Help With Credit Card Debt in California

If you live in California and have credit card debts you cannot pay, you can be sued or have your wages garnished. Fortunately, both state and federal laws allow honest California residents to negotiate credit card debt reduction through a non-profit credit counseling service or their local bankruptcy courts. But if you lied to get credit cards or used the credit cards knowing you could not repay them, you will have a hard time filing bankruptcy and in some cases can be arrested for doing so.

Credit Counseling

Before filing bankruptcy, you must get credit counseling to make sure that is the right choice for you, according to the United States Bankruptcy Court Northern District of California. During credit counseling, you will learn different skills to manage your budget and decide if you really should file bankruptcy. You can also try to hire someone to negotiate partial repayment plans with your credit card companies or try to do it yourself.

Debt Management Plans

Many non-profit services, including Consumer Credit Counseling Services of San Francisco, can help people negotiate a partial debt repayment plan with their credit card companies. Some other debts, like medical bills and loans not secured by collateral, are also eligible for a debt management plan. Once the counselor renegotiates your debts, they will take one payment from you each month and distribute the proceeds to all of your credit card companies. But you cannot get any new credit while in a debt management plan and usually pay a nominal monthly fee for this service.

Chapter 7 Bankruptcy

If you've lived in the Golden State for at least six months and earn less than the annual median income level, you can file for Chapter 7. This type of bankruptcy permanently forgives most of your pre-existing debts, including credit card and medical bills. As of 2011, the annual median income for a single California resident was $47,969, while the figure for a family of four was $79,194, according to the U.S. Trustee Program.

Chapter 13 Bankruptcy

Chapter 13 allows a court-supervised, partial debt repayment plan. You can also use Chapter 13 to keep more assets and resolve late mortgage problems. But you cannot legally get any new credit while in a Chapter 13 repayment plan; it usually takes three-to-five years to repay debts under this bankruptcy. Also, the fact that you filed Chapter 13 will negatively impact your credit rating for seven years from the date of filing. This credit reporting time frame is three years shorter than that mandated for Chapter 7.