DEBT MANAGEMENT » Get out of Debt

Wrapping your mind around debt-to-income ratio is as simple as applying a simple mathematical formula to your gross monthly fixed expenses. You never knew it was that simple, did you? To show you just how simple it is, let's take a closer look at what debt-to-income ratio is and how to calculate it.

What is Debt-to-Income Ratio and Why Calculate It?

When managing finances, it's important to get a grip on just how much you're bring in vs. spending. By tightening up on spending, you can make sure to reduce frivolous debts and avoid adding on more.

But before you reach this stage, it's a good idea to find out where you've gone wrong so that you can make necessary improvements. A great way to get this done is by calculating your debt-to-income ratio. This ratio is a configuration of how much you bring in versus how much you spend in fixed payments each month. Once the ratio is calculated, you can determine whether you're managing your finances correctly.

Calculating Your Debt-to-Income Ratio

The first step in making this calculation is adding up your monthly fixed expenses, including house payments or rental leases, revolving credit balances, car payments, alimony, child support, etc. Some items that should be excluded from the list include items that can be paid off in a couple of months or less, including utilities or grocery bills.

Next, you want to jot down your gross monthly income (the amount you earn before taxes and benefits). Then divide the monthly fixed expenses into the gross monthly income for your ratio.

How Your Debt-to-Income Ratio Affects Your Credit

Did you know that your debt-to-income ratio being too high can negatively affect your credit? If after calculating the ratio, you find that yours is higher than 36%, your debt is considered too high - as a result, your credit score can lower. And of course, the result of alowered credit score is higher interest rates and turned-down applications for credit.

Taking the time to understand your debt-to-income ratio and how it affects your life - and credit score - can help you make the best decisions on managing your monthly fixed expenses in relation to your gross monthly income.

Thephrase "automatic stay" is synonymous with what occurs afterfiling a bankruptcy. So if you think that you might want to start the process, it's good to learn what this phrase means in greater depth, and what your rights are in association with this phrase.

What is Automatic Stay?

An automatic stay is a court order that occurs after filing a bankruptcy. It disallows any creditors that have been summed up in the process to try to collect their debtsfrom you. In other words, after they've received the notice, they will be going against court orders if they contact you directly in any way (written or verbally). Most importantly, they are not able to sue youbecause at that point you are no longer responsible for paying the debt to them.

What are the Immediate Effects of Automatic Stay?

Somedirect results of filing a bankruptcy and the automatic stay are the following:

• No more repossessions. If part of your debt includes items that can be repossessed, once you have completed the process of filing a bankruptcy, your items can no longer be repossessed.
• Taxes on hold. After you have filed, the IRS is prohibited from conducting any collection activities.
• You cannot be evicted. If you are behind in your rent, your landlord cannot evict you under any circumstances.
• Your home cannot be foreclosed. If you owe money to your mortgage company and/or it is in the process of foreclosure, it cannot continue. And if it has not begun the process but was about to, it must stop.
• No litigations. No wage garnishments or lawsuits can be filed. If the processes have already started, they must be suspended.

What is Not Affected by Automatic Stay?

Oneactionthat isnot affected by automatic stay includes criminal proceedings. Also, it's important to note that if someone has co-signed with you on a debt that you owe and have included in the bankruptcy proceedings, the creditorcan still go after your co-signer if they weren't included in your filing.

Filing a bankruptcy brings with it a lot of considerations, and the automatic stay is one of them. So before you start the process, it's good to make sure you understand just what this part of the process means for your life.

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