Debt Relief and Financial Assistance for California Residents

InCharge provides free, nonprofit credit counseling and debt management programs to California residents. If you live in California and need help paying off your credit card debt, InCharge can help you.

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If you’re a California resident dealing with credit card debt, we can help you. InCharge provides free credit counseling to residents in all 50 states, including California.

During a credit counseling session, a certified counselor will go over your budget with you and help you determine the best solution for debt relief. That may include a debt management program offered by InCharge.

Debt management programs work with creditors to consolidate your debt, reduce the interest rate on your credit cards and create a monthly payment plan that you can afford. InCharge administers the program, taking your payment each month and distributing it each month to your creditors. Credit score is not a factor in qualifying for a debt management program, so even if you have bad credit, we can still offer you a debt-relief option.

Debt Relief Options for California Residents

Debt relief isn’t a one-size-fits-all proposition. Several options are available for Californians whose debts are getting the better of them.

What Are California Debt Management Programs?

A debt management plan is offered by nonprofit credit counseling agencies, who analyze your income and expenses to create a budget that includes a fixed monthly payment that allows you to pay off your high-interest debt in 3-5 years. A big plus is that you accomplish this without taking out a bank loan.

The credit counseling agency works with your creditors to reduce the interest rate on what you owe to a manageable level. How important is that? The average interest rate on credit cards is 16.7% (March 2022), but if a consumer misses a payment, the rate can jump to 20%-25%. Miss two payments and the rate can go to 25%-30%.

If you owe $5,000 on credit cards and reduce the interest rate from 25% to 8%, the interest payment falls from $105 a month to $33. That’s $72 a month you can apply to your balance to pay off the debt faster. Counselors at nonprofit credit counseling agencies figure out what your monthly payment would be to eliminate your credit card debt.

Debt Consolidation Loans for California Residents

A debt consolidation loan is a single loan that is used to pay off credit card debt for multiple cards. For example, if you owe a total of $10,000 on four credit cards, you take out a $10,000 debt consolidation loan and pay off the four credit cards. You still owe $10,000, but it’s to one source at a considerable reduced interest rate. Most banks, credit unions and online lenders offer debt consolidation loans, provided you meet the credit score standards.

California Debt Settlement

Debt settlement is a debt-relief option that allows someone to pay the debt for less than what is owed. It involves saving for 2-3 years to build up a lump sum and negotiating with your creditors to settle the debt for what you’ve saved up. It takes time, and it can drop your credit score 100-200 points.

The basics: You or a company you hire negotiates until you creditors or the collection agency agrees to accept a lower amount to settle the debt. If you owe multiple creditors, you need to make multiple agreements. During that process, debt settlement companies advise you to stop sending even minimum payments to the card companies, which means late fee penalties and interest are added to their balance every month. Rather, make payments to an escrow account and, after it builds up, call the creditors and start negotiating.

Not all card companies are willing to do this, and debt settlement companies charge fees. In addition to what a debt settlement does to your credit rating, which lasts seven years, the IRS considers forgiven debt of more than $600 as income that must be declared on your tax return.

If you have large credit card debt, this might be preferable to bankruptcy.

Do-It-Yourself Debt Relief for California Residents

Although many debt-relief strategies need a counselor or organization to assist you, it’s entirely possible you can pay back what you owe on your own, especially if your debt hasn’t overwhelmed you. If you’re willing to commit to getting your finances under control, here are steps that can get you debt free.

  • If you haven’t made a budget – and you probably haven’t – make one. Assess your monthly income and plan how to spend it so that you can not only meet your needs but pay down your debt. Set aside money each month to apply to what you owe.
  • Be disciplined. Commit to your budget. This will probably mean not making purchases for things you want but don’t really need right now.
  • Contact your creditors and ask them about lower interest rates.
  • Be strategic. If you have multiple debts, start by paying down the one with the highest interest rate, which will save you the most money.
  • Don’t shoot yourself in the foot. If credit card debt is your problem, don’t pay with credit cards while on this program. Use cash or a debit card. Don’t take out any other new loans, either.

Filing Bankruptcy in California

Bankruptcy is the other end of the spectrum. If your debt is so out of control that there is no feasible way to settle it any other way, bankruptcy provides a second chance to get your finances in order, and it can be done without losing many of the things you own, including your home.

There are two major types of bankruptcy, Chapter 7 and Chapter 13. In Chapter 7, your income must be less than the median income for your state. If you make more, you must file Chapter 13 bankruptcy.

In Chapter 7, non-exempt assets – a vacation home, an expensive car, artwork, card collections, jewelry – are sold by a court-appointed trustee and the money is used to pay off debts. Most assets, however, are exempt from being liquidated, most notably your home, car, personal items needed for work, pensions and Social Security.

In Chapter 13, you create a repayment plan that allows you to keep your assets in exchange for making regular payments to the trustee to pay down debt. The process lasts 3-5 years, after which any unsecured debts (like credit cards) are discharged. As long as you keep up with the payments, you can keep your house and car and other assets.

The consequences for bankruptcy are significant. Your credit score may drop 100-200 points, depending on where it was when you started. Bankruptcy stays on your credit report for 7-10 years, making it more difficult to get credit for a home or car loan in the future. Also, it doesn’t discharge student loans, tax debt or alimony, and since court proceedings are public, this may subject you to embarrassment. You’ll need a bankruptcy attorney to get you through the process.

Financial Assistance Programs in California

California offers financial aid for crisis situations, help with medical expenses, legal aid and help dealing with debt collectors. The state offers grant and assistance programs to state residents as well as delivering federally funded help through rent vouchers for low-income families.

Some of the assistance programs available include:

  • Healthy Families – This program provides diagnosis, free evaluation and surgical operations for those who are uninsured and or have low incomes.
  • Homeowner Assistance Program – Provides an annual payment of up to $472.60 to eligible persons to help with homeownership expenses. Applicants must be 62 or older, be blind or disabled and must meet income restrictions.
  • Water Bill Help – Northern California residents with low or moderate incomes are eligible for monthly water-bill discounts.
  • California Homebuyer’s Down Payment Assistance Program – Offers low interest rate first mortgage programs and down payment assistance for first-time homebuyers.
  • Help with Medical Debt Collectors and Charity Health Care – California has laws that to protect patients from aggressive and illegal debt collectors. The state also helps residents gain access to free medical care if needed.

The California Department of Social Services also offers grants and assistance to residents. Among the key programs are:

  • CalWORKs – An umbrella initiative to prepare residents for work. Services include transportation, child care and money to cover work-related or job-training expenses.
  • Cal-Learn – Helps parenting and pregnant teens attend and graduate high school or earn an equivalency degree. Program also provides payment to cover child care costs.
  • Cash Aid – Offers a number of programs to help low-income families meet basic needs. It provides transportation, child care, work-expense funds and counseling.
  • Community Services & Development (CSD) – is a department of the California Health and Human Services Agency. The CSD department manages various federal government programs that help lower income families achieve and maintain self-sufficiency. They can assist with rent, helps them with paying their home energy bills, and also aids them in finding as well as residing in affordable housing. In addition, CSD administers a state-funded Naturalization Services Program that will assist legal permanent residents in obtaining citizenship. Dial (866) 675-6623. Programs offered include :
  • Community Services Block Grant (CSBG) – is a program that was created to help provide a range of services to assist low-income families and people. The agencies help clients in attaining the knowledge, skills, and motivation that is necessary to achieve self-sufficiency. This program also provides low-income people with immediate life necessities such as shelter, food, and health care needs, etc.
  • Low-Income Home Energy Assistance Program (LIHEAP), Weatherization Assistance Program, and Reduced Rate Programs – The California State Department of Community Services & Development also administers these various energy and utility bill saving programs. Get financial help with paying utilities, summer AC bills, and free energy saving enhancements.

Food Assistance Programs in California

Like many states, California helps qualifying residents apply for federally funded food stamps. Food stamps, now called the Supplemental Nutrition Assistance Program (SNAP), aren’t exactly stamps anymore, but purchasing cards that help those falling below income thresholds to buy food.

The state Department of Social Services helps low-income people obtain food stamps if they meet the program criteria. Applicants need to complete a CalFresh form that can be obtained online or at a state welfare office. Some of the information required includes:

  • Proof of income
  • Proof of household expenses
  • Proof of child support
  • Proof of medical costs (required if a household member is disabled or older than 60)

The state also provides emergency food to low-income households through its Emergency Food Assistance Program and operates a special program to help a pregnant mother and newborn children with nutritional needs.

Also, California’s Women, Infants and Children (WIC) is a health and nutrition program for babies, children under 5, pregnant women and new mothers. It provides nutrition information and healthy living tips, experts who specialize in nutrition for mothers and their children, support and information about breastfeeding your baby, help in finding health care and benefits to buy healthy foods.

California Housing Assistance Programs

Californians have access to federally funded Section 8 housing assistance. Eligibility is largely based on income minimums, which vary from place to place around the state. Both single people and families can apply, though income criteria vary according to family size.

The program, a function of the federal Housing and Urban Development, provides rent subsidies for very low-income families. After applying for a rent voucher grant, applicants can be required to undergo background checks and may be placed on waiting lists, since funding often outstrips demand.

In addition to income verification, you need to provide past housing information and information on any court-ordered payments you’re making.

Local public housing authorities around the state also provide housing assistance, guidance and help in applying for Section 8 vouchers. Contact information is available online at their website.

California also operates homelessness prevention programs and rehousing services. It offers aid to prevent evictions, helps locate transitional housing, offers one-time rent help and offers funds to pay security deposits.

Rental assistance in California includes COVID-19 rent relief, subsidized apartments, eviction protection and homeowner assistance.

Homelessness Prevention in California

Federal government grants from HUD are used by local communities as part of the Continuum of Care program. Assistance may be offered to stop evictions. Other resources include transitional housing, one time rent help, or funds to pay security deposits.

California residents who have received an eviction notice may be able to qualify for emergency rental assistance. Continuum of Care also coordinates short-term housing for the disabled, seniors or veterans who are homeless, and CalWORKs Eviction and Homeless Assistance serves the unemployed, very low income or disabled.

Electric Bill Assistance in California

If you need help paying the utility bill, some energy companies in California offer resources in addition to those provided by government and nonprofit agencies. Most electric, gas and water companies in the state offer assistance programs, discounts or payment plans for families. Some programs are mandated by the state or federal government.

  • California Alternate Rates for Energy (CARE) is provides lower income customers with a 30-35% discount on electric bills and a 20% discount on natural gas bills.
  • Families that meet low-income guidelines also can receive grants for paying their utility bills from the federal government Low Income Home Energy Assistance Program (LIHEAP) as well as free energy conservation measures. Call 866-675-6623 for information or to apply.
  • The Family Electric Rate Assistance Program (FERA) offers discounted rates for some electricity usage. Families whose household income is slightly above the CARE allowances will qualify to receive FERA discounts, which bills applies a 12% discount on their electricity bill. FERA is available for customers of Southern California Edison, San Diego Gas and Electric Company, and Pacific Gas and Electric Company. Call your electric utility if your family qualifies.
  • The Energy Savings Assistance Program (ESA) provides no-cost weatherization services to low-income households who meet the CARE income guidelines, including attic insulation, energy-efficient refrigerators, energy-efficient furnaces, weather-stripping, caulking, low-flow showerheads and water heater.

Low-Cost Health Insurance for California Residents

Medi-Cal, as the state- and federally funded and state-administered health insurance program is called, offers low-income people an assortment of health care services.

Medi-Cal, which is a Medicaid plan, helps those who can’t afford conventional health coverage or aren’t offered it through work treatment and care. Applications can be made by mail, in person at state social services offices or online. For more information and directions for applying, access the Medi-Cal application site online at their website.

California has hundreds of free clinics offering free or discounted health care. They offer a wide variety of medical services to residents.

Medi-Cal also offers free eye exams, contact lenses and low cost prescription glasses from Medi-Cal Managed Care vision providers for income-qualified, as well as free dental care.

Other Money-Saving Programs in California

California also offers other financial programs for those with young children, seniors and those with disabilities.

  • Three government assistance programs help families save money on childcare through subsidized child care services or free daycare: CalWORKs, Alternative Payment and Child Protective Services. CalWORKs helps families transition off cash aid/welfare assistance and grants. It helps pay for child care expenses for families while the parents work, seek work, attend school or college, or while they seek permanent housing in California. Call (916) 657-2144
  • The California Department of Aging partners with local centers and office of aging locations to provide financial help for seniors over 55. Resources include food, health and medical care information, social services, jobs, and other government aid.
  • California’s Department of Developmental Services provides financial help for persons with disabilities and their caregivers, including information, assistance with the application process, in-home and medical care, and other financial aid.

California Debt Statistics

California has the third-highest cost of living in the U.S. in 2022, trailing only Hawaii and New York. But its per-capita income of $57,347 ranks ninth among the states.

That means it can be hard to make ends meet in California. The state passed a bill in 2016 that will raise the minimum wage, which is now $14 an hour and will be $15 an hour on Jan. 1, 2023.

Critics say that won’t ease the financial strain that drives people to become dependent on credit cards. The average Californian carries $5,120 in credit card debt, and the delinquency rate is 10.41%.

Another crunch is housing. The median price for a California home is $760,800, well above the national median price of $428,700. One study found that only 30% of California households could afford to buy a home.

But the next option isn’t cheap. The average California rental unit costs $1,844 a month, which is $518 per month above the national average is $1,326.

Residents of California have an average retirement account of $452,135, the 17th highest nationally. However, the state’s cost of living is third highest. California is a pioneer in retirement planning, having just adopted a private-sector pension plan that automates saving for California residents.

More on California’s Economy

California, with 39.6 million residents in 2022, is the nation’s most populous state. In many respects. It functions like a nation within a nation, offering a wide array of social services that many other states lack. If you live in the Golden State and are having money troubles, California has an array of debt-relief resources to help rehabilitate your finances.

There’s a lot of wealth, but it is concentrated in a few areas. California’s gross domestic product was $3.36 trillion in 2021, which would be the world’s fifth-largest economy if California were a nation.

The economy is based on technology, agriculture, business services and manufacturing. Four of the world’s 10 largest companies are headquartered in California, including Apple, Meta (Facebook), Visa and Alphabet Inc., the parent company of Google.

After the COVID pandemic saw California’s GDP shrink by 2.8% in 2020, the state bounced back and saw a 7.8% increase in 2021, third best among the states.

On the downside, thousands of businesses have left for states with lower taxes and less regulation. California lost 117,552 residents in 2021 after having lost 182,083 residents the year before. California’s top state income tax of 13.3% is the nation’s third highest behind New York and Oregon.

Seek Professional Debt Relief Help

Debt can ruin your financial life if you let it get out of control, but that doesn’t have to happen. A certified credit counselor can guide you through your options and help you tailor a solution that’s right for you. InCharge is nationally accredited a has been helping Californians eliminate debt for decades.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


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