Bankruptcy and rent to income ratio

[William C.]

A tenant that applied just filed Chapter 13 Bankruptcy several months ago and has a 600 credit score. His gross income is 4.6 times rent, but he has some after tax deductions (including bankruptcy payments he just started to make) which brings down his net income to 2.5 x rent. His job seems stable (with the same company for more than 10 years).

I have always used the 3 times rent rule for income, but don't know whether the bring home pay should be used for this guy. Your comments are greatly appreciated.

[Joel Owens]

On chapter 13's about 90% of the time they never finish the plan. It gets dismissed sometime during the usual 3 to 5 year payment plan for non-compliance. Very few finish the plan and get discharged. This is why you will see BK attorneys front load fees on the re-payment schedule to get paid first.

A tenant that has completed a chapter 7 tends to be better as they are not carrying all that debt to repay like a 13.