Debt Relief Strategies
Taking Control of Your Finances

Disclaimer- The content here on this website is informational only and is not an exhaustive review of consumer debt issues nor is it intended to be legal advice. The intent is to provide you with general information to better understand your situation and the tools available to take action if needed. This website contains links to other third-party websites. Such links are only for your convenience; we do not recommend or endorse the contents of the third-party sites. You should contact an attorney to obtain advice with respect to your particular legal matter. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client relationship between you and LACBA Counsel for Justice, its employees or volunteers.


debt-relief-image2Struggling to pay your bills? You are not alone. Many people face financial difficulties at some point in their lives where they find themselves juggling payments and trying to keep the bill collector wolves at bay. Living with a chronic illness can make it even more difficult to pay your bills on time with added co-pays and stretches of disability. It can seem overwhelming at times no matter the cause, whether it be illness, job loss, divorce or just overspending. Hopefully, the information in this section will help you to take charge of the situation and try to minimize the stress on your health.

A lot of good information can be found here.

What Are Some Steps I Can Take to Better Manage My Finances?
Budgeting image-2

Step 1: Create a budget AND STICK TO IT

  • Calculate total monthly income and expenses
  • Keep track of your spending
  • Comparison shop
  • Create a realistic budget you can meet

Step 2: Check your credit report annually

  • You are entitled to a free credit report every 12 months from each credit reporting company and it’s important to see what it says.
  • Access your free reports here.
    • Get all three reports from Experian, Equifax and Trans Union because they often show different information
  • Find and correct errors: Disputing Errors on Credit Reports
  • Learn about different types of credit and interest rates

Debt Management Plan image

Step 3: Minimize expenses
It sounds obvious but this is the hardest part.

  • Distinguish between necessities and luxuries
  • Find expenses that can be reduced or removed
    • Try to avoid unnecessary purchases
    • Live with roommates
    • Eat out less
    • Choose less expensive phone and internet plans
    • Use a shopping list to reduce impulse buying at the market
    • Try to build some savings – even a small amount each month can add up
      • Only spend savings for REAL emergencies

This form might help: Make a Budget Worksheet Form

Step 4: Insurance

  • Disability coverage - You may have insurance protection on things like credit cards that would cover minimum payments on the amount owed in the event of disability. Review your contracts for disability coverage.
  • Review and budget other insurance coverage, like car insurance and shop around for the best rates.
Consequences of Not Paying

What can happen if I ignore my debts?

Depending on what you owe and own, the ramifications of ignoring debt can vary. Eventually, a creditor can go to court to file a lawsuit and win a judgment against you. The court judgment can be enforced in several ways.

A lien can be placed on any real property (such as a house or condo), certain kinds of valuable personal property can be taken and sold, your wages can be garnished, and bank accounts may be attached (including joint accounts). If the creditor is a service provider, such as a utility or phone company, the services may be discontinued. If a car payment is missed, the creditor can repossess the vehicle without a court order. (See Car Repossessions) There can be serious consequences if child or spousal support payments are owed.

BUT you may be “judgment proof.” Judgment proof means that your property is “exempt” from private debt collection - it cannot be garnished, levied or seized or otherwise taken by your creditors to pay what you owe them. See Section on Judgment Proof for more information.

Can a creditor take my property?

In many cases they cannot. Consumer debts (major credit cards, store cards, gas cards) are either secured or unsecured:

Secured Debt – A creditor has the right to repossess or foreclose on specific property (called collateral) without any court involvement if the secured debt is not paid on time. A car loan is a good example of this type of debt. (See Car Repossessions for further information

Unsecured Debt – A creditor does not have the right to foreclose or repossess specific property when the debt is unsecured. Instead, the creditor must first obtain a court judgment to seize any of your property. A judgment occurs when a creditor files a lawsuit against you and wins the case.

Debt-what actions can I take

Impact on Credit Scores When you Don’t Pay Your Bills

Even if you are not sued or there are no active collection efforts taken against you, be aware that not paying your bills will result in a low credit score which can impact your ability to rent an apartment or secure a car loan in the future.

What Actions Can I Take?

What alternative actions can I take if I cannot pay my bills?

  1. Negotiate a Work-Out
  2. If you have some income or savings but are having a hard time meeting your financial obligations, BE PROACTIVE and contact the creditor(s) and see if they will agree to an extended payment schedule or a reduced interest rate. Successful negotiations can prevent interruption of service such as phone or utility and help prevent negative information on your credit report. If an agreement is reached, it is a good idea to send a confirmation letter to the creditor that lays out the terms you agreed to. But don’t let them strong arm you – ONLY AGREE TO PAYMENTS YOU FEEL CONFIDENT YOU CAN MAKE.

    If you need help with negotiations try a Nonprofit Credit Counselor

  3. Wait & See Option
  4. If you have very limited income, including disability benefits, and little or no assets, the “wait and see option” is one that people in your circumstances carefully consider. In other words, wait to see what, if any, action your creditors take. The reason this can be a popular option is simply because there is little, if anything, the creditor can collect from you.
    If this is an option you are considering, it is good to know the following information.

    Bill Collection Time-barred Debts – Statute of Limitations
    The good news is that most debts do not last forever, but they can be around for many years. Creditors have a limited time to file a lawsuit against you which, in California, is generally four years.

    Federal & State Fair Debt Collection Laws & Calif. Fair Debt Buying Practices Act
    The other good news is that consumers are protected from creditor harassment. For example, you have the legal right to NOT receive phone calls or demand letters and there are actions you can take to protect your wellbeing.
    State of California Department of Justice Website- Debt Collectors
    For more information See Illegal Bill Collection Activities

    Fair Credit Reporting Laws
    The last bit of good news is that eventually negative information will automatically fall of your credit report, which is generally seven years.
    A Summary of Your Rights Under the Fair Credit Reporting Act

  5. Sending “Judgment Proof" Letters
  6. If you have no assets, cannot work or have low wages, and your source of income is exempt from judgment enforcement actions (such as Social Security disability and other government benefits), you may be judgment proof and may want to write a “judgment proof” letter to the creditor(s). If you are judgment proof, it means your income and assets are exempt from collection even if the creditor gets a court order (judgment) against you.

    Judgment Proof – Information and Sample Letter

    Consequences – With the “Wait and See” and Judgment proof options it is particularly important to understand there can be serious consequences to not paying your bills when it comes to your credit score. Even late payments will show up on your credit report and result in a low credit score.

    Interest rates – A low credit score can result in much higher interest rates on any credit you are able to obtain including consumer credit cards and car loans.

    Utilities - Bad credit can impact your ability to sign up for utilities such as phone, cable and electricity because your credit is checked during the application process. In some cases, you may need to provide a deposit before you can receive service. It could impact cell phone service as well.

    Housing – Renting an apartment is where we have seen the biggest impact on our clients who have low credit scores. Landlords conduct credit checks before renting property to their tenants. As you know, Los Angeles is an expensive city to live in with very little affordable housing. A low credit score can lead to a demand for larger deposits or higher rental rates even if you are considered at all. This can be doubly true if you are trying to obtain a mortgage to purchase a house or condo.

  7. Wage Garnishment and Claim of Exemption

  8. Wage Garnishment Collection efforts can look very different if you are working. If a creditor sues you and receives a judgment, if you don’t pay the money owed or try to negotiate some type of payment plan with the creditor, they will likely file paperwork with the court to have a portion of your paycheck taken. This is called a “garnishment” and generally about 25% of your take-home pay will be withheld. Even if you are collecting Social Security Disability Benefits and working just part-time (below the allowed SSDI threshold), your earned income is vulnerable.
    Collection efforts can look very different if you are working. If a creditor sues you and receives a judgment, if you don’t pay the money owed or try to negotiate some type of payment plan with the creditor, they will likely file paperwork with the court to have a portion of your paycheck taken. This is called a “garnishment” and generally about 25% of your take-home pay will be withheld. Even if you are collecting Social Security Disability Benefits and working just part-time (below the allowed SSDI threshold), your earned income is vulnerable.

    However, if you can show that your earned income is very limited and is ONLY used for daily living expenses for you and your family, then you can file for a Claim of Exemption. You will have to provide documentation to prove to the court that earnings are used for necessities (such as food and shelter) and not luxuries like cable TV.

    See here for more information: California Courts- If You Do Not Pay Your Judgement

What Can I Do About Harassing Phone Calls and Letters?

For many consumers facing delinquent debt, it is the creditor harassment that is the most stressful. The good news is that you ARE PROTECTED FROM CREDITOR HARRASSMENT - California law protects people from harassing phone calls and letters from creditors. For example, consumer creditors cannot pretend to represent law enforcement or other government agencies, call you early in the morning or use profane language.


Illegal Bill Collection Activities
Click HERE for a full listing of illegal bill collection tactics.

Visit The Fedral Trade Commission website on "Debt Collection FAQs".

Stop Harassment Letter
When you make it apparent to creditors and collection agencies that you know your rights, in most cases the collection agency will stop harassing you. Click HERE

What Can I Do When My Rights Are Violated?
  • Keep records of all letters and phone calls with the collector
  • Include: date, time, collector name, representative name, direct quotes from the call, summary of the call
  • Try to get the collector’s address and phone number
  • Contact the Federal Trade Commission HERE or call them at (877) 382-4357 OR call the Consumer Financial Protection Bureau at (855) 411-2372
  • Discuss the issue with an attorney – consider contacting us, the AIDS Legal Service Project.
    Click HERE for Project Intake form.
Should I Consider Bankruptcy?

Some consumers automatically think about filing for bankruptcy when they fall into debtor/creditor problems. However, bankruptcy may not always be the best option for persons who are judgment proof and/or have few assets and a diminishing income. Bankruptcy takes several months to complete and costs hundreds of dollars to file the paperwork. If you are a person living on disability benefits and are unlikely to return to work, you will want to think very carefully about the timing of a bankruptcy filing since you can only file once every eight years and you should consider if you are going to continue to accumulate debt.

Rather than filing for bankruptcy, if possible, consider consolidating your debt and planning for your future needs. You can determine which services you want to maintain and therefore, which creditors you should negotiate with for extended payment schedules or reduced interest rates. Where appropriate, you may also send “judgment proof” letters to creditors of services that you determine are unnecessary.

However, declaring bankruptcy may be necessary if you have earned income or substantial assets to protect or if your debt is so great that you really need a clean slate to begin again. If this is your situation, you should consult with a bankruptcy attorney to determine whether declaring bankruptcy would be beneficial.

The AIDS Legal Service Project is here to help if you need legal advice specific to your situation or need legal intervention. If you are ready to complete the AIDS Legal Service Project (“ALSP”) online intake form, click HERE. It will be reviewed to see if you qualify for free legal services through the ALSP. If you are over income or have too many assets, then the project might need to refer you to the Lawyer Referral Service.

If you have any questions, you can also email or call (213) 833-6776.


Car Loans & Repossessions – Read this Before Making a Purchase

What About Student Loans? Deferment, Forgiveness, Cancellation & Discharge

I Haven’t Paid my Taxes

The Pitfalls of Payday Loans

Dealing with Medical Debt

Illegal Bill Collection Activities

Judgment Proof – Information & Sample Letter