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Keeping Your Head Above Water
Credit Card Debt Seminar Shows Ways to Avoid Bankruptcy

By Lois K. Whitehead, Public Relations Manager

Fiscal discipline and lifestyle adjustment can help disentangle consumers from debt, a serious matter that forces as many as three million Americans each year to declare bankruptcy, experts at a recent New York State Society of CPAs seminar said.

Speakers at the Credit Card Debt Seminar, sponsored by the Society’s Public Relations Committee, underscored strategies CPAs can give their clients to help them out of debt or avoid it altogether.

“People in debt must evaluate all expenses and downscale their lifestyle,” Committee Chair Ginger Broderick said. “Emotional spending is often the problem.”

Broderick and other speakers at the Oct. 29 seminar told an audience of professionals, consumers and journalists that CPAs should stress curtailing expenses, limiting credit card usage, and consolidating debt before considering bankruptcy. While bankruptcy stimulates economic activity, speakers agreed, it should be a last resort.

“Bankruptcy is the process you need when all other options have been exhausted,” attorney Steven Z. Jurista said. Often, he said, fully employed and otherwise responsible people resolve their debts through in- and out-of-court settlements because they didn’t budget.

Ways of Seeing: The Light at the End of the Tunnel

Broderick emphasized the need for consumers to be aware of their financial situation. Clients should be able to read bank statements, track their monthly bills and balance their checkbooks, in addition to interpreting the information on annual credit reports. Clients should assemble all their monthly credit card statements and take note of the total amount due and minimum monthly payment for each credit card they have.

Professionals can teach their clients to interpret such activity in a financial statement format, and to develop an understanding of financial ratios—such as limiting their rent or mortgage payments to no more than 25 percent of their gross income—which in turn will help them make necessary lifestyle adjustments.

Above all, Broderick said, clients should not leave their financial health in the hands of others; taking personal responsibility can avoid years of credit problems.

For people who accrue a lot of credit card debt—such as students with easy access to credit cards and older consumers who use credit to add to their income—debt consolidation becomes an attractive alternative to bankruptcy, according to Alan Franklin, president of American Credit Alliance. Franklin’s company, one of four such businesses in New York state, offers an aggressive repayment schedule for eliminating higher balances and higher-interest-rate accounts first, and consolidating debts into one monthly payment.

But Franklin also emphasized the need for better personal habits, such as consumers limiting themselves to one credit card for emergencies, and making use of debit cards and prepaid phone service to curtail spending.

Ultimately, if it is necessary, individuals can file Chapter 7 or Chapter 13 bankruptcy, Jurista said. Chapter 7—designed for people with limited assets—eliminates all debts, while Chapter 13 calls for an individual with a regular income to repay debts over a three- to five-year period.

If you are interested in attending a future seminar, please e-mail the author at lwhitehead@nysscpa.org.