Dear Sher,
I just want to make sure I am understanding this correctly. Based on new PN 583, when completing the 4-A Worksheet for Computing Income, do I need to exclude the revolving accounts from it? See the new handbook language below. I’m working with a family that has several revolving accounts that are working on paying them off in a couple of months. As of now they are not eligible as the revolving accounts are making their TDR high but if I don’t count the revolving accounts then their TDR will be within eligibility. Below is what I read, please advise.
Long-term installment obligations with more than 10 months repayment remaining, including loans, alimony, and child support (including back child support payments), but excluding revolving accounts. Funds borrowed from a retirement account are excluded since the applicant is repaying a loan to themselves. In the event an applicant does not repay the loan as agreed, the debt is reported as taxable income during that tax year but will be treated as sporadic income. All medical debts (be it a collection, judgment, etc.) are excluded.
Sincerely,
PN583 and Revolving Accounts
Dear PN583 and Revolving Accounts,
I can see where that may have gotten confusing but, no, the exception is that you don’t include revolving accounts in the 10 month exclusion. This is because an applicant can add to the balance or just pay the minimum amount due on a revolving account for ages (think of a regular credit card where you can keep using it and the balance and payments can fluctuate). It won’t naturally come to an end within the 10 months like an installment account would (installment accounts have a set number of payments for a set duration and then the loan is paid off – like a car payment). The change in the new language is simply from six months to 10 months where long-term installment obligations with less than 10 months remaining can be excluded from your Total Debt calculation, everything else remains the same. In your situation, the applicant will need to pay down or off those revolving account balances (until they are within TDR) before they are ready to apply with RD.
Sincerely,
Dear Sher
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