Debts can make like challenging for persons managing financial stress. California residents might wonder if their situation creates insurmountable problems, especially if they cannot reduce their budget further. Some may explore options to deal with the situation, including reviewing their eligibility for bankruptcy. However, others might find debt relief plans more workable at the moment.
Debt relief options
Debt relief plans could take many forms, including credit consolidation plans. One consolidation strategy might involve taking out a home equity loan to pay off debts, leaving the debtor with one loan to pay. A home equity loan would likely come with lower interest rates than credit cards.
Others could examine debt settlement offers. Here, the debtor negotiates a partial payment to close credit accounts they cannot pay. Such steps might deal with the immediate problems with the credit card company, but they could face credit score decreases and tax payment requirements.
Bankruptcy
Filing for bankruptcy may be the appropriate path forward for persons struggling with debts they cannot pay. Bankruptcy proceedings would place a stay on collection actions and allow the debtor an opportunity to address problems with creditors.
Debtors would choose the bankruptcy option most suitable for their situation. A wage earner may opt for Chapter 13 bankruptcy, a category that allows the debtor to pay off a negotiated sum of debts with a three to five-year payment plan. Some unsecured debts could face discharge in Chapter 13 proceedings.
Chapter 7 bankruptcy would be an option for those who pass the means test. These debtors cannot make payments on a Chapter 13 plan, so their nonexempt assets face liquidation, and some unsecured and secured debt may end up being discharged.