As part of the Los Angeles metro area, Santa Ana enjoys one of the most vibrant economies in the country. Located just minutes from the Port of Los Angeles, the most important port in North America, Santa Ana features many companies in the logistics, manufacturing and finance sectors. This area is ranked second among all metropolitan statistical areas and is more productive, in terms of dollars, than both Saudi Arabia and Switzerland. It’s safe to say that Santa Ana is not hurting for money.
Yet these statistics don’t describe the full picture. The Los Angeles area has one of the highest populations of illegal immigrants in the U.S., many of whom don’t participate in the official economy. In addition, the area had one of the highest unemployment rates coming out of the 2008-2009 recession. Los Angeles still suffers from official unemployment of over 7 percent, which is one of the highest for a major city in the United States.
From aerospace to the FIRE sector to Hollywood, Los Angeles features the top corporations in just about every industry that shapes the U.S. economy. However, like many other large cities, it has glaring differences between the haves and the have-nots.
California has the highest number of bankruptcies annually of any state, by far. This is driven, in no small part, by the Los Angeles area. The metropolitan area was hit particularly hard by the housing crisis of 2008, especially among minority home owners. The decrease in wealth and discretionary income has sent ripple effects through many neighborhoods, leading to micro-depressions, even as the glitzy parties of the Hollywood hills can be seen above, laughing into the night.
For many Santa Ana residents it has been their home that has gotten them into financial trouble. For others, it’s been out-of-control consumer spending or car payments. Whatever the cause, debt settlement can be a viable solution, a means to get out of debt clear without all the life-destroying baggage of a Chapter 7 filing.
Why Would Someone Choose Debt Settlement?
Debt settlement can be a viable solution for those who want to avoid bankruptcy. A declaration of Chapter 7 is a decision that is not to be taken lightly. For most people, a bankruptcy proceeding will have ongoing implications for the rest of their lives. Avoiding these outcomes is the main benefit debt settlement has to offer.
In general, debt settlement is a good option for people who have controlled the source of the debt accumulation, who have sufficient income to complete the program with high certainty and whose debts are not disproportionate to their income levels. If you fit these criteria, debt settlement may be the way to go.
But there’s another option that should be mentioned, and that’s debt consolidation. Debt consolidation allows people with sufficient collateral, usually a home, to convert high-interest, unsecured debt to low-interest, secured debt. This can be a particularly attractive option for those who have significant debt but also significant income and who, as a result, can pay down their debts quickly and with certainty. The reason debt consolidation is so attractive is because, done right, it will have no effect at all on the debtor’s credit score and can result in huge reductions in interest and, in some cases, reductions of principal. However, debt consolidation can only be considered by those with very high incomes who are guaranteed to be able to keep making as much or more for the foreseeable future. The reason is that, when debt consolidation is undertaken, by trading unsecured debt for secured debt the debtor is placing his home at risk, should he default.
On the other hand, debt settlement does not trade unsecured debt for secured debt. The trade-off is that debt settlement almost always mars the credit rating and history of the person who is settling. This can result in drops of up to 150 points on the debtor’s credit rating and notes of non-payment on their credit history. However, those things are relatively easily fixed, and their consequences pale in comparison to the devastation wrought on the debtor’s personal finances by a declaration of Chapter 7.
One reason is a successful bankruptcy will result in the debtor very likely being unable to obtain any credit cards, home mortgages or auto loans for up to a decade. For someone in their late 20s or early 30s, this could effectively mean that they cannot form a family.
Other problems with declaring bankruptcy include the debtor having their security clearance revoked and having the bankruptcy note on their credit histories forever. It’s a little known secret that employers can see any applicant’s bankruptcy history if they choose to look. Many employers, especially in certain trust-based industries, are very hesitant to hire applicants who have gone through bankruptcy, even years prior.
Finally, one of the most insidious and difficult-to-manage aspects of declaring bankruptcy is that many of the creditors whose debts will be permanently discharged by the bankruptcy court will be local. Running into people at the store or the local restaurant who you owed thousands of dollars to but now officially owe nothing can be awkward enough that many people who declare bankruptcy often end up moving.