Hurricane victims piling up credit card debt

updated 1:00 p.m. ET Sept. 14, 2005

PLANO, Texas - Jerry and Deborah Alciatore fled New Orleans with nothing but a couple of overnight bags, an ice chest and their credit cards. The bags emptied quickly, but two weeks after Hurricane Katrina hit, the balance on the credit cards is mounting fast.

Their first week on the road, they charged $1,600 in food and hotel bills in Houston, about $400 worth of clothing, mostly from discount stores, and a couple hundred more on gasoline.

Jerry Alciatore splurged $1,200 on a laptop to keep in touch with employees of his small architectural firm, pushing the credit card bill to about $5,000. They’ll soon have to make another mortgage payment on their house in Metarie, which was damaged but not destroyed by three feet of floodwater.

“I’m worried. We have about a one-month gap where my income will be cut off and so will my wife’s,” he said. “I have to see if my business is still going to be OK. We’re going to be out of our house for maybe three months, but I have a mortgage payment every month, and now we have to rent an apartment.”

The Alciatores are quick to say they are lucky compared to others who suffered so much more. They consider themselves middle class, maybe upper middle class.

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Still, financial experts say the couple is right to be worried. The Alciatores and other Katrina victims who thought they were financially secure must keep their debt in check while facing huge relocation costs and uncertainty about their income. It’s not easy.

“People in a crisis are not thinking clearly. Their emotions take over, and that’s not a good place to be when it comes to your finances,” said Deb Outlaw, a CPA and financial planner in Dallas. “Sometimes they feel like they have to get back to what they had before the disaster, but they need to be patient.”

Like much else surrounding Katrina, the financial aftermath is a story of haves and have-nots.

Helen Salazar-Realini, a financial planner in Miami, said most of those who left the Gulf Coast early will be fine. Insurance, after a deductible that can run several thousand dollars, will cover their homes and cars and living expenses while they are uprooted.

Renters will be in far worse shape, she said. They may have lacked insurance to cover their belongings and have difficulty recovering security deposits.

Salazar-Realini said people in such a dilemma should seek consumer credit counseling offered by familiar agencies such as United Way.

“They will expect that you’ll cut up all your credit cards. They’ll put you on a budget,” she said. Most helpfully, those agencies can negotiate a repayment plan with creditors that ideally should waive additional interest, the planner said.

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