California—especially the city of angels, Los Angeles—has a sophisticated and expensive aura to it. The draw of living in one of the most active and bubbling towns in the world draws many toward relocating and planting roots in LA. While Los Angeles is, quite objectively, beautiful and exciting, one major drawback is the enormous personal debt its residents pile up. Credit card debt, in particular, has become almost a fact of life in Los Angeles.
California tops the charts for the most credit card debt in the United States, with about $102 billion total credit card debt, and living in its biggest city, Los Angeles residents carry a considerable proportion of this heavy burden. Compared with income levels, residents of Los Angeles have one of the most significant burdens of debt in the USA. The average Angeleno has a credit card debt of $6,632, ranking in the top 20 of debt burdens across the country.
This ungodly debt profile has made life in the LA vastly different from the new utopia depicted in Hollywood, and actually, living in Los Angeles leaves you continually worrying about servicing your mounting debts. From student loans, auto loans, and the long-term commitments of mortgages, you are stuck in a merry-go-round of obligations.
A massive credit card debt can transform your life into a highly regimented routine, with monthly minimum payments making it impossible to make any meaningful long-term financial commitments. Missing your monthly payments makes it even worse, as you are liable to anyone of the following consequences:
- Late Fees: Missing a monthly payment, or paying below your minimum will cause your credit company to charge a recurring late payment fee for every instance of a missed payment.
- Higher Interest Rates: After 60 days of missed payments, rather than your standard rates, you are charged an exorbitant penalty rate. The penalty only extends your repayment period as you have an even more significant burden to pay off under the same limited period.
- Negative Credit Report: Unpaid or missed credit card payments are all reflected on your credit report. This negative detail is visible by anyone who does a credit check on your social security number—employers, mortgage brokers, landlords—and these missed payments paint an image of financial irresponsibility and risk.
- Credit Score Impact: Missed credit card payments can impact your credit score—the all-powerful figure that can influence multiple aspects of your life. A lower credit score leaves you with higher interest rates, difficulty in sourcing loans, and employment.
- Harassment: With multiple missed payments credit card companies sometimes transfer their recollection processes to specialized debt collection agencies. These collection agencies employ some disruptive and uncomfortable methods—all perfectly legal—to regain their unpaid money.
In spite of the tremendous fallout from the crippling debt burden, there are still some effective debt relief Los Angeles residents can employ to get rid of credit card debt. These avenues for debt relief can help you greatly ease the burden of perpetually mounting credit card debts.
Obtaining Credit Card Debt Relief in Los Angeles
If you are burdened by credit card debt, it can feel like an unending journey—with monthly minimum payments, stringent payment deadlines, and usually high-interest rates. If your credit card debt has become untenable or impossible to manage, there are many avenues for you to obtain some form of relief in the state of California and the city of Los Angeles.
Speaking to one of our legal and financial experts to determine what debt relief option is most suitable for your specific circumstances. The following are some of the credit card debt relief options available to you in Los Angeles:
- Debt Consolidation
If your credit card debt is on a very high repayment rate, it may be smart to consider debt consolidation to eliminate such a debt. Debt consolidation, in simple terms, means getting a new loan—on a much lower interest rate—to pay off the original credit card debt. Since the consolidation loan is on a lower interest rate, you save a lot of money in the long run, compared to paying off your credit card debt with its original rates.
However, it is inadvisable to jump into debt consolidation without speaking to your financial adviser, since many offers of debt consolidation are structured in a manner to keep you in debt for a more extended period. Also, debt consolidation rates can fluctuate and change, leaving you paying even more than you would have had to frequently.
Debt consolidation is not freedom of debt and anyone who claims that is probably trying to scam you of your hard-earned income. Debt consolidation combines your debts—loans, credit card debts, student loans—into a new single loan. This new loan must still be promptly repaid to prevent default and subsequently higher rates.
It is essential to carry out careful and comprehensive research into consolidated loan providers, as this is a particularly popular hunting ground for unscrupulous agencies. The Federal Trade Council reports that debt consolidation providers and other debt management companies continually top the list of consumer reports.
- Debt Settlement Agencies
You may engage the services of a debt settlement agency to help rid you of credit card debt. These third-party companies approach your credit card provider and negotiate a more convenient repayment plan on your behalf. In most cases, the debt settlement agencies arrange a one-time lump payment, which when paid, discharges your obligation to your creditors.
Like debt consolidation, debt settlement should be considered with wariness. There are hundreds of fraudulent debt settlement agencies looking to prey on desperate and vulnerable individuals seeking to gain some form of debt relief. Speak to one of our financial experts for a recommendation on trustworthy settlement agencies. You can also consult the American Fair Credit Council and ensure that your agency of choice is duly licensed and registered.
- Debt Renegotiation
Some creditors can be open to renegotiating the terms of your credit card payments—changing your monthly minimum, due date, or even your interest rate—to give you a more flexible payment plan. While most creditors may not be open to renegotiating the terms of your contract, it never hurts to try to reason with these credit card companies.
Although bankruptcy has a negative connotation to it, it can be a financially sound decision, if your debt portfolio is getting increasingly cumbersome. Filing for bankruptcy should not be rushed into, as there are many procedural and statutory steps to take before such an action succeeds. Bankruptcy is not a magical solution to financial difficulties but it can give some assistance with regards to personal loans like credit card debts.
The advantages of filing for bankruptcy include the following:
- Automatic Stay: Automatic stay is a provision in the bankruptcy code that prevents creditors from repossessing your property or continuing any debt recollection processes as soon as you begin the bankruptcy process. This is especially beneficial if the credit card company has employed a debt collection agency.
- Discharge: Depending on the type of bankruptcy you choose to file (Chapter 7 or 13) your obligation to repay certain non-priority or unsecured debt is discharged, wiping away your debts. Credit card debt often falls within this class of unsecured debt, and at the end of your bankruptcy process, you should have gained debt relief.
- Financial Recovery: If you diligently keep to the terms of your bankruptcy repayment plan, you should be able to, in a manner of speaking, hit reset on your financial life. Without the suffocating weight of debt on your neck, you can start to make smarter and more productive financial decisions.
If you are looking to wipe away credit card debt by filing for bankruptcy, you have two options to pick from; Chapter 7 and Chapter 13 bankruptcy. To help you decide what course of action is most beneficial to you speak to one of our experienced bankruptcy attorneys.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common bankruptcy process in the United States of America, with many people besot with debt choosing liquidation as an avenue to escape liability. To file chapter 7 bankruptcy you must adequately collect and organize certain financial documents to show the court your current economic standing. The documents required are:
- Income Slips
- Bank statements
- Credit card statements
- Taxation records
- Loan documentation
- A full list of creditors
- Assets and liabilities declaration
After providing this documentation, you are obligated to speak to a counselor to fully understand the risks and full implication of filing a chapter 7 case. The next stage is what is called the Means Test, which is stipulated to prevent an abuse of the bankruptcy process to defraud creditors. The means test compares your income to the median income of the state you reside in, in this case, California. The point of this test is to ensure debtors do not misrepresent their financial capability in their bid to avoid paying unsecured debts like credit card bills.
If your bankruptcy trustee rules that you are eligible to a file a Chapter 7 bankruptcy the entire process usually takes between 3-4 months for your debt portfolio to be discharged. The trustee will take your non-exempt property, sell them and distribute the proceeds to creditors that have filed appropriate claims. Non-exempt property in this instance includes everything not contained in California’s exemption list.
Chapter 13 Bankruptcy
While organizations, as well as the individual, can file chapter 7, Chapter 13 can be submitted exclusively by individuals. Eligibility for Chapter 13 bankruptcy is significantly stricter and has more restrictions compared to a Chapter 7 claim. To qualify for a Chapter 13 claim, you must have:
- A steady income source
- Secured debts (loans obtained with collateral) not exceeding $1,010,650
- Unsecured debts (loans without collateral, like most credit card debts) not exceeding $336,900
Filing Chapter 13 bankruptcy means a debt repayment plan is created for you to pay off your debt portfolio. This repayment plan can range from 3-5 years depending on the determination of your bankruptcy trustee after examining your income level.
The most significant advantages of filing a chapter 13 bankruptcy claim include the opportunity to stretch the more cumbersome debts, like your mortgage plans, over the length of the process—three to five years—and also prevent foreclosure of the property. Over the course of your bankruptcy process, you do not even have to meet your creditors, and all their recollection efforts, along with that of their agents must cease.
It is important to note that, while credit card debt can be eliminated, bankruptcy does not provide state or federal tax debt relief, or even relief from student loans, and legally mandated payments and fines. So while you can escape the burden of credit card debt, you cannot file bankruptcy to avoid the amount of child or spousal support, parking tickets, and fines.
Credit card debt is capable of restricting and almost ruining a person’s life, but it does not have to be that dire. At Wipe Away Debts, our team of experienced and fully qualified Californian bankruptcy lawyers will help you navigate your way from the seemingly endless abyss of debt. With years of experience helping thousands of Californians, and residents of Los Angeles especially, get out of debt, we guarantee an experience that will make your path to financial security and stability easy and stress-free.
The structuring of credit card payments can be challenging, with interest rates and monthly payment deadlines that may not line up with your income schedule. Rather than remaining in a debt rollercoaster that can last for years, take steps to break free of the burden of credit card debt, with the help of one of our practitioners. Contact us today and let one of our attorneys manage your case. We will provide guidance, support and sound legal advice as you embark on this journey to a debt-free life.