (if yearly, divide bonus by 12).
* Additional income from second jobs or a home-based business.
When you've calculated both numbers, take the first number (debt per month) and divide it by the second number (income per month). The resulting percentage is called a debt to income ratio. The higher your number, the more debt you have when compared to your income.
What if I Have a High Debt to Income Ratio?
If this is the case, it's likely you have already encountered difficulty in paying all of your bills in a timely manner. Professional credit counselors and financial professionals generally consider a debt to income ratio less than 36% ideal.
It might seem as though 36% leaves 64% free. This is not the case-when you calculated your debt to income ratio, you did not include other payments, such as home and car insurance, cell phone bills, television, internet, gas, food, clothing, utilities, and any other monthly amenities. Some of these expenses are necessary, others may not be. To understand your financial standing, you need to factor these additional monthly expenses into your equation.
If you have a debt to income ratio above 36%, it's time to consult a Minneapolis bankruptcy attorney. You will need to come up with a debt reduction plan. While bankruptcy isn't your sole option, it may be right for you at this time.
However, in many cases, bankruptcy is the sole choice available. You must stop and assess whether the debt you are carrying is controllable or completely unmanageable. If it's out of control, you should consider the bankruptcy option. How do you know if you are in control of your debt?
Determine Your Debt to Income Ratio
Debt to income ratio is a number that can reveal the amount of debt you accrue in a month versus the amount of income you contribute. You must consider all debts in this calculation; consider asking your Minneapolis bankruptcy lawyer for assistance. At times, lenders do this calculation without inputting major expenses such as rent or mortgage payment. You should include the following monthly expenses in your calculations (if they apply) and bring the resulting number to your Minneapolis bankruptcy law expert:
* Car lease or loan payments.
* Student loan payments.
* Alimony and child support.
* Mortgage or rent.
* Personal loan payments.
* Payments to credit cards (multiple your minimum times two).
* Revolving credit payments.
Once you've calculated the amount of debt you incur per month, it's time to look at your monthly income for comparison. Include:
* Paycheck after taxes.
* Bonuses (if yearly, divide bonus by 12).
* Additional income from second jobs or a home-based business.
When you've calculated both numbers, take the first number (debt per month) and divide it by the second number (income per month). The resulting percentage is called a debt to income ratio. The higher your number, the more debt you have when compared to your income.
What if I Have a High Debt to Income Ratio?
If this is the case, it's likely you have already encountered difficulty in paying all of your bills in a timely manner. Professional credit counselors and financial professionals generally consider a debt to income ratio less than 36% ideal.
It might seem as though 36% leaves 64% free. This is not the case-when you calculated your debt to income ratio, you did not include other payments, such as home and car insurance, cell phone bills, television, internet, gas, food, clothing, utilities, and any other monthly amenities. Some of these expenses are necessary, others may not be. To understand your financial standing, you need to factor these additional monthly expenses into your equation.
If you have a debt to income ratio above 36%, it's time to consult a Minneapolis bankruptcy attorney. You will need to come up with a debt reduction plan. While bankruptcy isn't your sole option, it may be right for you at this time.
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