Does Debt Relief Hurt Your Credit in California? (2024)

It is no secret that most Americans are in debt. While the average amount varies depending on age, location, and other demographics, it’s safe to say that most people who live in this country are in debt. In the state of California, the issue of debt is getting larger. California is ranked in the top 10 of national debt, and the number is constantly increasing. Many people find themselves in search of a California debt relief lawyer as they try to decrease the amount of debt they’re in.

What Is Debt Relief?

Debt relief refers to solutions that can help consolidate or restructure a person’s debts to make repayment more manageable. These ways include lowering interest payments, requesting more time to repay, and settling for a lesser amount.

When many people think of debt relief, they immediately think of bankruptcy. Therefore, looking into options can be scary as there can be a misconception that debt relief will drastically hurt your credit. However, many people qualify for other forms of debt relief. There are a number of ways to relieve credit, and some methods do not have as much of an impact as others.

The Types of Debt Relief and How They Affect Your Credit

Contrary to popular belief, debt relief includes more than just bankruptcy. There are a number of options available for those who are looking to alleviate some of their debts:

• Debt management programs. Debt management is one of the better options for those looking for debt relief. With debt management programs, the ideal candidate already has credit that is in good standing but may be looking to alleviate the burden of their credit, such as decreasing the amount of interest and fees.
  In a debt management program, a credit counselor works on your behalf to establish a workable repayment plan. This counselor will negotiate with you and the creditors for a solution that works for both of you. As long as you commit to the plan and make all payments in full and on time, it should not negatively affect your credit. Many counselors will charge a small fee for this service.
• Debt consolidation. Debt consolidation is the process of taking existing debts and consolidating them all into one debt. For instance, if you have three credit cards with a $500 balance, you can consolidate them into one loan or a new credit card with a $1,500 balance. This can be a good idea for those who do not have a lot of debt and are in good credit standing.
  However, for those who have a lower credit score, finding options for debt consolidation can be difficult as many options have score requirements. If you do not meet these requirements or if you have a large amount of debt that will be tough to consolidate, there are debt relief programs that can help you find some options for you. Most people have found that debt consolidation does not hurt their credit score so long as they adhere to the terms set out in the consolidation.
• Debt settlement. Debt settlement is an option if you are unable to pay back the total amount of the debt. Settlement involves contacting the debtor and requesting to settle the debt for a lesser amount than what is owed. For example, if you have a $1,000 debt, you can request to pay them $650. Sometimes creditors are willing to accept a lower amount, especially if you agree to pay in a lump sum or if they believe that the alternative is never recouping the debt.
  When considering debt settlement, know what you would be able to pay and when before making the call. While creditors are not obligated to accept your offer, it is helpful to try, as many do agree to some form of settlement. Unlike debt consolidation, settlement can have a negative impact on your credit score, and the settlement stays on your report for seven years.
• Bankruptcy. Depending on your situation, bankruptcy might be a viable option. There are various options for bankruptcy, so if you are considering this option, speak with an experienced bankruptcy attorney who can guide you in the right direction as you navigate these complex situations.

FAQs

Q: Does Debt Relief Affect Your Credit?

A: This depends on the type of debt relief route you choose. Generally speaking, the main types of debt relief that will affect your credit are debt settlement and bankruptcy. Debt management and debt consolidation will not affect your credit much, but if you stick to the plan to relieve the debt, you may see an increase in your score over time.

Q: What Are the Negative Effects of Debt Relief?

A: If you choose either debt settlement or bankruptcy, you will see a decline in your credit score. While these negative marks can be challenging in the short term, they may be a first step in your financial recovery. Our firm can help you understand what option works for your situation.

Q: Is Debt Relief Settlement a Good Idea?

A: Debt relief settlement is a good idea if you are unable to pay the total amount of the debt and if you have a low credit score. We recommend only opting for this solution if debt consolidation and debt management programs are not an option for you and you do not need to declare bankruptcy.

Q: How Long Does Debt Relief Stay on Your Credit?

A: This depends on the debt relief option that you choose, as they affect your credit report differently, with varying levels of impact. Debt management programs and debt consolidation will likely not go on your credit report. Debt settlement stays on your report for five years. Bankruptcy can stay on your report for up to 10 years.

Work With Our Team Today

If you require debt relief or would like to talk more about what debt relief solution would be right for you, an experienced lawyer can help you find the ideal solution for your situation with minimal possible impact on your credit score. Contact the Law Office of Christopher P. Walker for assistance.