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Stockton, California has had a rough ride over the last decade. Starting with the subprime mortgage crisis of 2007, the city was sent into an economic death spiral and has yet to fully right itself. Rapid demographic change mixed with a collapsed housing market has fueled an unusual amount of economic hardship for a city in the richest state in America.

But unlike some of California’s thriving economic centers, Stockton never developed the tech industry of nearby Silicon Valley or the highly diversified economy of Los Angeles. What Stockton did have going for it in the mid-2000s was one of the state’s most booming housing markets. Unfortunately, that came crashing down in 2008. What resulted was a shocking decline in housing prices, taking much of Stockton resident’s net worth with it.

Within one year, between 2007 and 2008, housing prices in the city fell by 44%. This, combined with high unemployment, led to Stockton being named the foreclosure capital of the United States, at one point. The city’s official unemployment rate skyrocketed to over 20% by 2010, among the highest in the nation for any city or town of any size. Meanwhile, the city’s crime rate was quickly matching forces with its other prodigiously awful metrics. Today, Stockton, California is one of the most dangerous cities in the nation, in terms of both violent crime and property crime. It has been named the eighth worst U.S. city to live in by Forbes Magazine.

Compounding all of this is the larger macroeconomic picture of California as a whole. While the state has a relatively mild 5.5 percent unemployment rate, it has continued facing implacable demographic challenges. Rather than being a nasty, once-off aberration, Stockton may be a glimpse into the state’s future.

With a rapidly expanding Latino population and a decades-long hemorrhaging of middle-class whites, the state is increasingly taking on characteristics of a banana republic, with a large, brown, permanent underclass being lorded over by a small plutocracy of white elites. This transformation can be seen in the state’s welfare rolls, unofficial unemployment stats and nation-leading bankruptcy numbers.

But for Stockton residents who find themselves quickly submerging under a sea of unmanageable debt, bankruptcy may not be the best option. Debt settlement may be able to resolve their financial issues without the horrific consequences of a Chapter 7 bankruptcy.

Who is debt settlement right for?

Debt settlement can be far superior to other forms of debt management but only if certain criteria are fulfilled. The first is that the debtor should be dealing with only unsecured consumer debt. Any kind of court-ordered debt, such as alimony or child support, or government-owned debt, such as back taxes or student loans, cannot typically be consolidated. Special attention is due where any company claims to be able to make these kinds of debt go away. Failure to pay many of these can result in fines and even criminal charges.

The second element that must be present is that the debtor should have recognized the habits or expenses that caused him to enter into debt in the first place. Priority one should be forming a plan to avoid making the same mistakes twice. This is the reason that so many financial counselors say that debt settlement doesn’t work. Without a strong game plan to stay out of debt once the person has become debt free, it’s all but guaranteed that they’ll slide back into their old ways and be back exactly where they started, on short order.

Lastly, the borrower’s income level relative to the debt load should be such that there is a reasonable chance that they will be able to complete the debt settlement program. Debt settlement programs are much more forgiving than some other programs, such as debt consolidation, when the debtor is unable to complete them. Still, both the debtor and the settlement company will get the most out of the program when the debtor can complete it. In fact, many of the best settlement companies won’t get paid at all until the case has been successfully resolved in full.

Why debt settlement?

The other two main options for discharging large debts are consolidation and bankruptcy. Bankruptcy is the option of last resort. It is often described as a nuclear option because it utterly annihilates all IOUs, under the weight of the law. But it also leaves the debtor in a terrible financial position for up to ten years. Another difficult aspect of declaring bankruptcy is the hard reality that many of the creditors the debtor may have become legally exempted from paying are friends, family, neighbors and coworkers. As a result, many people who declare Chapter 7 end up permanently moving away from the communities where they have lived for their entire lives.

The other option is debt consolidation. This can be an attractive option for those debtors who have a very solid income and know that they’ll be able to pay off the consolidation loan. But it can also be extremely risky. It usually involves taking out a home equity line of credit, the defaulting on which results in foreclosure of the borrower’s home.