Jon Morgan is in a financial position where owes more than he earns each month. Due to his lack of financial planning and heavy debt load, Jon started missing payments and saw his credit rating plunge. Unless corrective action is taken, personal bankruptcy will follow.
Jon recently contacted his lawyer so as to set up a wage earner plan with his creditors and establish a debt repayment schedule that is workable in light of his personal income. His creditors have all agreed to a plan under which interest payments and late fees will be waived during the repayment period. The process will have Jon make payments to the court, which will then pay off his creditors.
Jon has an outstanding debt of $28,000. His creditors have set a repayment period of 4 years during which monthly principal payments are required. They have waived all the interest charges and late fees. Jon's yearly take-home is $30,600.
a. Calculate the monthly debt repayment amount.
b. Determine how much excess income Jon will have each month after making these payments.
Total duration of repayment = 4 years = 4*12 months
This solution contains step-by-step calculations to determine the monthly debt repayment amount and also how much excess income Jon will have each month after the payments. All workings and formulas are shown.