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Debt settlement is not for everyone, but many New Yorkers can take advantage of this situation to help them get out of a situation that seems hopeless. New Yorkers aren’t all in a drastic financial situation, but many live without enough money to make ends meet. This leaves them unable to pay both their credit card bills and purchase food for their families or pay their bills. When this occurs, families have to make a decision. That decision is to forgo making credit card payments. The average American owes $16,748 in just credit card debt. When you take into account the socioeconomics in New York combined with the average household income and the poverty rate, it’s understandable so many people consider debt settlement.

The median household income in New York is only $50,711, which might explain why the poverty rate is so high. The poverty rate in New York currently stands at 20.9%. With so many people living at or below this level of poverty, debt settlement is a big business here.

Debt Settlement Laws in New York

The problem with debt settlement is it’s not always an option. Debts must be unsecured, such as credit cards or medical bills. Secured debts such as a car or home cannot be settled. If you want to consider debt settlement as an option, it’s going to require you stop making payments on your cards. Few settlement companies are willing to negotiate with creditors if you’re making on-time payments and not missing any. The reason is creditors aren’t going to accept the terms, because they have no incentive. They’re getting money from you, so they’re not settling their debts with you otherwise.

If you want to settle your debts, it’s going to require you stop making payments. This is a huge problem for your credit score, and it’s not something you should do if you can avoid it. When you begin making late payments or not making payments all together, you’re going to greatly affect your credit score. These negatives stay on your credit report for a staggering 7 years.

One law you should be aware of in New York aside from the unsecured debt law is the law regarding settlement. Debt collectors and creditors are not required to do agree to any settlements. Debt settlement companies are not allowed to charge you upfront for any services they provide, and you should always look at the best ones on the BBB list in the city. You can choose from nationally known debt settlement companies or local attorneys, but always use the BBB as your best resource.

How Debt Settlement Benefits the Public

Choosing to go the route of debt settlement is going to hurt your credit, but it’s not a problem if your debt is already hurt. Being able to apply for a debt settlement program probably indicates you haven’t good enough credit to apply for a consolidation loan to pay off your debt. Your creditors are reporting every late payment and missed payment to the credit bureau, which means your credit score is negatively affected each month.

When you settle your debts, your creditors agree to stop reporting late payments. It won’t fix your score, but it helps you get started repairing it. You’ll end up with a lower monthly payment with only one interest rate, which saves you ample funds each month. You’ll pay off your debts faster, and the total cost is far less with settlement. Many creditors will settle your debts for as much as 40% off the original balance due. It’s a great way to get your financial life back on track and make some positive changes.

Finding help is good news for those who live at or below the poverty level in New York, but it’s not for everyone. Don’t take on a settlement program if you cannot afford to make the payments, and always check references prior to getting your foot in the door of any settlement company or attorney office.

Who Should Apply for Debt Settlement Relief

We’ve mentioned before it’s not for everyone, and that’s particularly true of debt settlement in New York. You must be late on your payments, you must have more than $7,500 in unsecured debt, and your debts must be unsecured. You must also have a permanent address in New York, and your income must be low.

Never pay a fee upfront. You’re going to want to check with the BBB prior to choosing a debt settlement company, and talk to a legal representative to discuss your options. This is because many companies are scam companies taking your money and doing nothing in return. They’ll claim your creditors didn’t agree to the services offered, they’ll take their fee, and they’ll rip you off. You can’t afford this. Becoming familiar with New York law, the socioeconomics, and the resources that can help your case is the best way to ensure you’re getting the help you need.