How to Settle Your Debts in New York

You always hear that if you can make it in New York, you can make it anywhere. But what if you’re not making it in New York? What’s if you’re struggling to keep up with your expenses and bills and there never seems to be enough money coming in and too much going out? That’s the point where you might want to start exploring your debt relief options. One option is debt settlement. A debt settlement involves paying less than the full amount of your total debt to each creditor to fulfill your obligation to them, usually in a lump sum payment upfront or as part of a very short installment plan. You can try debt negotiation on your own or you can work with a New York debt settlement company. Creditors do not have to agree to any settlement offers, but they do so more often than you might think. This is because creditors know that once debt payments have been delinquent for a significant period (at least 90 days), their chance of ever seeing any payments on the outstanding balance is very low, only one out of five on average. As such, the opportunity to get some money, even if it’s not the full amount owed, will decrease their overall losses. When you add in the incentive of getting this money upfront in a lump sum, this increases your chances of entering into a settlement agreement. If you have a manageable number of creditors, are already behind on payments and the bulk of your debts are unsecured, like credit card debt, you might be a good candidate for debt settlement. Importantly, you will also need access to funds to make lump sum payments or the ability to set aside money to save up for these offers. If that is not feasible for you or if you have many different types of debts and a large number of them, this may not be your best solution. Debt settlement will not work for payday loans, title loans, student loans, and most medical bills. There are also risks to consider with this debt relief option. If you’re not already behind on your payments, creditors will have no reason to discuss a settlement plan. But once you fall behind, there are irreversible implications, including late fees, penalties, a negative hit to your credit score, collection calls and possible lawsuits from collection agencies. Further, there can be tax consequences to debt settlement, as the amounts “forgiven” can be treated as taxable income by the IRS. Finally, it’s important to be aware that while there are great New York debt settlement companies out there to help you through the process, there are also plenty of predatory companies looking to make a profit off of your financial problems, so you need to be aware of possible scams and look out for red flags. 

Learn More Through Free Nonprofit Credit Counseling

A good first step to getting on track with your personal finances is to learn about the different debt relief possibilities from a reputable nonprofit credit counseling agency. You can meet one-on-one with a credit counselor, who will take an in-depth look at your financial circumstances. They will review your income, expenses, and debt amount and discuss your short-term and long-term financial goals with you. This initial session is always free, and in the end, they’ll recommend a personalized action plan with your best next steps, whether that’s debt consolidation, a debt management plan, or bankruptcy. You should look for a nonprofit organization that is accredited by the National Foundation for Credit Counseling (“NFCC”) as they are held to rigorous standards. While the NFCC doesn’t certify debt settlement companies, you can discuss the option with your credit counselor and get their opinion on whether that’s a feasible option given your financial circumstances. 

How to Settle Your Debts in New York

If debt settlement is an option that you want to explore further, then follow the below next steps to help determine if it will suit your debt management needs. If you do choose to pursue it, this article will walk you through the debt settlement process so that you can move forward with confidence.

New York Debt Consolidation

Debt consolidation is an option that can be very effective in the right circumstances. In a New York debt consolidation, you take on new debt, usually in the form of a personal loan, to pay off your existing debt. So long as you have a good or excellent credit score and qualify for a lower interest rate on your debt consolidation loan, you will save money by getting rid of higher interest rate debts like credit cards. The key to debt consolidation is having a good or excellent credit score, which unfortunately counts this option out right away for a lot of people. 

New York Debt Management Plan

Another option is to pursue a debt management plan. A New York debt management plan (“DMP”) is a form of debt consolidation that is not dependent on your credit score. You can work with a credit counseling agency to create both a reasonable budget and an affordable DMP monthly payment. The credit counseling agency can then negotiate on your behalf with your creditors to lower interest rates and reduce or eliminate late fees and penalties. Unlike a debt settlement, by the end of your New York DMP, you will have paid in full on all of your debts. 

New York Bankruptcy

If you find that debt settlement doesn’t work for you because there’s no money left to set aside at the end of the month after you pay your living expenses, bankruptcy may be a better option. In bankruptcy, you can eliminate some or all of your unsecured debts to get a fresh start with your finances. Most bankruptcy attorneys offer free consultations so you can explore this option at any point in the process. If you do decide to file a New York bankruptcy you can check Upsolve’s screening tool to see if you qualify for free assistance throughout your case.