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CALIFORNIA DEBT RELIEF - FACTS, PROGRAMS, AND SOLUTIONS

California debt relief - facts, programs, and solutions

BY Rebecca LakeNovember 25, 2024

California's healthy economy and natural attractions make it a preferred place to live for millions of people. If you're one of them, you probably know that life in the Golden State can be expensive. In fact, it’s among the very priciest states to live in. You've got rent or mortgage payments to manage, utilities, groceries—it all adds up.

And sometimes, you might rely on credit cards to cover the gap. Debt can hold you back financially, but it doesn't have to. California debt relief can help you resolve what you owe so you can live life to the fullest.

What is debt relief?

Debt relief isn't just one thing; it's a range of solutions people use to manage debt when they feel overwhelmed.

For many people, debt relief means debt settlement. When you settle debt, you work out an agreement with your creditor to accept less than what's owed. The rest of your balance is forgiven.

Your creditor gets paid something, so the debt isn't a total loss. And you get to hit the reset button on your finances.

Your situation can influence the type of debt relief that's best for your needs. Aside from debt settlement, debt relief options include:

Average Credit Card Debt in California

Credit card debt in California impacts many across all age groups. We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during October 2024. Here are the key statistics:

Average Credit Card Debt	Percent holding Credit Card Debt	Average Debt for Balance Carriers
$14,969	88%	$16,030
(▲ 1.2% MoM)	(▲ 0.5% MoM)	(▲ 1.0% MoM)

This snapshot shows that the average credit card debt for Californians seeking debt relief rose slightly month-over-month (MoM), with both the percentage of debt holders and the average debt for balance carriers experiencing a modest increase.

Breakdown of Average Credit Card Debt by Age Group

This breakdown shows how credit card debt affects each age group in California, with older adults generally carrying higher balances and a greater proportion holding debt.

Age Group	Percent holding Credit Card Debt	Average Debt for Balance Carriers
18-25	86%	$9,919
26-35	88%	$13,145
36-50	90%	$16,609
51-65	90%	$17,491
65+	92%	$16,696

California debt relief programs: How do they work?

When it comes to debt relief, California residents have choices. At the top of the list are debt settlement, bankruptcy, and credit counseling.

Debt settlement. California debt relief programs can help you resolve your debt for less than what you owe. This debt solution is typically best suited for people who mostly owe unsecured debts like credit cards or medical bills, have $7,500 or more in debt, and have a financial hardship that’s making full repayment difficult or impossible.
Bankruptcy. Bankruptcy allows you to either eliminate debts in Chapter 7 bankruptcy, or restructure your payments through Chapter 13. Whether you file Chapter 7 or Chapter 13 partly depends on your income. While bankruptcy is often considered one of the more extreme debt options, it can be the best solution if you can't afford to pay what you owe, or need more time to pay and want some legal protection against collection actions.
Credit counseling. A credit counselor can review your debt and budget and offer personalized solutions for relief. One of those might be a debt management plan, which allows you to pay off credit card debt, typically over two to five years. A debt management plan can also offer reduced fees or interest rates but you won’t get a discount on the amount of debt you owe.

How effective are these debt relief options?

Debt settlement could drastically reduce the amount you pay back to your creditors. And you could clear your debts in as little as 24 to 48 months.

Bankruptcy could eliminate all of your unsecured debt—however, there's a catch. If you file Chapter 7, you may have to give up some of your assets to satisfy your creditors. Assets are things you own that have some value. California law allows you to exempt certain assets. In other words, there are some things that are protected from creditors. It's important to consider what kind of trade-off you might have to make to clear your debts.

Debt management plans can help you get out of debt, but only if you stick with them. The FTC estimates that the overall success rate for DMPs is 21%, which suggests they ultimately don't work out for the majority of people who enroll.

Debt settlement: A powerful solution for California residents

Debt settlement, sometimes referred to as debt negotiation, could reduce what you owe by 25% to 50%. It's possible a creditor might agree to an even larger reduction of your debt.

Here's how debt settlement in California typically works.

You contact a professional debt settlement company to discuss your situation.
If you're a good candidate, the debt settlement company outlines a plan to help settle your debts.
You make monthly payments into a secure account that you control.
The debt settlement company negotiates a reduction of your debt with your creditors.
Once an agreement is reached, you authorize the debt settlement company to use funds in your secure account to pay your creditor. The debt settlement company takes its fee out of the same account.

That's a simplified overview of the process, but the takeaway is clear—debt settlement offers a path to relief from financial stress and debt shame.

Who is debt settlement for? You might consider it if you:

Owe a significant amount of unsecured, high-interest debt
Would like to get out of debt sooner rather than later
Can set aside money for settlements

When you reduce debt through negotiation vs. another option like consolidation, you can save money and pay it off faster.

Is debt consolidation the right choice?

Debt consolidation is an alternative to debt settlement. When you consolidate debt, you take out a new loan and use the proceeds to pay off credit cards, medical bills, or other debts. That leaves you with one loan payment each month. You could also pay less in interest if your loan has a lower rate than the combined rate on your credit cards.

Is debt consolidation vs debt settlement a better option? Yes, for some California residents, but no for others.

Debt consolidation could make sense if you:

Have good or excellent credit
Would like to simplify monthly debt payments
Owe an amount of debt you believe you can reasonably handle, since consolidation doesn't reduce the amount you owe, it only combines your debts.

Debt settlement may be the better choice if you:

Want to reduce the total amount you owe
Have experienced a financial hardship that makes it difficult to keep up with debt payments
Owe a larger amount of unsecured, high-interest debt

If you’re interested in debt consolidation, it's important to shop around. Compare personal loans for debt relief from different lenders to estimate how much you can borrow and what you'd pay in interest.

California statute of limitations

California debt laws determine the statute of limitations (SOL), which is how long a creditor has to try to collect on unpaid debts. The current SOL is four years for written debts, which includes credit cards.

When the statute of limitations in California expires on a debt, it becomes “time-barred.” That means you can no longer be targeted for debt collection, i.e., creditors can't sue you to get you to pay.

The debt doesn't go away, nor does your responsibility for it. But if a debt is close to the SOL date, the creditor may be more open to a settlement.

Time-barred debts can be tricky, because it's possible to restart the clock on the SOL if you make a partial payment or agree to pay. You may want to talk to a debt relief expert or debt attorney about expired debts if you're interested in a settlement.

Hardship programs for California residents

Financial hardship assistance exists to help people who find it difficult to pay their bills. There is no federal debt relief program for credit cards, though there are programs that can help with other types of debts, such as student loans or back taxes.

State relief programs can also provide help in certain situations. If you need help, consider these California hardship programs:

CalWORKS. CalWORKS provides cash assistance to help families cover housing costs, utilities, food, and medical bills.
Low-Income Energy Assistance Program (LIHEAP). LIHEAP offers one-time assistance with utility bills, and free help to make energy-efficient upgrades to your home.
California LifeLine. The LifeLine program offers low-cost phone services to eligible California households.

Your local Department of Social Services can help you explore options if you have a financial hardship. If you specifically need help with credit cards, you might contact your creditors directly—many credit card companies offer hardship programs that temporarily lower or pause payments until you're back on your feet.

Find your debt relief solution

If you've made it this far, congratulations. Now you're ready for the next step which is to choose a debt relief solution.

That's where Freedom Debt Relief comes in. We've worked with over half a million Americans to offer personalized debt solutions and we're ready to help you, too. We know that there's no such thing as one-size-fits-all, and our Freedom Financial Certified Debt Consultants can walk you through the options to help you choose the one that best meets your needs.

California debt help is just a phone call away. Request a free, no-obligation debt relief evaluation with a Certified Debt Consultant by calling 800-910-0065 now.