California Debt Relief In a Nutshell

Californians can accrue debt from student loans, personal loans, medical bills, credit card debts, and other means. If you’re ready to become debt-free, there are many options for debt relief in California. Debt relief helps individuals with heavy financial burdens find aid to manage outstanding balances. This article explains the ins and outs of California debt relief, including statistics about the average California resident’s debt burden, and offers helpful resources.

Top 6 Debt Relief Programs in California

Choosing the right debt relief program takes diligence and research. Brad Reichert, debt expert and Founder and Managing Director of Reichert Asset Management LLC, recommends California residents look carefully for programs tailored to their state.

“California has specific, yet broad-based consumer protection laws and regulations regarding debt relief services,” Reichert shares. “When conducting your search for debt relief firms, verify that the organization is knowledgeable about these laws, such as the California Rosenthal Fair Debt Collection Practices Act and the California Homeowner Bill of Rights, if applicable to your situation.”

Read on to learn more about your options for debt relief in California:

1. Debt Management Programs

There are many different ways to relieve your debt, and one of them is using a debt management program. With a debt management plan, you can reduce your credit card debt without resorting to taking out a loan. Debt management programs also help you find ways to make payments that you can afford so your once daunting debt becomes more manageable.

2. Debt Consolidation Loans

With debt consolidation loans, you’ll take out a loan to pay off your debts in a lump sum. One of the benefits of a debt consolidation loan is that you can typically borrow the money at a lower interest rate than the multiple high rates you’d pay to each individual creditor.

When you secure a lower interest rate through a debt consolidation loan, you’ll be able to replace high-interest debt that’s often at 20% or more with more manageable debt payments each month.

California debt consolidation loans may help you repay your debt faster. While you’ll still owe a balance, the amount will be less costly and easier to pay off after receiving a debt consolidation loan.

3. Debt Settlement

Entering into a debt settlement program allows you to negotiate the amount you pay off, absolving some of your debts in the process. Debt settlement works by engaging a third party to negotiate with lenders on your behalf with the goal of eliminating part of your principal balance.

Let’s say that you have a loan of $16,000 that you need to pay back. You might use a debt settlement company to negotiate with creditors to reduce your total debt owed (the principal amount). For example, through debt settlement, you may save up to 50% of the total amount owed, which means you’d only have to pay about $8,000 to eliminate your debt. 

While this may take some points off your credit score, you’ll be able to get rid of debt without paying the massive sum that you’re currently struggling to pay. Working with a debt settlement company to accomplish this can help you achieve your goals for financial freedom.

4. Credit Counseling

When you seek out a credit counseling agency, you’ll be working with a credit counselor one-on-one to better manage your debt. Through credit counseling, you’ll learn skills like budgeting, get information about credit scores and debt management, and get lots of financial resources to put you on a better path toward financial success.

Some credit counseling agencies also help you make a debt management plan, reorganize your repayments to creditors at lower interest rates, or even negotiate with creditors to waive fees. Many credit counseling agencies are nonprofit and provide services at little to no cost.

5. Bankruptcy

If you can’t escape your financial situation through any other debt-relief options, then you could consider filing for bankruptcy. When you file for bankruptcy, you liquidate your assets or create a plan to follow to repay your debts.

There are different kinds of bankruptcies that you can file for, depending on your situation. Individuals typically file for Chapter 7 or Chapter 13 bankruptcy to sell off or reorganize assets to pay back creditors. Usually, bankruptcy is a last resort.

6. Debt Forgiveness

Sometimes, you can achieve debt forgiveness, even if you don’t pay upfront or have unsecured debt. This happens when a lender agrees to reduce the amount of money owed without asking you to pay it off.

Most debt forgiveness programs follow strict requirements, and those who qualify must provide documentation to prove their background and need for debt forgiveness. However, if you're looking for California emergency debt relief options, this may be a way to eliminate your outstanding debts or at least minimize your burdens.

How TurboDebt Can Help Californians with Debt Relief

TurboDebt has helped 21,709 Golden State residents through our debt relief programs, enrolling a total debt of $151,058,273 in 2023. The average debt per enrolled client is $24,622, showing California residents that TurboDebt can help provide effective debt relief. 

An infographic showing how TurboDebt helped California with debt relief in the past year 

Top Kinds of Debt California Residents Need Relief From

California Debt and Finance Statistics

Bankruptcy 

In 2021, California had the highest rate of bankruptcy filings per capita in the entire country. Because the average total debt in California is high, the state saw 30,973 bankruptcy filings in 2022. If debt negotiation doesn’t work, bankruptcy is an option some individuals choose for a fresh financial start.  

Average Income and Employment

In 2021, the median household income in California was $84,097. In terms of per capita or individual income, the average is $41,276.

Credit Scores

In California, the average credit score is sitting at 721, slightly above the national average of 714. This number remained unchanged for 2021 and 2022, showing a strong credit rating amidst perpetually-rising credit card debt.   

Identity Theft

Californians reported 125,597 incidents of identity theft in 2022, ranking 14th in the nation. Many of these incidents are the result of cybercrime, where online thieves steal dates of birth, Social Security numbers, as well as medical insurance and tax information, costing citizens damage to their credit and even monetary losses.  

Banking and Tax Info

Currently, the sales tax rate in California starts at 7.25%. This will vary depending on your city and county because local rates are added to the statewide tax.

California also charges some of the highest income tax rates in the nation depending on your earnings. You’ll pay from 1-13.3% depending on how high an income you make.

These additional local tax rates can push the total sales tax to as high as 10.75% in some areas. Add to that California’s state income tax, where rates can be as high as 12.3% for its highest-income earners, and you can quickly run into debt issues from taxation.

Get Help Today With California Debt Relief Solutions

Seeking help through California debt relief options can be a valuable step toward regaining financial stability and peace of mind. Whether facing overwhelming credit card debt, medical bills, or other financial challenges, these solutions offer tailored assistance to individuals and businesses navigating the complexities of debt management.

However, it's crucial to approach such services with careful consideration and due diligence. Researching the reputation, track record, and transparency of any debt relief provider is essential to ensure a positive and effective outcome. 

With the right support and guidance, Californians can take proactive steps toward achieving financial freedom and security.