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NEW YORK DEBT RELIEF - FACTS, PROGRAMS, AND SOLUTIONS

New York debt relief - facts, programs, and solutions

BY Dana GeorgeDecember 25, 2024

For New York (the state) New York City is, in so many ways, the jewel in the crown. Economically speaking, New York City leads as the top financial center of the world, but the state as a whole can hold its own in the economic stakes too.

As you might expect, the cost of living is high in the Empire State.New York ranks as the 5th most expensive state in the U.S. (out of 50 states and the District of Columbia). All categories measured—including groceries, healthcare, and transportation—are well over the national average of 100%. But the cost of housing comes in at a whopping 170.2%.

What is debt relief?

Debt relief is a term used to describe reorganizing your debt. When you reorganize your debt, you may get a lower interest rate, have some late fees forgiven, or get an extension on the repayment period. It’s all about rearranging the debt to make it easier for you to pay off.

There are several ways to approach debt relief, including:

New York debt relief programs: How do they work?

If you're considering New York debt relief programs, start by comparing each one separately. No two debt options are precisely the same, and one is sure to be a better fit for your situation. Here, we look at some of the most common:

Debt management

A debtor and a credit counseling agency create an agreement (a debt management plan, or DMP) to pay off multiple debts using one monthly payment. The counseling agency negotiates with creditors to reduce interest rates or waive fees, with the understanding that the debt will be fully paid off in three to five years.

Working with a credit counselor or beginning a DMP doesn't directly impact your credit score. However, the plan could temporarily hurt your credit score.

For example, the agency may require you to close the credit card accounts that you've included in your DMP. Closing accounts that still have a balance could cause your credit utilization ratio (which measures how much of your available credit you're using) to spike. That’s because you’re now using more than 100% of your $0 available credit on that card. High utilization typically lowers your credit score.

But there’s good news. Entering a DMP should make your payments more manageable, and your ability to make payments could help you re-establish a positive payment history. And according to FICO®, once you're in a DMP, your creditors may offer to update account statuses to current instead of past due. This alone could improve your score.

Debt consolidation

Debt relief in New York isn't just for those who experience late or missed payments. It's also available for those who simply want more wiggle room in their monthly budget.

Let's imagine you manage to make all your payments each month, but your budget is stretched thin and you're constantly stressed by the state of your finances. A debt consolidation loan could help relieve the pressure and give you a clear idea of when your debts will be paid off.

Here's how it works: With debt consolidation, you take out a single loan to pay off multiple debts. As long as the interest rate on the loan is lower than the average rate you're paying on your existing debts, debt consolidation could be worth considering. (It usually doens’t make sense to pay off a debt using a more expensive loan.)

Unlike the variable interest rates most credit cards carry, most personal loans have a fixed rate. You’ll know what your monthly payment is going to be for the rest of the loan, and you’ll know your payoff date.

Debt settlement

Debt settlement lets you resolve your debt for less than the full amount you owe. With debt settlement, either you or a debt settlement company negotiates with creditors to accept less than the full amount you owe, and forgive the rest. The agreement could be for a lump sum payment, or a series of payments.

Debt settlement is typically best for those who can't afford to repay the full amount of their debt, and could also help those who’d like to avoid bankruptcy. Before entering debt settlement, it's important to know which debts can˛ be included. Debts that could be cleared this way are typically unsecured, like credit card accounts and medical bills. Debts secured by collateral can’t be included. This includes mortgages and car loans.

Debt settlement companies charge a fee, typically based either on the amount of your enrolled debt or on the amount of debt that is forgiven. You don’t pay that fee until:

An agreement has been reached and presented to you for your approval
You approve the agreement
At least one payment toward the agreement has been made

Settled debts are reported as “settled,” which is better than a collection account but less favorable than “paid as agreed.”

The debt settlement process is likely to harm your credit standing. Most people choose to stop making payments on their enrolled debts while they’re in a debt settlement program. That makes it easier to afford to set aside money every month toward settlement offers. Also, many have have already fallen behind by the time they consider debt settlement. Late payments and collection accounts are bad for your credit.

Healthy credit tends to flow naturally from stable finances. Once you get back on firm financial footing, you’ll be in the best position to maintain good credit.

Bankruptcy

Bankruptcy is a legal process for dealing with debt. There are several types of bankruptcy protection. Bankruptcy could mean reorganizing a person’s debt to make it possible for them to repay what they owe, or it could mean forgiving the debt in full or in part.

Generally, individuals file for either Chapter 7 or Chapter 11 bankruptcy protection. Using a means test, the bankruptcy court determines which kind of bankruptcy you’re eligible for. In other words, the court looks at whether you have the means to repay your debt or whether you need a fresh start to get back on their feet.

Bankruptcy attorneys work with this legal procedure day in and day out, and a good attorney is the best place to start.

Income-driven payment plans

For those who find it challenging to repay their federal student loans, an income-driven payment plan bases monthly payments on income and family size, reducing the monthly payment to a more manageable level.

The goal is to reduce a person's payments to an amount that matches their current financial situation and allows them to stay on top of their student loan debt.

Find out if you qualify at StudentAid.gov.

Average credit card debt in New York- debt relief seekers

Credit card debt in New York impacts many across all age groups. We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during November 2024. Here are the key statistics:

Average credit card debt for all debt relief seekers	Percent holding Credit Card Debt	Average Debt for all debt relief seekers and carrying credit card balance
$15,245	89%	$17,060
▲ 2.1% MoM	▲1.5% MoM	▲ 0.6% MoM

This snapshot shows that the average credit card debt for New Yorkers seeking debt relief rose slightly month-over-month (MoM), with the percentage of debt holders and the average debt for balance carriers experiencing a modest increase.

Breakdown of average credit card debt by age group

This breakdown shows how credit card debt affects each age group in New York, with older adults generally carrying higher balances and a greater proportion holding debt.

Age Group	Percent holding Credit Card Debt	Average Debt for Balance Carriers
18-25	83%	$11,035
26-35	85%	$14,015
36-50	91%	$18,036
51-65	91%	$17,780
65+	92%	$18,500

Debt settlement: A powerful solution for New York residents

When it's time to reduce debt, no single method is right for everyone. However, most people find that one works better for their situation than others. Debt settlement in New York may be different than debt settlement in Peoria or Phoenix, likely due to the high cost of living in New York.

For example, the average credit card debt for New Yorkers at the end of September 2024 was $8,810. Further, according to the New York City Comptroller's Office, by midyear 2024, 12% of New Yorkers with credit card accounts were more than 90 days late on paying at least one of them.

If you're weighed down by debt that feels impossible to rid yourself of, debt settlement is one way to clear it for less than the full amount you owe. Through debt negotiation with your creditors, if you qualify, you could get rid of your unsecured debts like credit cards, personal loans, and payday loans, and start working toward a better financial future.

Is debt consolidation the right choice?

There’s no one-size-fits-all financial solution for debt. Instead, it depends entirely on your situation and what feels most comfortable. Let’s dive into how debt consolidation works and compare consolidation with debt settlement.

There’s more than one way to consolidate debt. For example:

Debt consolidation loan. Debt consolidation loans are personal loans. You borrow a lump sum, use it to pay multiple debts, and then repay the consolidation loan in monthly installments. The goal is to borrow the funds at a lower interest rate than you currently pay. Most personal loans for debt consolidation are unsecured, meaning you don’t have to risk anything of value by using it as collateral.
Home equity loan. A home equity loan allows you to borrow against the equity in your home and use the funds to pay off debt. Because home equity loans are secured by the home, they often have a lower interest rate compared to other options.
Cash-out mortgage refinance. This is a new mortgage that’s bigger than your current mortgage. You use it to pay off your old mortgage and still have money left over that you could use for another purpose.

Who may benefit from debt consolidation vs debt settlement

Typically, the consumer who benefits most from a debt consolidation loan has less severe debt and a credit rating that’s high enough to qualify for a low interest rate.

On the other hand, a person with a financial hardship that makes their debts unaffordable may find debt settlement a better option.

New York statute of limitations

A statute of limitations refers to how long a creditor has to sue you for outstanding debt. According to New York debt laws, creditors have three years from the last activity on an account to take you to court for the following types of debt:

Credit card debt
Medical bills
Personal loans
Auto loans
Student loans

Creditors have six years to pursue legal action to recover mortgage debt in New York. Once a creditor wins a judgment, the statute of limitations is 20 years to collect on that judgment. This includes unpaid debts already ruled on in court and child support judgments.

One thing you (and a debt expert) will consider is how long it's been since the last activity on your accounts and how much time is left on the statute of limitations. Pinning that down will help determine which debt relief will provide the most benefit.

Hardship programs for New York residents

The state of New York offers a variety of programs to those facing financial issues, such as medical bills or loss of income. New York's financial hardship assistance is designed to provide temporary relief. Here are some state relief programs available:

Cash assistance: The Family Assistance (FA) program helps families with children.
Safety Net Assistance (SNA): A program designed for those who aren’t eligible for Family Assistance.
Emergency Assistance to Adults (EAA) and Emergency Assistance to Families (EAF): Provides emergency assistance to individuals and families in need.
Department of Social Services (DSS): Helps connect New Yorkers to rental assistance programs to help them move out of a shelter into more stable housing.
New York Home Energy Assistance Program (HEAP): Provides low-income households discounts on gas and heat.
Child Care Subsidy Program: Aids eligible families struggling to pay for child care services.
Low Income Household Water Assistance Program (LIHWAP): Helps provide payment options for water and sewer services.
Federal Communications Commission (FCC): Helps households afford broadband internet service.

Find your debt relief solution

If you’re keen to alleviate the stress and worry of your growing debt burden, take heart. There’s a personalized debt solution for your situation. To find the right solution for you, just follow these four simple steps:

Call Freedom Debt Relief at 800-910-0065 for a free debt relief evaluation.
Learn about available debt-relief options and get help customizing the right solution for you.
Commit to staying the course. No matter which New York debt help you choose, keep your eye on the prize till you’ve completed it.
Look forward to a better financial future and the prospect of a worry-free life when you’re free of debt