Turbo Takeaways
- Californians face a mix of credit card, medical, and personal loan debt that often requires structured relief.
- Debt relief programs in the Golden State offer ways to reorganize, reduce, or settle unsecured debt.
- Choosing the right relief option depends on your credit, income, and long-term financial goals.
Your Options To Get Out of Debt in California
California is a land of dreams for many. From majestic forests and coastlines to the glamour of Hollywood and the innovation of Silicon Valley, residents of the Golden State earn one of the highest per capita incomes in the country.
However, Californians also carry some of the highest levels of debt in the country. Golden State residents owe an average of nearly $150,000 in total debt.
Read more about debt relief in California and how leading programs have assisted thousands of residents in the Golden State in paying off substantial debts.
Credit Counseling
How It Works
Credit counseling can be a great first step in relieving debt if you’re looking to improve your credit score, review your credit reports and history, and get some sound economic advice from a credible source.
Many credit counseling organizations offer services to Cali residents at little or no cost. Nonprofit agencies and credit counseling advisors provide and connect Californians to services that help boost credit and teach financial literacy.
Pros
- Low-cost access to financial education and credit review
- Offers budgeting help and guidance before choosing a debt plan
- Connects Californians to nonprofit resources and workshops
Cons
- Not a debt-repayment solution on its own
- May require participation in financial education programs
- Limited impact if you need immediate balance reduction
Cost
Credit counseling agencies may charge a small fee or offer reduced or free services to low-income clients.
Stats
- Although credit counseling remains a practical way to manage debt, more U.S. citizens have opted to settle their debts over the past decade.
Resources
The state of California offers suggestions for reviewing your credit score and credit reports.
Debt Management Plans
How It Works
Many credit counseling agencies also offer debt management to help clients organize and pay off debts.
Cali residents can connect with a nonprofit or private credit counseling organization to set up a plan that assists borrowers in paying down outstanding debts through the agency.
Pros
- Creates a monthly plan to pay down debts
- Can reduce interest rates through creditor agreements
- Provides long-term repayment support via a counseling agency
Cons
- Often requires closing credit cards to prevent new debt
- Does not directly reduce existing balances
- Monthly fees apply for each account in the plan
Cost
Most debt management plans (DMPs) require clients to pay an initial setup fee and charge a monthly fee for each account on the payment plan.
Stats
- California's debt-to-income ratio of 1.709 makes it likely that many residents’ debt exceeds their income.
Resources
Learn more about the pros and cons of debt management plans and how to enroll.
Debt Consolidation
How It Works
Golden State residents can opt to pay off large balances by transferring them to a new credit card account with zero interest or by taking out a low-interest, fixed-rate consolidation loan big enough to cover all current debts.
California’s high average credit score of 722 makes it easier for residents to access better interest rates when taking out a consolidation loan or applying for a 0% balance transfer card.
Pros
- Allows to reorganize debts into a single monthly payment
- California’s strong average credit score helps secure better rates
- Balance-transfer cards offer temporary interest-free repayment
Cons
- Loans may take longer to repay and increase total interest
- Balance-transfer cards can jump to high APRs after promo ends
- Requires good credit to qualify for favorable terms
Cost
The cost of your debt consolidation loan depends on your interest rate and the total amount of debt you transfer over.
With a balance-transfer credit card, you’ll be charged the card’s standard interest rate (up to 36% in some cases) on the balance that’s left over after the initial 0% promotional balance transfer rate expires.
Stats
Resources
Read more to find out if a debt consolidation loan is right for you.
Debt Settlement
How It Works
Negotiating lower balances using debt settlement can reduce your total debt by up to 50%, making it an effective solution for residents with high credit card balances, outstanding personal loans, or even medical debts.
Cali residents can pay off thousands of dollars in unsecured debts, such as credit cards and personal loans, by negotiating with creditors through a settlement company or using the DIY method.
Pros
- Can significantly reduce unsecured balances
- Shortens the payoff timeline vs. minimum payments
- Lower interest rates can alleviate your financial burden and make repayment more manageable
Cons
- May lower your credit score during the process
- Settlement fees apply once debts are successfully negotiated
- Not all creditors agree to settle
Cost
California settlement companies typically charge fees ranging from 15-25% of your total enrolled debt, but a reputable company will never charge you fees upfront.
Stats
- In 2023 alone, 157,518 California residents had debt in settlement.
- California residents alone have enrolled over $300 million in debt.
Resources
California’s Attorney General provides helpful tips for dealing with debt collectors, offering valuable guidance during challenging times.
Bankruptcy
How It Works
When all other debt-relief options fail, bankruptcy is your last resort for eliminating outstanding debts through California’s court system.
California’s bankruptcy courts are broken into four districts: Northern, Eastern, Central, and Southern. Individual consumers usually file either Chapter 7 or Chapter 13 bankruptcy through the district office closest to their residence.
Pros
- Can discharge most unsecured debt
- Offers a legal pathway to reset finances when other options fail
Cons
- May require selling certain assets to pay creditors
- Remains on credit reports for several years
- Court and attorney fees vary across California districts
Cost
Court and filing fees may differ based on where you file and which type of bankruptcy you choose, so check local fee schedules. You’ll also owe fees to a bankruptcy attorney unless someone takes on your case pro bono.
Stats
- A total of 45,781 Golden State residents filed for bankruptcy (PDF) in 2024, an increase from the previous year.
Resources
Explore how filing for bankruptcy can impact your finances and life.
What You Need To Know About Debt in California
“California has some of the strictest laws in place to protect its citizens, and that is evidenced and supported by California Attorney General Rob Bonta’s consumer protection webpage,” shares Brad Reichert, founder and managing director of Reichert Asset Management.
“He and the attorney general’s office provide valuable information to California residents about their rights under the law, as well as the latest scams and tricks that fraudsters attempt to use these days,” Reichert adds. “By knowing your rights and knowing what to look out for, you can protect yourself while you’re on the road back to financial wellness.”
Statute of Limitations on Debt in California
Each state sets a statute of limitations on debt collection to protect consumers and govern how long a creditor can legally pursue a debt using the state’s court system. Here are the details about California’s statutes:
| Type of Debt Agreement | Length of Time Collectible |
|---|---|
| Written Contracts | 4 years |
| Promissory Notes (such as a mortgage) | 4 years |
| Open-Ended Accounts | 4 years |
| Oral Agreements | 2 years |
Statute of Limitations on Medical Debt in California
With 6-10% of the California population carrying medical debt in collections, the statute of limitations helps consumers with limited income manage medical expenses. In California, the statute of limitations on medical expenses is four years.
Student Loan Forgiveness in California
Californians owe an average student loan debt of $36,168, with many finding it difficult to pay back debt in an uncertain economic climate. The Golden State and other partners offer several assistance programs to help residents struggling with student loan debt:
Student Tuition Recovery Fund (STRF)
California’s Student Tuition Recovery Fund mitigates or relieves economic losses for students enrolled in a school approved by the California Bureau for Private Postsecondary Education.
Health Resources and Services Administration (HRSA)
HRSA provides millions of dollars in loan repayments and scholarships to Californians through the following programs:
- National Health Service Corps
- Nurse Corps
- Substance Use Disorder Treatment and Recovery Loan Repayment Program
- Pediatric Specialty Loan Repayment Program
- Faculty Loan Repayment Program
Resources for Financial Assistance in California
California’s Department of Public Social Services offers programs to help those struggling with economic hardship. Here are the top ways Californians can access cash assistance resources:
- CalWORKs: California’s Work Opportunity and Responsibility to Kids program offers temporary financial assistance and employment-focused services to families with minor children after they meet certain state requirements.
- Refugee Cash Assistance (RCA): The RCA program aids certain individuals not eligible for welfare services, providing housing, food, medical assistance, and employment-focused services.
- Cash Assistance Program for Immigrants (CAPI): This program provides cash assistance to aged, blind, and disabled legal immigrants who are ineligible for other state benefits.
- Stimulus Checks: Currently, no California stimulus check is planned for 2025 or beyond.
- California Middle Class Tax Refund (MCTR): The tax refund provided one-time inflation relief to eligible residents.
Learn more about financial assistance for California residents, including programs for families and veterans, plus medical benefits.
Get Professional Help Paying Off Your Debt
Taking the DIY approach to debt relief may only get you so far, especially if you've turned to payday loans in California, which can lead to high fees and more debt. Instead, when you leverage the experience of a debt relief organization, you get expert advice on the best plan to meet your financial needs and goals.
TurboDebt® enrolled over $150 million in debts from Cali residents, saving clients an average of 54% of their total debt. Our clients pay off unsecured debt more quickly by combining outstanding balances from credit cards, medical bills, and personal loans.
Read thousands of positive TurboDebt reviews on Trustpilot and Google to learn more about our commitment to exceptional customer service.
Contact our team today to start your free consultation and join thousands of Cali residents who’ve left their debt behind to do more California dreaming.