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How to Settle Debt in California?

By Lacy Gallagher on September 6, 2011

California Department of Consumer Affairs defines a debt settlement plan as a negotiation of a one-time settlement amount with creditors, typically advised by a credit counseling organization. The organization acts as a middleman between you and the creditor. You place a payment with the credit counseling organization and that company settles the debt with the creditor. Californians may create a debt settlement plan with companies licensed with the California Department of Corporations (DOC) or nonprofit credit counseling programs.

Any credit organization that pays debt on the behalf of the consumer is required to be registered with the DOC, so debtor beware of online spam ads that promise too good to be true solutions to debt. It is crucial to ensure that the company you chose to entrust your debt with, and thus your credit score with, has obtained all necessary licensing from the state. California DOC can quickly determine the legal status of a credit company. Simply call toll-free at 1-800-ASK-CORP (1-800-275-2677) or research the organization on the United States Trustee Program website that contains a complete list of authorized organizations. California law mandates the fees charged by both profit and non-profit programs. In the process of choosing an organization to do business with consumers should consult the Federal Trade Commission’s “Facts for Consumers”.

These organizations typically offer both debt management plans (DMP) and debt settlement plans (DSP). Both programs are created to assist with lowering one’s debt as quickly as possible, but the programs have varied methods for payments.

Debt Management Plan is an agreement where the debtor and the licensed organization decide on a monthly payment from the debtor to the credit counseling organization that is applied to the all of your individual debts. Guarantee that your various debtors have agreed to the same arrangement discuss between you and the credit counseling organization.

Debt Settlement Plan is a one-time negotiation between the credit counseling organization and the creditors. The debtor pays the organization and the organization pays off the creditors; each transaction is one payment of the agreed upon amount.

Any problems regarding these credit counseling organizations in California may be voiced by contacting the California Department of Corporations, 1-866-ASK-CORP (1-866-275-2677).

Reference:

www.corp.ca.gov/fsd/faq/credit.asp

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