DEBT DANGER ZONE MORE SOUTHLAND RESIDENTS OWE MORE THAN THEY CAN AFFORD.

Byline: BARBARA CORREA Staff Writer

Wondering if those weekend shopping sprees, the Tahoe ski trip and all the extras on that ``economy car'' are making your debt load too heavy?

Here's a simple test: If you earn the median income for Southern California and have a car loan, chances are pretty good that you are in or are near the consumer debt danger zone.

``Normally, someone should not have more than 40 percent of their income as debt,'' said Richard Pittman, housing services coordinator at ByDesign Financial Solutions, also known as Consumer Credit Counselors of Los Angeles.

Forty percent sounds like a lot, until you think about it.

``In California, where average annual income is $50,000, you should not have more than $20,000 of debt. Unfortunately, that includes the car,'' said Pittman.

Put another way, it's time to raise the red flags when monthly debt payments climb above 20 percent of net income, excluding rent or mortgage. ``We have people committing 40-45 percent of their income to a home, so they are well outside acceptable levels'' when taking into account all the other debts they are paying on, he said. Indeed, many, if not most, people in Southern California reside within the debt danger zone.

And Southlanders are not alone. American consumer debt - excluding mortgages -- surged to $2.2 trillion in April, about twice as much as a decade ago, according to the Federal Reserve.

Heather Thompson started to suspect that her debt level was too high about a year ago, after she incurred thousands of dollars in medical expenses. But, thinking that her tax refund would take care of a lot of the balance, she didn't put a tight rein on spending right away.

``I took my daughter to Chuck E. Cheese's,'' said Thompson, an engineer at Northrop Grumman in El Segundo. ``I bought a laptop. I take a lot of vacations, they are hugely expensive. I had a party and bought platters at Costco. It's not that much, but when you start spending $30 here and $30 there, it adds up really quickly.''

At one point, Thompson had seven credit cards and about $40,000 in debt. That's down to about $25,000 now. With her income after taxes and deductions coming at a little over $3,000 a month, she's spending about a third of that on payments, which puts her on the verge of the danger zone.

Recently, though, she worked out a plan to put herself back on track. She stopped the $130 a week contributions to a 401K plan. She increased her W-2 claims to 5. And then, last week, she cashed $3,000 out of her retirement savings to use toward debt payments.

Many families set off on a borrowing binge in recent years as low interest rates allowed lenders to loosen standards.

Mortgage payments as a percent of disposable income topped 11 percent at the end of last year, a historic high.

Despite new bankruptcy laws enacted last fall to make it harder to declare personal bankruptcy, filings in California jumped more than 30 percent from 2004 to 2005, the American Bankruptcy Institute reports.

The debt buildup can be blamed largely on the availability of home loans, and on homeowners spending in many cases under the assumption that rates would stay low until they could pay them off. Now that they are up again, consumers who took out variable rate loans are getting hit.

``I think they're going to be shocked, particularly in the the area of mortgages,'' said Phillip Q. Shrotmana financial planner in Long Beach. ``If they bought on an adjustable rate mortgage they've already seen at least a 100 percent increase.''

Philip Board a financial adviser at 1 On 1 Financial in Upland, said he's hearing the same concerns. ``I had a gentleman call me yesterday to ask if he should cash out his retirement to pay off his home equity line,'' he said. ``He's been going through the refinancing game and he's been having fun and now he can't sell his house for what he wants. He makes a fair amount of money but he spends too, and now he's living paycheck to paycheck.''

Advisers urge clients to convert variable home loans to fixed if at all possible. Aside from that, professionals say the first thing to do when there's too much owed after the money has come in is to contact the lender, and then begin keeping tabs on every expense, no matter how tiny it seems.

``I have them track expenses for a month, including Starbucks, vending machines, everything that leaves their hand,'' said Ann Lander, a certified financial planner in Signal Hill who also teaches a financial strategies course for women at the Long Beach Parks & Recreation.

``Spending patterns come out that they weren't even aware of and sometimes that's enough.''

It's not just frivolous spending that has put a lot of consumers into the debt danger zone. Less medical insurance coverage is forcing more people to pay for doctor visits with plastic.

``We're seeing more people with no health insurance putting medical expenses on credit cards,'' said Percy Bolton, a financial planner in Pasadena. ``I'm getting calls about companies that have eliminated their medical care or they have higher deductibles.

``With the price of gas as well, we see more of a tightening. I have clients thinking about leaving L.A.''

Indeed, getting into debt is the easy part, especially when credit is as easy to get as it has been. Getting out is the hard part, and there isn't much optimism about how consumers are going to do that.

``I think you're going to see more people in debt,'' said Lander.

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Sources: American Bankruptcy Institute; Federal Reserve