Facing unmanageable debt in Los Angeles? You have options.
If you’re struggling with bills but want to avoid filing bankruptcy, there are several legitimate alternatives that can reduce monthly payments, stop collections, or help you keep your home. This guide walks through seven commonly used debt-relief paths, the advantages and trade-offs of each, and where Los Angeles residents can find free or low-cost help. The goal: help you choose a safer option that fits your situation while avoiding costly scams.
Important note: California now requires tighter oversight of debt-settlement providers — some services must register with the state regulator, and federal agencies continue to press enforcement actions against scam operations. Read the descriptions below, and contact a qualified counselor or attorney before you sign anything.
7 Alternatives to Bankruptcy — What they are and when they help
Nonprofit credit counseling & Debt Management Plans (DMP)
How it works: A HUD- or NFCC-affiliated nonprofit counselor reviews your budget and may enroll you in a DMP. You make a single monthly payment to the agency, which pays creditors and often negotiates lower interest and waived fees. DMPs are designed for unsecured debts like credit cards and can stop collection calls while active.
Pros: Lower interest, single payment, counseling and budget help; typically no aggressive fees. Cons: Account closures may be required and participation is reported to credit bureaus. For reliable help, use a HUD-approved housing/housing counseling directory or an NFCC-accredited agency.
Debt consolidation loan or balance-transfer credit cards
How it works: Consolidation combines multiple debts into one loan (personal loan or home-equity loan) or moves balances to a lower-rate credit card. This can lower monthly payments and simplify finances if you qualify for a better rate.
Pros: Predictable single payment, possible interest savings, fewer accounts to track. Cons: May require good credit or collateral; moving unsecured debt to secured debt (home equity) risks your house if you default. Shop for transparent terms and compare total interest costs before signing.
Negotiate directly with creditors (hardship programs)
How it works: Many banks and credit issuers offer hardship plans, temporary forbearance, payment plans, or reduced-interest options for borrowers facing job loss, medical bills, or other crises. You (or an attorney/counselor) contact the creditor to request specific relief.
Pros: No third-party fees and often faster than other routes. Cons: Not every creditor will offer a favorable program; keep confirmations in writing and be wary of advice to stop payments unless you have a written agreement.
Debt settlement (negotiate to pay less than you owe)
How it works: You or a company negotiates a lump-sum or structured reduced payment with creditors to settle the debt for less than the balance. In California, providers of debt-settlement services must comply with state registration and consumer protections implemented under the California Consumer Financial Protection Law (DFPI rules effective Feb. 15, 2025) — check registration before paying any company.
Pros: Potentially lowers total owed. Cons: Big risks — fees, tax consequences on forgiven amounts, steep credit-score impacts, and the possibility creditors sue. Federal and state regulators have taken enforcement actions against abusive debt-relief firms; always verify complaints and registration status.
Mortgage loan modification, forbearance, and foreclosure prevention
How it works: If your primary problem is your mortgage, lenders may offer loan modifications, forbearance, or other loss-mitigation options. Los Angeles County offers free foreclosure-prevention counseling and direct assistance through the Department of Consumer and Business Affairs (DCBA) and HUD-approved housing counseling agencies. Counselors can review loan documents and help you apply to servicer programs.
Pros: Can keep you in your home and avoid foreclosure. Cons: Not guaranteed; timing matters — contact a counselor immediately after missing payments or receiving foreclosure notices.
Federal student-loan alternatives: IDR plans, TPD, PSLF, and administrative options
How it works: For federal student loans, options like income-driven repayment (IDR) plans cap monthly payments based on income; Public Service Loan Forgiveness (PSLF) and Total & Permanent Disability (TPD) discharges may eliminate payments under qualifying circumstances. These are separate from bankruptcy and often more accessible than a student-loan adversary proceeding.
Pros: Keep loans in good standing or reduce payments without harming credit. Cons: Forgiveness timelines can be long; documentation and eligibility rules are strict.
Legal help, consumer protections, and local Los Angeles resources
How it works: If you're threatened with unlawful collection practices, have been the target of a debt-relief scam, or face wage garnishment, consult a consumer law attorney or legal aid organization. Los Angeles County’s DCBA offers free counseling, mediation, and referrals — they can help identify scams, mediate disputes, and point you to legal clinics. Report suspicious debt-relief firms to the FTC, DFPI (California), and local consumer offices.
Pros: Legal advocacy can stop illegal collection tactics and recover refunds. Cons: Attorneys cost money (but many consumer-legal clinics and pro bono programs exist in Los Angeles).
How to choose the right alternative — a quick decision checklist
- Identify the debt type: mortgage or rent problems need housing counselors; federal student loans need StudentAid.gov and IDR options; credit-card and medical debt are typically handled by DMPs, consolidation, settlement, or negotiation.
- Get free advice first: contact HUD-approved housing counselors, the NFCC, or Los Angeles County DCBA for free counseling and local referrals. These agencies can often prevent costly mistakes.
- Beware of upfront fees and guarantees: legitimate counselors and reputable lenders won’t demand large advance fees to reduce unsecured debt, and no reputable company can guarantee a fixed percentage reduction. If a firm pressures you to stop paying creditors, get a second opinion.
- Check registration and complaints: in California, search DFPI’s registries for debt-settlement providers and check the FTC for enforcement actions before hiring a third party.
Immediate steps to take today
- Gather your most recent bills, pay stubs, and a monthly budget.
- Call a HUD-approved housing counselor (800-569-4287) if housing is at risk.
- Make a list of priority debts (mortgage, secured loans, utilities, taxes, child support) and call creditors to ask for hardship plans.
- Contact Los Angeles County DCBA for free one-on-one counseling (toll-free within LA County: 800-593-8222).
Final thoughts — protect yourself and act early
Bankruptcy can be the right solution for many people, but it’s not the only route. Many Los Angeles residents avoid filing by using nonprofit counseling, lender hardship plans, mortgage loss-mitigation, student-loan programs, or—carefully—debt settlement. Whatever path you consider, verify credentials, get written agreements, and consult free local resources before paying fees to a company that promises quick fixes. Regulators including the DFPI and FTC have increased enforcement, so check registration and complaints before you contract with a debt-relief provider.
If you’d like, we can help you: (1) locate a HUD-approved housing counselor in Los Angeles, (2) prepare a script and checklist for calling creditors, or (3) review a debt-relief offer before you sign. Contact a licensed consumer attorney if you face lawsuits, wage garnishments, or complex student-loan issues.