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Information as to what is considered a bad debt to income ratio - The Bills.com Blog
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Information as to what is considered a bad debt to income ratio
Question: My debt to income ratio is in EXTREMELY BAD shape! I am current on All my unsecured debt except for TWO: a Capital One Personal Loan that I am now 4 months past due, and a sears card. I sent a certified letter to Cap One to explain our situation and to try to work things out, but they responded with their own letter threatening to charge-off ourdebt which will ruin our credit Even More! My total unsecured debt is around $30,000.00, and I just realized that we've been living in a $500.00 Plus Deficit Every month for the last 24 months at least. Also, I am legally disabled and unable to work now for several years! My wife works full-time at $8.25 per hour. It has created an unbearable hardship just trying to feed and clothe my 3 children...ANY Suggestions? Most Sincerely, Randy W.
Answer: Randy, you have several options - but I would recommend either debt settlement or bankruptcy advice.
I suggest that you consult with a qualified bankruptcy attorney in your area to discuss your eligibility for filing Chapter 7 Bankruptcy. Given the severity of your financial problems, I think that bankruptcy would probably be the best way to resolve your debts. However, I am not an attorney and do not know the details of your financial situation, so you must consult with an attorney to determine you eligibility for bankruptcy and whether or not filing for bankruptcy protection will improve your financial outlook.
To find an attorney in your area who specializes in bankruptcy law, you should contact your state and/or county Bar Association to request a referral to a bankruptcy attorney in your area. Given the fact that you are disabled and that your wife earns only $8.25/hour, I would be surprised if you did not qualify for Chapter 7 Bankruptcy, but again, only an attorney in your state can tell you for sure after carefully analyzing your finances.
To learn more about bankruptcy, I encourage you to visit the Bills.com Bankruptcy Information page at www.bills.com/bankruptcy/.
If, after consulting with an attorney, you find that you do not qualify to file bankruptcy, you may want to consider alternative debt relief options, such as debt settlement or credit counseling. Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would disribute the funds to your creditors, based on the new payment amounts. One benefit of CCCS is that it should not seriously damage your credit score. However, it may have a negative impact on your ability to obtain a loan despite your good credit score, as many lenders view enrollment in a CCCS program the same as filing Chapter 13 bankruptcy. So, you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. There are a few additional drawbacks to CCCS. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, the average DMP takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.
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You may also want to consider the services offered by debt settlement firms. Rather
than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt. Many consumers prefer debt settlement programs to CCCS, as debt settlement programs tend to be significantly shorter than CCCS plans, and the monthly payments in debt settlement are usually lower. There is one major drawback to debt settlement programs, though?they will significantly damage your credit while in the program and for at least a year or two afterwards. However, if you are currently unable to afford to pay your creditors, the hit to your credit may be worth the benefit of ridding yourself of credit card debt. To read more about credit counseling and debt settlement programs, I encourage you to visit the Bills.com Debt Help page at http://www.bills.com/debt-help/.
Again, I believe that bankruptcy would probably be the best option for you to resolve your outstanding debts. However, other options are available if you find the bankruptcy is nor a viable option. I wish you the best of luck in solving your financial difficulties, and I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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