How to Settle a Debt in California

Sarah Edwards | November 22, 2022

Edited by Hannah Locklear

Getting sued for a debt in California is stressful. You have to respond to the lawsuit, and it’s usually difficult to find an attorney to take on your case.

When you know you owe a debt, and you want to settle it once and for all, you have options. Most creditors and debt collectors are willing to accept a settlement for less than you originally owed. In fact, the average debt settlement in the US is 50% of the original debt amount.

If you’re looking for a way to get rid of your debts in California, we have answers.

Follow these steps to settle a debt in California

1. File an Answer to your debt lawsuit.
2. Make an offer to start negotiations.
3. Get the settlement agreement in writing when an offer is accepted.

You can reach a debt settlement with your creditor or debt collector in California on your own with SoloSettle and avoid having to hire a debt settlement company.

Now, let’s take a closer look at each step. Check out this video to learn more about the debt settlement process:

1. File an Answer to your California debt lawsuit

You're likely worried if you’ve received notice of a debt lawsuit against you in California. No one wants to be the subject of a legal claim, and few people relish sharing their financial difficulties with a judge. However, it is possible to settle your debt lawsuit without going to court.

If you are being sued for a debt in California, you must file your initial response to the lawsuit by submitting an Answer document to the court and opposing party before California’s deadline, which is 30 days.

Even though you plan to settle the debt before your court date, filing an Answer prevents the court from granting a default judgment against you. You should avoid a default judgment at all costs, because it can lead to wage garnishment and seizure of your property.

Before starting your settlement negotiation, file an Answer in response to the creditor or debt collector’s Complaint. Address each claim listed in the Complaint by admitting, denying, or denying due to lack of knowledge.

For instance, you might contest the amount of money the creditor or collector is seeking from you or their right to file a lawsuit against you.

Learn more about how to respond to a debt lawsuit in California here.

Draft and file an Answer to your California debt lawsuit in minutes online.

2. Make an offer to start negotiations

Once you’ve responded to the lawsuit, you’re ready to reach out to the creditor or debt collector with your first settlement offer.

Since each debt account and circumstance is unique, there isn’t really a settlement percentage that works as a standard for all cases. So, in order to make your first offer, you’ll need to do two things:

1. Calculate how much you can pay.

Calculate how much money you have left over each month after you pay for the basics: food, shelter, utilities, and transportation. Subtract other costs that must be paid like other non-delinquent debt. Add the difference to any savings you have available to pay off this debt. The sum is the amount you have available to pay off the debt.

Amount available to settle = (monthly income – monthly costs) + savings

2. Determine how much you think the creditor or collector will accept.

Debts settle within a broad range of amounts. They can settle for amounts ranging from 1% to over 100% of the total amount of the debt. According to America Fair Credit Council’s Regan Report, the average consumer can reach a debt settlement of 50% when working with a debt settlement company.

All of that said, a 50% settlement is not easy to get. We don’t see it much. An 80% settlement is easy in most cases, as most creditors and debt collectors are willing to drop to that amount. Usually, we see debts settle for somewhere within that range. Around 60% is pretty common.

Ultimately, debts settle for a very broad range of amounts. How much the debt actually settles for depends on the answers to a variety of questions:

• Is it a signed promissory note or book account?
• Is there a meritorious defense?
• Are there any offsets?
• Is it interest bearing?
• Is there a valid fee-shifting provision? A fee-shifting provision requires the borrower to pay the cost of collection.
• When was the last payment?
• Is the debt owned by the original creditor or has it been assigned to someone else?
• Is it part of a federal or state loan program or is it a private loan?
• Is it secured credit?
• Is it dischargeable in bankruptcy? Is it a student loan?

Ask yourself these questions about your debt to have a better idea where to start with your negotiations. Here’s a little idea of what you could say in your initial offer:

“I see you’re suing me for [$500] for [case number]. I don’t have that kind of money and I don’t agree with the amount. But I do have [$250] that I can pay within 30 days to settle the debt in full. Let me know if you accept.”

SoloSettle’s software takes care of the negotiation process for you.

Now, let’s look at an example.

3. Get the settlement agreement in writing when an offer is accepted

As with most communications you have with creditors, debt collectors, and their attorneys, you should make all your offers in writing and, when reached, be sure to get the settlement agreement in writing too.

This will prevent any sneaky debt collection behavior in the future, and it will protect you in case they go back on their word.

Here’s a real sample of a settlement agreement document:

Read a full debt settlement agreement here.

Let SoloSettle manage your debt settlement agreement for you.

SoloSettle is the easiest way to settle your debt

SoloSettle’s goal is to empower you to negotiate and reach a debt settlement on your own.

SoloSettle makes negotiating easy by providing a structured process.You can use our web-app to send and receive offers from collectors. It will draft offers for you and protect you from the potential lies and bullying of debt collectors. Most importantly, SoloSettle makes sure all of the proper legal language is included to protect your rights when communicating with the creditor or debt collector. When a settlement agreement is reached, SoloSettle manages the settlement agreement documentation for you and protects your sensitive financial information from the collectors, preventing them from over-charging you.

Check out this review from a real SoloSettle customer:

“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.

SoloSettle really saved me a ton of time and heartburn and kept me from having to be my own lawyer in court.”

California has some crazy debt statistics

California is known for its sunny weather, its long coastline along the Pacific Ocean, and the star-studded city of Los Angeles. However, it’s also an expensive place to live. According to a 2022 cost-of-living survey, California is the third-most expensive state, falling behind only Hawaii and New York.

Housing costs are extreme in California. Buying a single-family home in the state will set you back an average of $708K—more than double the national average of $303K. Gas is also notoriously more expensive in California than in other states.

The average California household carries $8,505 in credit card debt. That’s unsurprising, given the high cost of living. Many families rely on credit cards when they don’t have enough savings to cover unforeseen expenses. If they can’t pay off the balance quickly, credit card debt will start to take a big bite out of their monthly income

Luckily, if you’re a Californian struggling with debt, you can settle your debt and find the financial freedom you’re seeking.

Can I settle my debt in California?

Debt settlement is an option for people who’ve fallen behind on bills and don’t see a way out of their financial difficulties. Under a debt settlement agreement, you’ll pay a portion of the original obligation as a lump sum, and the creditor agrees to wipe out the remainder of your debt.

Many debt settlement companies can provide you with a structured plan for debt settlement and handle the negotiations with your creditors. Debt settlement organizations usually charge a percentage of some amount involved in the negotiation, like the total debt amount or the total settlement amount..

Typically, the amount paid for debt settlement assistance is 25% of the total value of your debt.

You can attempt to settle your outstanding obligations with your creditors yourself. This strategy can work if you already have some money saved and feel comfortable bargaining in high-pressure negotiations with debt collectors or other creditors.

California debt settlement laws can protect you

If you choose to work with a debt settlement company or agency, be sure to learn about your rights as a consumer first. Under the California Fair Debt Settlement Practices Act (AB-1405 Debt settlement practices), which was passed in 2021, debt settlement companies cannot:

• Engage in false, deceptive, or misleading acts or practices when providing settlement services, including banning advance fees
• Fail to give certain debt settlement disclosures, including with an unsigned copy of the proposed written contract before you sign
• Withhold your right to cancel a contract with them
• Withhold monthly statements of your accounts while the debt settlement contract is still in place
• Offer to lend money, extend credit to a consumer, or purchase a debt account
• Request payment for the debt settlement services until a settlement has been reached according to the contract signed by the consumer

Any debt settlement company that is found in violation of the California Fair Debt Settlement Practices Act may be held responsible for statutory damages between $1,000-$5,000 per violation, as determined by the court.

You can avoid having your rights violated by scammy debt settlement companies, and work out a debt settlement agreement on your own with the help of SoloSettle.

What’s the best debt settlement company in California?

Well, we’ll let you decide on this one. Many consumers prefer SoloSettle over traditional debt settlement companies for a few reasons:

• You can settle debts of any size with SoloSettle. Many debt settlement companies require you to have a debt over $15k.
• SoloSettle actively attempts to settle your debt, whereas many debt settlement companies take a more passive role, waiting for settlement offers to come to them.
• SoloSettle is offered by SoloSuit, a trusted brand and a legitimate company. Many traditional debt settlement companies are actual scams.
• SoloSettle has legal defense built in with SoloSuit. While settling, you can use SoloSuit to block lawsuits if you need. Most debt settlement companies don’t provide legal defense; if you’re sued for a debt you are on your own.

Below is a list of other great debt settlement companies to consider:

• Freedom Debt Relief
• Century
• National Debt Relief
• Accredited Debt Relief
• Citizens Debt Relief
• CuraDebt

Can I consolidate my debt in California?

Debt consolidation is an excellent option if you want to maintain a good credit score while paying off your debts over a shorter period.

There are two types of debt consolidation: a traditional debt consolidation loan and a balance transfer credit card. Interested individuals need a decent credit score—at least 650—to qualify for either option.

A traditional debt consolidation loan involves borrowing enough money to cover your outstanding debt, like credit cards and medical bills. You’ll use the new loan to pay off your old debt and then make monthly payments toward the debt consolidation loan balance.

Debt consolidation loans typically have lower interest rates than credit cards, which means that you can pay down your balance more quickly by making just one monthly payment.

Your other option is a balance transfer credit card. You’ll transfer your high-interest debts to the new card, then make payments to the new lender until you pay it off. Many balance transfer credit cards offer 0% interest for a short period, like six months to a year.

Both methods are good options for those with decent credit, but if you have a poor credit score, you’ll need to look at other alternatives.

What’s the best way to send an offer to a collector?

As a rule of thumb, it’s best to keep all your communications with debt collectors in writing. That being said, you can use the following methods to send a settlement offer to a debt collector:

• Phone: Communicating with debt collectors over the phone is risky unless you record the call for proof. According to CA Penal Code §632 and §637.2, it is illegal to record a debt collection phone call without both parties' consent. So, you have to ask the debt collector if you can record the call before doing so. As such, making a settlement offer over the phone probably isn’t your best bet in CA. Debt collectors admittedly prefer to communicate over the phone, because they’re trained negotiators and know how to manipulate the conversation to get what they want. They’re also notorious for lying and bullying over the phone because there will be no record of it. Although collectors prefer it, this is the worst way for a consumer to negotiate with the collector.
  
  
• Mail: Mail is good because it provides a recorded paper trail. However, it’s slow, and unless you pay for tracked mail, you don’t really know if it was delivered, in a low-trust environment. Many collectors are set up to receive mail negotiations. Mail is also asynchronous. Debt collectors are professional negotiators. You probably are not. Negotiating by mail levels the playing fields by allowing you time to think between each round.
  
  
• Email: Email is nice because it is instantaneous and recorded in writing. Some collectors aren’t set up to negotiate via email with consumers, but if you can find their contact information, email is definitely the ideal option. It’s the best of both worlds because it’s fast, but you still get everything in writing.

How to find debt relief in California

If you’re feeling overwhelmed with debt as a California resident, there are organizations in place to help you find relief.

You may consider debt settlement, debt consolidation, or bankruptcy as some other debt relief options.

To learn more, check out our article called How to Get Debt Relief in California.

Does settling the debt stop my creditor from taking further action against me?

Yes, as long as you follow a few key steps.

Make sure to get your settlement agreement in writing. If your creditor attempts to contact you further concerning the debt, you can refer to the agreement.

You must abide by the terms of the agreement, or it will lose its validity. Make sure to pay your creditor in accordance with the settlement terms. The creditor may restart the lawsuit process if you don’t make your payment on time.

With some luck, determination, and SoloSettle’s software, you’ll be able to settle your debt and move on.

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to answer a summons for debt collection in your state

Here's a list of guides for other states.

All 50 states.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Guides on how to beat every debt collector

Being sued by a different debt collector? Were making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Cypress Financial Recoveries
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Fulton Friedman & Gullace LLP
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mannbracken
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• Nationstar Foreclosure
• Northstar Capital Acquisition
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Pallida LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• Provest Law
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• Regents and Associates
• RSIEH
• Salander Enterprises LLC
• Second Round Sub LLC
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group
• Weinberg and Associates
• Wolpoff & Abramson

Win against credit card companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get answers to these FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendants Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouses Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

How Does Debt Assignment Work?

What Happens If a Defendant Does Not Pay a Judgment?

How Does Debt Assignment Work?

Can You Serve Someone with a Collections Lawsuit at Their Work?

What Is a Warrant in Debt?

How Many Times Can a Judgment be Renewed in Oklahoma?

Can an Eviction Be Reversed?

Does Debt Consolidation Have Risks?

What Happens If You Avoid Getting Served Court Papers?

Does Student Debt Die With You?

Can Debt Collectors Call You at Work in Texas?

How Much Do You Have to Be in Debt to File for Chapter 7?

What Is the Statute of Limitations on Debt in Washington?

How Long Does a Judgment Last?

Can Private Disability Payments Be Garnished?

Can Debt Collectors Call From Local Numbers?

Does the Fair Credit Reporting Act Work in Florida?

The Truth: Should You Never Pay a Debt Collection Agency?

Should You Communicate with a Debt Collector in Writing or by Telephone?

Do I Need a Debt Negotiator?

What Happens After a Motion for Default Is Filed?

Can a Process Server Leave a Summons Taped to My Door?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

Youre Drowning in Debt — Heres How to Swim

Help! Im Being Sued by My Debt Collector

How to Make a Motion to Vacate Judgment

How to Answer Summons for Debt Collection in Vermont

North Dakota Statute of Limitations on Debt

ClearPoint Debt Management Review

Indiana Statute of Limitations on Debt

Oregon Eviction Laws - What They Say

CuraDebt Debt Settlement Review

How to Write a Re-Aging Debt Letter

How to Appear in Court by Phone

How to Use the Doctrine of Unclean Hands

Debt Consolidation in Eugene, Oregon

Summoned to Court for Medical Bills? What to Do Next

How to Make a Debt Settlement Agreement

Received a 3-Day Eviction Notice? Heres What to Do

How to Answer a Lawsuit for Debt Collection

Tips for Leaving the Country With Unpaid Credit Card Debt

Kansas Statute of Limitations on Debt Collection

How to File in Small Claims Court in Iowa

How to File a Civil Answer in Kings County Supreme Court

Roseland Associates Debt Consolidation Review

How to Stop a Garnishment

Debt Eraser Review

Do Debt Collectors Ever Give Up?

Can They Garnish Your Wages for Credit Card Debt?

How Often Do Credit Card Companies Sue for Non-Payment?

How Long Does a Judgement Last?

​​How Long Before a Creditor Can Garnish Wages?

How to Beat a Bill Collector in Court