Tuesday, July 11, 2017

Will Filing Bankruptcy Help My Debt To Income Ratio Improve?

When you apply for a loan your credit score is checked, as is your debt to income ratio. If you have more debt than you have income, it will be hard to get a loan. But if you are able to keep your debt low, compared to how much you make, you stand a greater chance of getting a loan. A low debt to income ratio will also help you get loans at lower interest rates, which helps keep your payments manageable. So what happens when your debt spirals out of control and in order to get a handle on it, you file for bankruptcy? We all know that even though bankruptcy has an impact on your credit score, it can rebound quicker than you think after having filed a case. But does this positive impact carry over to your debt to income ratio also?

There is a good argument to make that filing bankruptcy will help improve your debt to income ratio. Here’s how:

         Some of your debts will be eliminated in your bankruptcy. Once eliminated, the debts are no longer considered due and should not be included in your total debt figure.
         When some of your debt is eliminated, causing the amount of total debt you owe to go down, you suddenly look more capable of making loan payments when lenders check your credit.
         If your income remains the same after bankruptcy, yet your debt has been reduced, your overall debt to income ratio will improve.
Having fewer debts will make it easier to pay remaining debts, and it will also make it easier to get a loan. This is an often overlooked benefit to filing for bankruptcy, but is an important one. Not only will you be able to show more income than debts, but if you do take out a loan after having filed bankruptcy, and make the payments on time your credit score will also start to improve. The combination of these things makes the transition back to your normal life after filing for bankruptcy smoother. To learn more about the benefits of bankruptcy, call our office.

If you have questions about bankruptcy, call us today or reach us online at www.law-ri.com. We have multiple locations to serve you and can schedule a time to meet at the office most convenient for you.

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