90- 564 C.M.R. ch. 6, § 4

Current through 2024-51, December 18, 2024

Section 564-6-4 - Factors Used in Assessing Applicant's Ability to Pay

Using information supplied by the applicant, which may be verified by the Department, the Commissioner shall determine the applicant's ability to pay the deductible by examining the following factors:

A. Total income:

The applicant's total income, as opposed to the applicant's total taxable income, and the nature of that income. The applicant's total income will be determined to fall into one of the following categories which will be referred to throughout this Chapter:

1. Category A if the income is less than 75% of median household income;

2. Category B if the income is 75% to 125% of median household income; and

3. Category C if the income is greater than 125% of median household income.

"Median household income" is the amount set forth in the most recent Farmers Home Administration Income Tables, which are supplied on a county-by-county basis and take account of household size.

B. Cash flow: The applicant's cash flow during the past year will be determined to evaluate any excess money the applicant may have available after paying all other living expenses. Cash flow is determined by subtracting all expenditures from all revenues.

The expenses deducted when calculating the applicants cash flow may be increased by the Commissioner by the application of a contingency allowance, to take account of emergencies or unidentified needs. For example a contingency allowance of 5% would increase the applicant's expenses by 5% when calculating the applicant's cash flow. A contingency allowance of 15% may be applied to applicant's in Category A, of 10% to applicants in Category B, and of 5% to applicants in Category C. The Commissioner may decide not to assign a contingency allowance if he determines that the expenses listed by the applicant are not reasonable or are inflated.

C. Net worth: The applicants net worth shall be determined by subtracting liabilities from assets to determine if the applicant has any available assets which could be sold to pay the deductible.

D. Debt capacity: A determination of the applicant's ability to pay the deductible through the assumption of debt shall be determined by calculating the applicant's debt capacity which is the ratio of liabilities to assets. An applicant is determined to have debt capacity if the liability to asset ratio is as follows:

1. Category A: The ratio must be less than .50 if the applicant is retired, nearing retirement or unemployed, and less than .60 if the applicant is employed.

2. Category B: The ratio must be less than .55 if the applicant is retired, nearing retirement or unemployed, and less than .70 if the applicant is employed.

3. Category C: The ratio must be less than .60 if the applicant is retired, nearing retirement or unemployed, and less than .80 if the applicant is employed.

In addition, a determination will be made as to whether all of the applicants debt payments exceed 36% of the applicants total income as it is doubtful that applicants directing more than 36% of gross income to debt payments would have significant liability assuming more debt.

E. Extenuating circumstances: Any extenuating circumstances, such as age, health, employment status, or anticipated expenses may be considered by the Commissioner.

90- 564 C.M.R. ch. 6, § 4