Unpaid, delinquent credit card debts can lead to civil lawsuits and wage garnishments filed against Californians. Several types of debt relief options, ranging from nonprofit credit counseling services to federal bankruptcy assistance, can help Californians get out of credit card debt faster while protecting many of their personal assets.
Credit Counseling
Credit counseling is required before filing for bankruptcy or requesting a debt management plan, according to the California Department of Justice. Debt management plans enable Golden State residents to repay their credit card debts at reduced interest rates; during the plan, the consumer issues one monthly payment to the credit counselor. The counselor then distributes the funds as agreed to creditors, also taking a modest administrative fee. Before enrolling in a debt management plan, Californians should thoroughly investigate the credit counseling firm to ensure its representatives have a history of responsibly handling payments.
Bankruptcy and Your Assets
Before filing any type of bankruptcy, consider the fate of your assets. If you have lived in California for at least two continuous years, you can use asset exemption laws to keep some of your personal property, notes Bankruptcy Action. Depending on your age, medical status, family situation and what type of assets you have, as of 2011 you can potentially keep anywhere from $75,000 to $150,000 of personal property as well as all insurance and pension benefits.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy enables you to permanently discharge many of your pre-existing debts, unless you lied to get credit cards or used them right before filing a case. Generally, you must earn less than California's annual median income level to file a Chapter 7 case. As of 2011, the annual figure for a single resident was $48,009, while the level for a four-member California household was $78,869, according to the U.S. Trustee Program. A Chapter 7 filing erases your credit card debts but damages your credit rating for 10 years.
Chapter 13 Bankruptcy
People earning more than California's annual median income level can partially reduce their credit card debts under Chapter 13 bankruptcy. Chapter 13 creates a partial debt repayment plan carried out over three to five years; during this time, a California resident cannot get any new credit without a bankruptcy judge's consent. Also, judges can require Chapter 13 filers to use part or all of their tax refunds toward credit card debt repayment.
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