2024 Guide to Debt Consolidation and Relief in California

The Golden State is known for sunny weather, dramatic hillsides, ocean views, the glitter of Hollywood and DisneyLand. But California is also home to skyrocketing costs of living, housing insecurity, high taxes and soaring gas prices.

California ranks No. 1 in the U.S. for mortgage debt, owing an average of $161,562 in December 2022. That’s no surprise, considering that in May, 2022, the average cost of a single-family home hit $900,170. The high cost of housing also means that California is grappling with a homelessness crisis — 30% of all Americans experiencing homelessness are located in the Golden State.

Californians fare a bit better when it comes to non-mortgage debt, with an average of $36,106 per capita from credit card bills, personal loans, auto loans, student loans and medical bills.

If you’re a California resident who needs help getting out of debt and back on your financial feet, here are the resources you need.

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Table of Contents

How to Become Debt-Free in California

Here is a look at each program to help you determine what works best if you’re a California resident who needs debt relief.

1. Debt Consolidation Loan

Works best for: People with 670+ credit scores

Debt consolidation loans involve using a new, larger loan to pay off your other unsecured debts, including credit cards. A debt consolidation loan should typically have a lower interest rate than your current debts to be effective.

This leaves you with one monthly payment and one creditor, saving money and simplifying your payments.

2. Debt Consolidation Company / Debt Consolidation Program

Works best for: Anyone with more than $10,000 in unsecured debt who is struggling to make their payments and wants to avoid bankruptcy.

Debt settlement involves negotiating with creditors to repay less than the total amount they owe, sometimes as a lump sum and sometimes as a longer-term payment plan.

In California, debt settlement can help you pay off different forms of consumer debts, including:

Credit cards/lines of credit
Personal loans
Department store cards
Old judgments
Student loans in default
Other unsecured loans or debts

To make debt settlement work, you must stop paying your debts for three to six months until your creditor charges off the debt. This will damage your credit score but will incentivize the creditors to negotiate. Once settlements are reached, and payments are made, your credit score will rebound.

Pro tip: The average debt settlement customer ends up debt-free while paying about 75% to 80% of the total enrolled in the program after all fees are paid.

Debt Settlement Risks

Your creditors aren’t obligated to settle
If a creditor refuses to settle, you could end up having to pay accrued interest and late fees
Missed payments will show up on your credit report
You may have to report the forgiven amount as income tax to the IRS

California Debt Consolidation Companies

Looking for a debt consolidation agency in California to help you get a handle on debts? Here are a few firms that could help:

Best Overall: DebtHammer

DebtHammer helps borrowers overwhelmed by unsecured debts ranging from payday loans and tribal loans to credit cards and medical bills.

After a free consultation to review your situation, the DebtHammer representative will offer you a menu of options. You will decide on the course of action you prefer. These options may include debt settlement, debt consolidation, bankruptcy or others. DebtHammer requires a minimum debt of $7,500 for program enrollment or $1,000 in payday loans. The company charges 25% of the total enrolled debt.

READ MORE: DebtHammer review

Though based in Texas, DebtHammer currently provides solutions to residents of California, Arizona, Arkansas, Alabama, Alaska, Delaware, Florida, Georgia, Illinois, Kansas, Louisiana, Maine, Massachusetts, Michigan, Montana, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, Virginia, West Virginia and Wyoming. Some service options may not be available in all states.

Click here to schedule a free consultation.

More Debt Relief Companies in California

Debt Negotiation Services Debt Settlement Company: Boynton Beach, CA (561) 964-6404 thednsway.com
Alleviate Financial Solutions 4 Park Plaza Suite 1500, Irvine, CA; (800) 308-2935 alleviatefinancial.com
Guardian Litigation Group: 17922 Fitch Suite 150, Irvine, CA; (949) 312-4226 guardianlit.com
New Era Debt Solutions: 330 Wood Rd., Suite B Camarillo, CA; (805) 303-8773 neweradebtsolutions.com
Global DS 675 W Indiantown Rd. Jupiter, FL; (866) 677-5044 globaldsgroup.com
InCharge Debt Solutions: Orlando, FL; (800) 565-8953 incharge.org
Golden Financial Services Debt Settlement Corporation: Lake Worth, FL, (619) 600-5189 goldenfs.org
National Debt Relief 180 Maiden Ln 30th floor, New York, NY; (800) 300-9550 nationaldebtrelief.com
DebtBlue: 1125 E Campbell Rd Suite 200, Richardson, TX; (855) 269-9462 try.debtblue.com

California Debt Settlement Attorneys

Financial Relief Law Center: 1200 Main St suite C, Irvine, CA; (949) 570-5466; www.bwlawcenter.com
1st California Law: 2090 N Tustin Ave #240, Santa Ana, CA; (714) 881-7300; www.oc-bankruptcylawyer.com
Fitzgerald & Campbell: 400 N Tustin Ave # 401, Santa Ana, CA; (844) 431-3851; www.debtorprotectors.com
Attorney Debt Reset: 1540 River Park Dr Ste. 114A, Sacramento, CA; (916) 446-1791
Resolve Law Group: 6345 Balboa Blvd building 2 suite 247, Encino, CA; (818) 995-4540; resolvelawgroup.com
Shevitz Law Firm: 2600 W. Olive Avenue #5469 Burbank, CA; (213) 863-0183; www.shevitzlawfirm.com
Shield Law Group: 15910 Ventura Blvd Suite 710, Los Angeles; (818) 732-4400; shield.law
Bankruptcy Attorney: 554 S San Vicente Blvd suite 160-f, Los Angeles; (424) 285-5525; www.losangeles-bankruptcyattorney.com
Southern California Law Advocates: 1801 Parkcourt Pl # F202, Santa Ana, CA; (714) 872-8187; www.socaladvocates.com
Westgate Law: 16444 Paramount Blvd #205, Paramount, CA; (562) 222-5057; westgatelaw.com
Wadhwani & Shanfeld: 310 E Palmdale Blvd # C, Palmdale, CA; (661) 338-5569; www.wslaw.com
Law Office of Jerry R Lowe: 2344 Tulare St #301, Fresno, CA; (559) 495-1529; www.jerrylowelaw.com
The Cardoza Law Corporation: 548 Market St # 80594, San Francisco, CA; (855) 982-2400; www.cardozalawcorp.com
Trevor Caudle Law Practice: 350 Bay St #100, San Francisco, CA 94133; (415) 859-9626; www.trevorcaudlelaw.com

Eligible Debts

When seeking debt relief in California, it’s important to note that not all types of debt are eligible. Debts that can be included in the state’s debt settlement programs include:

Credit cards
Department store cards
Signature loans
Personal lines of credit
Old repossessions
Other unsecured debts
Old judgments
Private student loans in default

Ineligible Debts

Debts that don’t typically qualify for debt settlement in Florida include:

Home mortgages
Federal student loans
Car loans
Other secured debts
Credit Union debts
Medical bills

3. Debt Management

Works best for: People with primarily credit card debt. Many credit counseling agencies work exclusively with credit card debt (and thus won’t be a help if you need to consolidate medical bills or student loans.)

A debt management program will usually reduce the interest rates on your credit cards from the current average of about 20% to somewhere around 9%. This will lower your monthly payment. However, unlike debt settlement, you will repay the full amount you owe, plus a lower amount of interest. The program usually takes 3-5 years to complete.

Pro tip: It’s important to note that only 55% to 70% of customers who enroll in DMPs successfully complete the program. If you enroll in a Debt Management Plan but don’t complete it, your financial situation could worsen.

So, for example, if you had $5,000 in credit card debt and were paying 25% interest, your monthly interest rate would be $105. If you reduce the interest to 8%, you’ll pay $33 a month in interest. That’s a $72 savings that you could apply to reducing your debt and paying it off faster.

These programs are usually set up and administered by nonprofit credit counseling agencies.

Like with debt settlement, debt management does not involve a loan. Credit scores won’t matter. But if you default on payments, your creditor could raise the interest rate back to its original amount.

Credit Counseling Agencies in California

Consumer Credit Counseling Services (Los Angeles County): 5670 Wilshire Blvd #1800, Los Angeles; (213) 514-3600; creditcounselingservice.business.site
Consumer Credit Counseling Services (San Francisco): 315 Montgomery St Suite 1000, San Francisco; (415) 636-8377; creditcounselingservice.business.site
STL Financial Services: 5416 Fair Ave, Los Angeles, CA; (818) 824-3133
Freeman Financial Services; 8363 Folsom Blvd, Sacramento; (916) 465-3200; www.freemanfinsvcs.com
American Consumer Credit Counseling: 633 W 5th St 26th & 28th floor, Los Angeles; (213) 533-4115; www.consumercredit.com
A Professional Credit Services: 2706 Artesia Blvd, Redondo Beach, CA; (310) 374-3736
Cal Coast Credit Service: 1142 State Farm Dr, Santa Rosa, CA; (800) 655-6495; www.calcoastcreditservice.com
Oakmont Credit Services: 225 E Broadway STE 312, Glendale, CA; (818) 930-5005
Sharp Credit Services: 9541 Flower St, Bellflower, CA 90706; (562) 219-5872
Better Credit USA: 745 Distel Dr # 118, Los Altos, CA; (408) 655-4235; bettercreditservice.com
California Credit CPR: 21405 Devonshire St #201, Chatsworth, CA; (747) 224-0147; www.californiacreditcpr.com
Golden Financial Services: (858) 605-6196; nomorecreditcards.com
Credit Repair – Blue Water Credit: 111 N Market St #374, San Jose, CA; (408) 763-3046; bluewatercredit.com
Credit.org: 1555 W Florida Ave, Hemet, CA; (951) 524-9957; credit.org

4. Bankruptcy

Works best for: People who can see no other way to get out of debt within the next five years, who’ve already suffered significant credit score damage or who’ve tried one or more of the other options and failed.

Bankruptcy in California is governed by federal law rather than California law. There are no state-specific forms and you won’t file with the county court.

For Calfornians seeking debt relief, bankruptcy could offer a fresh start.

The two main types of personal bankruptcy are:

Chapter 7: Usually the most common option for individuals, Chapter 7 involves selling off (liquidating) the debtor’s assets to repay their creditors. Afterward, any remaining eligible debts are erased. Chapter 7 cases usually last 4 to 6 months.
Chapter 13: With Chapter 13, the debtor gets to keep most or all of their property and assets. Instead, they must set up a 3 or 5-year payment plan with their creditors to pay as much of their debts as possible. These cases are usually much more complicated and often require a bankruptcy attorney.

Most people don’t get to choose which type of bankruptcy they file. For instance, to qualify for Chapter 7, you must first pass a means test.

Here are the means test guidelines for California:

1 Member Household – $47,798.00
2 Member Household – $62,009.00
3 Member Household – $66,618.00
4 Member Household – $75,111.00
5 Member Household – $83,211.00
6 Member Household – $91,311.00
7 Member Household – $99,411.00
8 Member Household – $107,511.00
9 Member Household – $115,611.00
10 Member Household – $123,711.00

For a complete list of California bankruptcy resources, click here.

California Bankruptcy Exemptions

While some states allow filers to choose between state and federal bankruptcy exemptions, California does not. In California, you have to use state exemptions in order to be able to keep property in bankruptcy.

California has two state exemption systems and you can select the set that works best for you. You can also use federal nonbankruptcy exemptions. In California, spouses generally cannot double exemptions, though there are a few exceptions.

Homestead exemption: California has one of the most generous homestead exemptions in the U.S. It allows homeowners to exempt an unlimited amount of equity in their primary residence, provided certain conditions are met. However, there are limits on the exemption amount if you haven’t lived in California for a specified period before filing for bankruptcy.
Motor vehicle exemption: Debtors are allowed to exempt a certain amount of equity in their vehicles. Exemption amounts vary depending on the specific circumstances and the type of vehicle.
Personal property exemptions: These cover various personal property items, including furniture, clothing, household goods, and appliances. The total exemption amount for personal property is usually capped.
Tools of trade exemption: If you need specific tools and equipment for your occupation, those assets can be exempted those assets up to a certain value.
Jewelry exemption: State allows you to exempt a certain amount of the value of jewelry items.
Wild card exemption: The California wild card exemption allows debtors to exempt a limited amount of any property they choose, which can be used to cover any assets that are not adequately protected by other exemptions.
Retirement accounts: Qualified retirement accounts, including 401(k)s, IRAs, and pensions, are typically exempt from bankruptcy proceedings, up to a limit.
Public benefits: Various benefits, including Social Security, unemployment benefits, and disability benefits, are exempt.
Alimony and child support: Court-ordered alimony and child support payments are usually not dischargeable in bankruptcy.
Life insurance: Some life insurance policies with a cash surrender value may be exempted.

Exemptions will vary depending on your specific situation and the type of bankruptcy filing. Please consult with a bankruptcy attorney to understand how these exemptions apply to your personal situation.

READ MORE: Types of bankruptcy explained

What is the Statute of Limitations on Debt in California?

The statute of limitations is the time in which a debt collector can legally sue you for unpaid debts. In California, it is as follows:

Four years on most types of consumer debt
20 years for state tax debt
Two years on oral agreements

California’s statute of limitations begins with the first missed payment. Once the statute of limitations expires, the court can no longer order you to repay the old debt. Debt collectors also can’t garnish your wages or place a lien against your vehicle or home.

You will still legally owe these debts, though. Debt collectors can also still send letters or call to try to get you to pay.

Pro tip: In California, other state laws may apply to certain debts. For example, Chase, Discover, and Bank of America credit cards follow the laws of Delaware. Capital One follows the laws of Virginia. Always check with the lender or creditor to see what their exact policies are.

Debt Collection in California

There are several state protections in place for California residents. If you’re being harassed by debt collectors, here’s what you need to know.

State Protections

The Department of Financial Protection and Innovation (DFPI) regulates and oversees California debt collection practices. It also handles licensing and complaints. The Department operates under the following:

California Consumer Financial Protection Law – in effect since January 1, 2021
Debt Collection Licensing Act – in effect since January 1, 2022

Both of these help protect consumers and create a more level playing field in the financial service industry.

If You’re Being Harassed by Debt Collectors

If debt collectors are harassing you, file a complaint with all three of the following:

California’s Attorney General office
Federal Trade Commission (FTC)
Consumer Financial Protection Bureau (CFPB)

READ MORE: How to deal with debt collectors

Where to Make a Complaint in California

The best place to file a complaint about a payday or other predatory lender is through the DFPI. Even if you’ve registered a complaint with another agency, it’s a good idea to notify the DFPI, too.

Here’s the contact information:

Regulator: Department of Financial Protection and Innovation
Address: Office of the Ombuds, 2101 Arena Boulevard, Sacramento, CA 95834
Phone: (866) 275-2677 or (916) 327-7585
Email: Ask.DFPI@dfpi.ca.gov
Link to website: https://docqnet.dfpi.ca.gov/complaint/

Or you can submit the complaint to the Consumer Financial Protection Bureau (CFPB), a federal organization that protects individuals from predatory financial institutions, including payday lenders.

More California Debt Statistics

	California average	National average
Average salary	$73,220	$59,428
Median household income	$84,097	$70,784
Per capita income	$41,276	$36,430
Unemployment	4.6%	3.5%
Household debt	$84,730	$59,580
Auto loan debt	$23,268	$22,612
Credit card debt	$6,222	$6,194
Mortgage debt	$422,909	$236,443
Median mortgage payment (30-year fixed)	$3,399	$2,823
Average student loan debt	$37,084	$37,338
FICO credit score	721	714
Average VantageScore	703	701
Retirement savings	$452,135	$255,000
Child poverty	9%	5.2%
Overall poverty	11.5%	11.6%
2022 consumer bankruptcy filings	31,702	387,721
2022 foreclosures	27,269	248,170
Identity thefts reported	125,597	1,108,609
Percentage of unbanked residents	7%	4.5%
Average credit utilization ratio	24%	31%

Payday lending laws in California: Legal

Maximum loan amount: $300 in principal and fees
Maximum Interest Rate (APR): 460% APR on a 14-day loan for $100
Minimum loan term: N/A
Maximum loan term: 31 days
Number of rollovers allowed: None
Number of outstanding loans allowed: One
Installment option: No
Cooling-off period: None
Finance charges: 15% of the face amount of the loan check
Collection charges: $15 non-sufficient funds (NSF) fee
Criminal action: Prohibited

Unlike in some states, the California payday loan laws are straightforward. There are clear limitations on how much a person can borrow and the finance charges. This makes it easy to determine the total cost of the loan.

Unfortunately, it’s difficult to fully regulate the payday loan industry. Because of this, some lenders can still legally charge triple-digit interest rates.

Debt Resources for California Residents Facing Hardship

Arkansas offers a variety of local and state programs for residents looking for help with debt or finances. Among other things, these resources can provide low-cost or free childcare, job-related education and training, healthcare, and legal aid. Some programs can also help with the cost of rent or utilities.

Some of the main food banks in the state include:

Los Angeles Regional Food Bank: 1734 East 41st St. Los Angeles; 323-234-3030
San Diego Food Bank: 9850 Distribution Ave. San Diego; 858-527-1419
Second Harvest Food Bank of Silicon Valley: 750 Curtner Ave. San Jose; 408-266-8866
San Francisco Food Bank: 900 Pennsylvania Ave. San Francisco; 415-282-1907
Central California Food Bank: 4010 E Amendola Dr. Fresno, Calif.; 559-237-3663
Sacramento Food Bank and Family Services: 3333 3rd Ave. Sacramento; 916-456-1980
Food Bank of Southern California: 1444 San Francisco Ave. Long Beach; 562-435-3577
Alameda County Community Food Bank: 7900 Edgewater Dr. Oakland, Calif.; 510-635-3663
Community Action Partnership of Kern: 5005 Business Park N. Bakersfield, Calif.; 661-336-5236
Second Harvest Food Bank: 2950-B Jefferson St. Riverside, Calif.; 951-359-4757

For a more comprehensive list of food banks in the state, check the California Department of Social Services’ website. Another option is to go to Feeding America’s website for their list of food banks and pantries in the country.

How to File for Unemployment in California

Californians who’ve recently lost their job or had their work hours drastically reduced may be eligible for unemployment benefits. You can file an unemployment claim and check your eligibility online. You can also get an estimate of how much you could receive in benefits.

State Hardship Programs

California has a significant number of programs designed to help those in a financial crisis. This includes help with:

Medical expenses
Utility bills
Rent or mortgage payments
Food
Legal assistance
Dealing with debt collectors

Many of these programs are charitable or run by local agencies such as churches. Others are funded by the federal or state government. The state also offers a number of grant and assistance programs, such as:

Healthy Families: Provides diagnosis, evaluation, and surgical operations for uninsured residents, or those who have low incomes.
Homeowner Assistance Program: Offers an annual payment of up to $472 to eligible residents to help with homeownership costs. Applicants must be 62 or older, be disabled, or blind. They’ll also need to meet specific income restrictions.
Water Bill Help: Low-income northern California residents with low to moderate incomes are eligible for discounts on their monthly water bills. One such program is the Low-Income Home Energy Assistance Program (LIHEAP).
California Homebuyer’s Down Payment Assistance Program: Helps first-time homebuyers with their down payment and find low interest rates.
Help with Medical Debt Collectors and Charity Health Care: California has laws to help protect patients from aggressive debt collectors. The state also provides free medical care in certain situations and to eligible individuals. Besides, this, the California Department of Social Services also occasionally gives out grants and other financial assistance to residents. These programs are meant to provide temporary relief. Key programs include:
CalWORKs: Services include transportation, childcare expense coverage, and a stipend to cover work-related expenses (ex. job training).
Cal-Learn: Helps pregnant teens and new parents attend and graduate from high school or earn an equivalent degree. The program also helps cover the costs of childcare.
Cash Assistance: California has several programs to help low-income families meet basic needs. This includes CalWORKS, SNAP, and Cash Assistance Program for Immigrants (CAPI).
The Community Services Block Grant: CSBG was created to provide a range of services to assist low-income families and individuals get the knowledge, skills, and motivation needed to achieve self-sufficiency. It’s a federally-funded program that also offers life necessities such as shelter, food, and basic health care to those in need.
Low-Income Home Energy Assistance Program: The California State Department of Community Services & Development runs several programs, including LIHEAP and the Low-Income Weatherization Program (LIWP). These programs are designed to help reduce energy usage and costs. They can also provide direct financial aid to those struggling with high utility and heating bills.
H20 Help to Others: This is a newer program made to help individuals, families, and seniors with their water bills. It’s meant specifically for low- to moderate-income homeowners living in Northern California.

Cost of Living in California

Annual Mean Wage (All Occupations)	$61,483
Median Monthly Rent	$2,895
Value of a Dollar	$.88
Cost of Living	142.2
Cost of Living Rank	3
Grocery Cost Index	113.7
Housing Cost Index	201.9
Utilities Cost Index	124.3
Transportation Cost Index	131.7
Miscellaneous Cost Index	110.3

Source: World Population Review (updated September 2023)

The Bottom Line

California debt relief options exist for those struggling with large amounts of consumer debt. These include debt consolidation, debt settlement, credit counseling, and local and government-run agencies.

If you’re being harassed by debt collectors or dealing with suspicious lenders, contact the California Department of Financial Protection and Innovation.

2023 Guide to Debt Consolidation and Relief in California