New York Debt Relief: Facts, Programs, and Solutions
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%.
New Yorkers can free up cash each month with Freedom Debt Relief
Ozzy S., Freedom client²
“Right away, I had more money each month because of program costs so much less than what I was paying on my minimums.”
Excellent •
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:
What are the main types of debt relief programs available to New York residents?
Debt management plan: A 3-5 year plan to fully repay your unsecured debt, administered by a nonprofit credit counseling agency. Your creditors may reduce interest rates or waive fees. Your credit counselor can help you learn more money management skills.
Debt consolidation: Combine multiple debts into a single debt with better terms. For example, you might consolidate two $1,000 credit card debts with 20% APRs into a single $2,000 personal loan with a 14% APR and smaller monthly payments.
Debt settlement: An agreement with your creditor to accept less than the full amount you owe and forgive the rest. You can settle debts yourself or work with a professional debt settlement company. Typical debt settlement programs take 3-4 years to complete.
Bankruptcy: Chapter 7 bankruptcy wipes out unsecured debts in a few months. You might lose some of the things you own (to be sold by the court, and the money given to your creditors). If you earn too much to qualify for Chapter 7, you'll be directed to Chapter 13, which is a 3-5 year repayment plan.
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 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.
How does New York debt relief affect your credit score?
DMPs: Could damage your credit initially. You'll likely be required to close your credit card accounts while they still have unpaid balances, which is likely to lower your credit score.
Debt settlement: Most people stop paying their creditors so they can save money for settlement offers. Missing payments causes credit score damage. Once you settle debts, they will be reported on your credit report as “settled,” which is better than a collection account but not as favorable as “paid as agreed.”
Bankruptcy: Chapter 7 bankruptcy typically stays on your credit report for 10 years, and Chapter 13 for 7 years.
When negative information hits your credit report, the number of points you lose often depends on your starting point. The higher your score is, the farther it could fall. If your score was already low, you might not experience as much of a drop.
It’s important to focus on choosing a debt solution that helps you become financially healthy. Dealing with your debt could put you in a much better position to build and maintain good credit later on.
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 March 2025. 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 |
|---|---|---|
| $16,288 | 88% | $18,046 |
| ▲ 1.8% MoM | 0% MoM | ▲ 2.1% MoM |
Copyright© 2025. Freedom Debt Relief, LLC. www.freedomdebtrelief.com
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 | 78% | $9,483 |
| 26-35 | 88% | $14,551 |
| 36-50 | 91% | $19,293 |
| 51-65 | 90% | $18,382 |
| 65+ | 92% | $18,787 |
Copyright© 2025. Freedom Debt Relief, LLC. www.freedomdebtrelief.com
Reviews and Testimonials from New York
I'm getting my debt paid off.
LeRoy Willkomm, US
Freedom dept relief has always been very informative in helping me to reach my financial goal. They are very friendly and caring always willing to answer any questions I may have. I highly recommend their program. Thank you, Lori.
Lori Provost, US
Se pudo arreglar el prblema gracias
Cesar Mayen, US
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.
What are the alternatives to debt relief for managing credit card debt in New York?
New York residents might consider some combination of these debt solutions:
DIY debt repayment strategies:
Debt snowball method (pay smallest debts first)
Debt avalanche method (pay highest interest first)
Hardship programs:
Offered directly by credit card companies
May reduce interest rates or waive fees
Contact creditors directly to inquire
Credit counseling:
Free financial education when you enroll in a DMP
Help creating a repayment plan
Help managing your debt until it’s paid off
Budgeting:
Create a budget that works for you
Cut unnecessary expenses
Increase income if possible
Balance transfer credit cards:
0% APR promotional period if you qualify
Consolidate multiple cards to one
Requires good credit
Personal loans:
Lower interest than credit cards, on average
Fixed repayment schedule
Requires decent credit
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.
How to qualify for debt consolidation in New York State?
To qualify for debt consolidation in New York, you typically need the following:
A fair or good credit score
Steady income
Debt-to-income ratio below 50%
A good credit score improves your chances of getting approved for debt consolidation loans. If your score isn’t high right now, you can work on it. The best way is to make timely payments.
Your debt-to-income ratio is the percentage of your income (before taxes) that goes to housing and debt payments each month. You can improve your DTI by earning more money or lowering your debts.
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.
Are there New York State specific laws regulating debt settlement companies?
New York doesn’t specifically regulate debt settlement companies. But you still get national protections laid out by the FTC Telemarketing Sales Rule (TSR). The TSR lays out a few ground rules settlement companies must follow:
No upfront fees
Clear and transparent process and costs
No misleading advertisements or promises
Fees: Debt settlement companies mustn’t charge you until they’ve reached an agreement with your creditor and made at least one payment toward it. Avoid companies that ask you to pay fees upfront—these may be scams.
Transparent process and costs: Settlement companies must be clear about what will happen and how much it’ll cost. If you have questions, you should get clear answers.
No misleading advertising: Companies shouldn’t overpromise what they could save you. “Pennies on the dollar” promises are a big red flag. Creditors don’t have to settle, and success is never guaranteed.
Financial 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 New York 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 until 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.
New Yorkers can free up cash each month with Freedom Debt Relief
Ozzy S., Freedom client²
“Right away, I had more money each month because of program costs so much less than what I was paying on my minimums.”
Excellent •
What is the process for filing for bankruptcy in New York?
Filing for bankruptcy in New York is an involved process. It’s recommended to work with an attorney.
Here are the steps for Chapter 7:
Enroll in mandatory credit counseling. Find agencies approved for credit counseling at the justice.gov website.
Fill out bankruptcy forms detailing all debts, assets, and financial information.
Pay the filing fee or apply for a waiver. As of June 2025, it costs $338 to file for Chapter 7 voluntary bankruptcy in New York.
Turn over your non-exempt assets to the court to sell. Non-exempt assets are things you’re not allowed to keep. The trustee has control over what possessions are sold.
Meet with creditors. Your trustee will hold a meeting where you’ll swear under oath regarding your financial situation, and clear up any concerns the trustee has.
Complete a 2-hour course on financial management, online or over the phone.
Receive a notice saying that the order wiping out your debts has been filed.
List of reputable non-profit credit counseling agencies in NYC
Government databases, consumer organizations, and state-specific programs can point you to reputable nonprofit credit counseling agencies in NYC.
Government databases: The U.S. Department of Justice Website offers a searchable database of approved credit counselors. NYC residents can filter by state and district to find the nearest counseling agencies.
Consumer organizations: The National Foundation for Credit Counseling connects you to certified credit counselors across the United States, including New York. It’s one of the oldest and most reputable nonprofit organizations out there.
State-specific programs: Call 311 or visit nyc.gov/talkmoney to book an appointment at an NYC Financial Empowerment Center for free financial counseling. Counselors can help you set up a bank account, contact lenders about a debt, and more.
Compare debt settlement vs. debt management plans in New York
Debt settlement is a way to clear a debt for less than you owe. Some creditors are willing to negotiate if you can’t afford to fully repay your debt.
Key facts:
For someone experiencing a hardship
Can DIY your own debt settlement or work with a professional debt settlement company
Programs typically last 3-4 years
Fees: 15% or more of debt enrolled in program
A debt management plan (DMP) is a structured repayment plan to fully pay off your debt, managed by a credit counselor. Creditors might agree to lower your interest rate or waive fees.
Key facts:
For someone who can afford all of their debt payments, and possibly more
Administered by nonprofit credit counseling agencies
Duration: 3-5 years
Fees: Small, because the credit counseling agency is funded by creditors
Debt settlement and debt management plans (DMPs) in New York are solutions that address different cases. Debt settlement is for someone with a financial hardship. DMPs are best if you can afford your debts but you’re overwhelmed and need help managing your finances for a while.
How to spot and report debt relief scams in New York?
Debt relief scams overpromise, mislead you, and ask you for money before they deliver results.
Red flags to watch out for:
Promises to eliminate your debt quickly or through a new government program
Pressure to decide whether to enroll in a debt relief program
Fees before results
Guarantees to eliminate debt or remove info from credit reports
Reputable debt relief programs won’t overpromise or mislead you. Doing so is illegal under federal law. Debt relief companies who make guarantees are probably scams.
How to report scammers:
Call 800-382-4357 or report the fraud to the FTC online.
Get in touch with the attorney general's office.
You can file a complaint about a non-compliant student debt relief company or an advertisement that you think is deceptive with the New York State Department of Financial Services.
Are there any New York State government programs for student loan debt relief?
Yes, the New York State Higher Education Services Corporation offers student loan debt relief programs. There are loan forgiveness programs for:
Attorneys
Licensed social workers in critical areas
Young farmers operating a farm in New York State
Participants in federal income-driven repayment plans
Nursing faculty in New York State
Child providers at licensed agencies
Teachers in struggling districts
The Education Debt Consumer Assistance Program (EDCAP) helps New Yorkers navigate the complicated student loan landscape. Through the program, you can get help applying for financial aid, getting out of debt, and more. It’s free and confidential.
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