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One of the most common misconceptions people have about New Yorkers is they’re all wealthy residents residing in penthouse apartments along Fifth Avenue or Park. The state’s population is just over 19.5 million residents, and approximately 15.9% of those live below the poverty level. More than 14% of the state’s population has no high school degree despite being past the age of graduation, and only 33.9% of the population has a Bachelor’s degree or higher level of education accomplished.

The unemployment rate in New York is 5.7%, which is lower than the national average. The median household income in the state is only $39,820. That’s a far cry from penthouses on Fifth Avenue and vacation homes along the beach in the Hamptons. It does explain why so many New York residents live below the poverty level, and why so many of them struggle to pay their debts. With the national average credit card debt hovering around $16,000, many New Yorkers find it nearly impossible to get ahead when they are in debt. The bills are growing, the interest rates taking over, and the fear of going broke is very real. It’s why many consider debt settlement their only option. Who is the ideal candidate for debt settlement, what does it mean, and how does it benefit those who use it? The answers are simple, but the decision is personal.

Debt Settlement Benefits in New York

The benefits of debt settlement are what most people want to know first and foremost. It’s a very simple process. Your debt is too much for you to bear, so you call a debt settlement company with a good reputation for helping consumers alleviate their financial stress. This company takes all your personal and debt information from you, and they contact your creditors. What they do is offer a settlement for a portion of what you owe the creditor. They creditor can either negotiate the price, agree to it, or say no. If they say yes, the card is cancelled, the amount dropped, and a repayment agreement is worked out with the company.

The best candidates for this settlement program are those who are already in debt, can’t afford to make their monthly payments, and have already missed payments. Creditors are not obligated to accept a settlement offer, but they’re more inclined to do so when you’ve already missed payments. Many consumers unable to make their payments file for bankruptcy, which means creditors get nothing. A settlement agreement isn’t ideal for them, but it’s better than nothing if you file for bankruptcy. It’s beneficial to settle because of the following:

  • Creditors stop reporting your late payments to the credit bureau
  • Interest rates are canceled
  • Your payment is one payment with one interest rate to all your creditors
  • You can pay off your bills for far less and in less time

Creditors aren’t going to accept your offer of settlement if you aren’t behind on your payments. However, you don’t want to get behind on them and negatively affect your credit score just to get a lower payment. This is going to affect your financial life for the next 7 years, and it’s a terrible idea just to qualify for debt settlement programs.

Debt Settlement Laws in New York

Debt settlement sounds like a great idea if you’re already behind on your payments. However, the laws are very clear regarding this type of debt program, and there’s no getting around them. The biggest law pertains to which debts you can include in your settlement plan. The only debts New York law allows to go into settlement are unsecured debts. Any debt you have with collateral is not unsecured. A house, a car, or a piece of property cannot be settled.

  • Medical bills
  • Credit card bills
  • Cell phone bills
  • Private student loans
  • Collection accounts

Each of these is an unsecured debt that can be settled. The other most important law determines the rights of the collectors and creditors. No one is required by law to accept a settlement offer. What this means for consumers is you can offer all you want, and a creditor or debt collector has the legal right to tell you they do not accept the terms and conditions of your settlement agreement and you won’t be able to repay those loans through settlement.

New York residents have help when they need it, but it’s not for everyone to take advantage of. If you have good credit and can consolidate your loans and debts into one large personal loan with a low interest rate, you should. It’s not worth your credit score to stop making payments to become eligible to settle your debts. Your credit score is the most important, and should be treated that way.