California Debt Relief: What to Know
14 MIN READ
Published March 30, 2023 | Updated November 15, 2023
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.
What is the Economic Climate of California?
For those in debt, it can be difficult to figure out what to do to get out of a dire situation. No matter what your circumstances are, there are ways to better it. So, if you’re an indebted California resident, debt relief is possible—whether you live in San Diego or Los Angeles.
Many California residents don’t have enough money in their savings accounts or checking accounts to cover their debt. The cost of living is too high, and with things like medical bills, the burden of payday loans, and student loan debt, Californians are struggling. This means that there is little money to spare for California residents living paycheck to paycheck.
What Kinds of Debt Do California Residents Have?
Average Consumer Debt
In California, the average amount of consumer debt is $137,301, well above the national average of $95,067. Consumer debt is calculated based on outstanding balances from secured and unsecured debts from mortgages, auto loans, student loans, personal loans, and credit cards.
Credit Card Debt
California residents owe an average of $6,030 in credit card debt, above the national average of $5,910. Credit card debt looks worse on a credit report versus other types of debt, so you’ll want to reduce it as soon as possible.
To maintain a good credit score, it’s a good idea to have a FICO Score of at least 670. However, with high credit card balances in relation to your credit limits, you can easily fall far below this figure. California’s credit card debt rose 17% from 2021 to 2022.
Auto Loan Debt
Auto loan debt in California sits above the current national average and keeps rising. As of 2022, Californians owed an average auto loan debt of $21,027, up from $19,550 in 2021.
Higher auto loan monthly payments are largely due to the fact that people with lower credit are being offered more “sub-prime” higher-risk, higher-rate auto loans, which will result in higher monthly payments due to the bank. When you can’t make the minimum payment, you go further into debt.
The average home value in California is $718,687, nearly doubling over the past decade. This number considers the state average, and averages vary from locality to locality. California homeowners top the list in the highest amount of mortgage debt in the nation at $401,954 in the last quarter of 2021.
Student Loan Debt
Students often leave college with lots of debt. California students carry an average of $37,042 in federal student loan debt. This is slightly above the national average of $35,287.
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.
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.
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.
How Has TurboDebt Helped?
TurboDebt has helped 10,097 Golden State residents through our debt relief programs, enrolling a total debt of $72,871,921 in 2022. The average debt per enrolled client is $22,815, showing California residents that TurboDebt can help provide effective debt relief.
Top Kinds of Debt that Californians Need Relief From
Credit Card Debt
It can be difficult to escape credit card debt. No matter what you need to purchase on your credit card, it might feel like you can’t escape the never-ending cycle of monthly credit card payments and interest. Even paying a minimum balance only shaves a few hundred dollars a year off your principal as credit card companies continue to charge interest and fees each month. TurboDebt can provide residents with relief from overwhelming credit card debt.
Money can complicate a marriage and often makes divorce even harder. If you’re in the midst of a divorce, TurboDebt can help you bounce back. In fact, the average divorce costs around $17,500 in California. If you’ve been affected by divorce proceedings, there is hope with the help of TurboDebt.
On average, it costs Americans between $30,00 and $40,000 to start a business. If you pursued a business endeavor and you experienced financial troubles because of it, the experts at TurboDebt can put you on the path to financial wellness.
Many people in California are experiencing debilitating medical debt. In the U.S., the average amount of medical debt individuals carry is $2,424. If you’re one of those people, you’re not alone. TurboDebt can help you get out of the medical debt that is inhibiting your financial future.
From natural disasters to unexpected repairs, homeowners face costs for the upkeep of a property. Mortgage payments account for the largest percentage of consumer debt in the country. Home equity lines of credit (HELOC) increased by 3.5% from 2021 to 2022.
Homeowner debt can seem insurmountable if you get behind on payments, but TurboDebt can help. Our debt relief programs allow you to restructure your payments to reduce and eliminate your outstanding balances.
When it comes time for retirement, you might find that you have too much debt. According to Corporate Finance Institute, it is best if you spend 36% or less of your income on debt.
If a large percentage of your monthly income goes toward your debt, TurboDebt can help you find a way to reduce the amount of debt that you have in retirement.
How To Relieve Your Debt in CA
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:
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.
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. This process can help you repay your debt faster. While you’ll still have a debt to pay off, the amount will be less costly and easier to pay off after receiving a debt consolidation loan.
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.
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.
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.
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.
How to Get Help in California: Debt and Financial Hardship Resources
Temporary Assistance Programs
California offers several temporary assistance programs for those needing immediate help. California CalWORKs assists families who don’t have housing, food, and other basic needs.
California also offers the WIC program, which is useful for women who can’t afford food. WIC helps women, infants, and children in need.
State Health and Human Services
If you need medical help, California offers resources to improve your situation. For example, the California Healthy Families program provides children with low-cost insurance. This program supports children in need through California Medicaid coverage.
CalWORKs provides childcare for families who can’t afford daycare.
Shelters for the Homeless
California provides homeless shelters throughout the state, including the Los Angeles Mission homeless shelter, the Union Rescue Mission shelter, and the MSC Homeless Shelter.
Free Transportation Services
To get to work or find job opportunities, it’s important that you have access to proper transportation. In California, there are a few options for transportation services. For example, you might use the Lifeline Transportation Program, which provides low-income people with affordable transportation.
Start Your Debt-Free Future with TurboDebt
With the help of TurboDebt, you’re on your way to getting out of debt and rebuilding your wealth. Our strategic planning, advising, and debt settlement programs can help you overcome heavy debt burdens.
Remember, it’s important to be diligent when you’re trying to get out of debt. Don’t fall for debt relief scams, but research and validate through reviews of accredited organizations. With hundreds of five-star reviews, trust TurboDebt as your first step toward building your wealth. We’ll help you find the right debt solutions to meet your needs.