By Cara Baruzzi, Register Business Editor
cbaruzzi@newhavenregister.com

For many consumers, debt is a part of everyday life, but for some the burden has been exacerbated by the economic downturn. Rising unemployment, a tough job market and various other factors are making it increasingly difficult for some to escape their mounting debt.

Households with credit cards have, on average, nearly $11,000 in credit card debt, according to a recent study by the Nilson Report, which tracks credit card transactions.

Though it may seem daunting at the outset, reducing and eliminating debt is possible but it takes some work, according to the Connecticut Society of Certified Public Accountants.

A good place to start is to make a list of all debts, including the amounts owed, who they are owed to, interest rates, monthly payments and other details, said Ronald Milone, principal at Konowitz, Kahn & Co. in North Haven.

“The vast majority of people do not do that,” he said. “That’s what gets them in trouble. It’s an amazing exercise when you actually put pen to paper.”

Once they have determined their situation, the Connecticut Society of CPAs urges consumers to:

‰Make a call. Those in debt should contact creditors — mortgage lenders, utilities, credit card issuers and any others — and explain their situation.

Creditors are increasingly willing to work with clients to resolve any issues, particularly in a bad economy, because they want to ensure they get what they are owed — even if it is late, or in a lesser amount. They are fearful of consumers filing for personal bankruptcy, which means they may not get anything they are owed, Milone said.

“Many, many creditors will be more than willing to make arrangements if you ask them to,” he said. “They realize the state of the economy.”

They may be able to suspend payments for a while, lower interest rates or arrange for smaller payments, Milone said. “Be totally honest with the creditor” and see what can be done, he said. Continued...

• 1
• 2
• 3
• See Full Story

Talking to creditors likely will put an end to phone calls from them asking about payments.

‰Get help. A reputable credit counselor can assist in negotiating with creditors or compiling a realistic budget to help people get back on their feet.

Milone cautioned, however, that not all credit counseling clients have been pleased with the results. Many have felt they could do themselves what they paid others hefty fees to do, he said.

“You have to be careful with these firms,” he said. “Make sure they don’t require a large upfront fee payment.”

The National Foundation for Credit Counseling can help find reputable counselors who offer free or low-cost advice. Contact the foundation at 800-388-2227 or www.nfcc.org.

‰Get a fresh start. Whether they are in debt because of poor spending habits or an unexpected financial crisis, consumers should take the opportunity to prepare a budget that reflects their current situation.

Keep a list of income and expenses for a month, and examine it for potential changes that could save money.

Once out of debt, make a “brutally honest assessment of your financial situation and, maybe even more importantly, your spending habits,” Milone said. “People tend to overspend.”

Take steps to make sure that, once debt is alleviated, it does not start to pile back on, he said.

“As early as you realize you have a problem, that’s the time to address it,” he said. “The earlier the better.” Continued...

• 1
• 2
• 3
• See Full Story

Contact Cara Baruzzi at 203-789-5748.

• 1
• 2
• 3
• See Full Story

• 1
• 2
• 3
• 4
• See Full Story

• Return to Paging Mode