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New York State Debt Relief: Your Guide to State Laws and Managing Debt

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Living in the Big Apple comes with a high price tag. Not only do New Yorkers rank among the top 10 states with the highest per capita credit card and student loan debt loads, but those fortunate enough to break the renter cycle and invest in a home also carry one of the highest mortgage balances in the U.S., according to our analysis.

If you’re facing unmanageable debt in New York, we’ll provide some options to help you tackle your debt wisely.

This guide shares all you need to know about what happens when your accounts go into collections in New York, finding debt relief options, paying down debt and how you can use debt consolidation to eliminate high-interest debt and get on track to financial freedom.

Debt in New York: At a glance

New York Debt
Type Per capita balance, 2018 Rank out of 50 states* U.S. per capita balance
Credit card debt $3,840 7 $3,220
Student loan debt $6,090 8 $5,390
Auto debt $3,700 49 $4,700
Mortgage debt** $32,620 19 $33,680
*No. 1 is highest
**First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in New York

It’s clear from the table above that New Yorkers carry a lot of debt, especially on credit cards and from student loans (auto debt, luckily not so much).

There is no statewide or federal standard for when an account goes is sent into collections, but most credit card providers will begin making collection calls after a payment is 30 days late. Some might make courtesy calls sooner to remind you of a missed payment.

After 180 days, or six months, they might sell the debt to a collection agency, and you would then have to pay the collections agency instead of your original creditor.

All consumers are granted the same protections under the Fair Debt Collections Protections Act, which puts limits on how debt collectors can conduct their business.

For example:

  • Collectors may only contact you between 8 a.m. and 9 p.m.
  • You can’t be contacted at your job if you’ve asked a debt collector not to reach you there.
  • You’re entitled to request debt collectors verify your debt and you can dispute debts that do not belong to you.
  • Debt collectors cannot harass you or make threats such as threatening to call law enforcement or have you arrested.
  • Debt collectors have to stop contacting you if you ask them in writing to stop.

Some states, New York included, have bolstered those federal protections with protection of their own — namely, the New York State Debt Collection Procedures Law.

Under this law in New York, your creditor cannot tell an employer about the nature of your debt before they obtain a judgment against you. They can’t threaten to collect an additional fee above the debt, interest charges, and any late fees owed. They can’t suggest that their actions or communications are authorized or issued by a government entity or are part of a judicial process.

Finally, creditors can’t threaten an action they wouldn’t normally perform to collect the debt, and they can’t contact you with such frequency or timing that it could be considered harassment.

They also cannot contact you at work if your employer disapproves.

If a creditor or debt collection agency chooses, it may contact you in person or by mail instead of calling. If you have a complaint about a specific company’s debt collection practices in New York, you can download and file a complaint form on the attorney general’s website here.

You can also call the consumer hotline at 800-771-7755 or download and mail a complaint form to your regional office of the attorney general.

Responding to collection letters and phone calls

You have a few choices when it comes to facing your debt collector head-on. If you don’t believe the debt is rightfully yours — perhaps it was a result of fraud — you can file a dispute.

Write a debt validation letter to the debt collection agency within 30 days of their initial contacting you by phone or mail. The debt collection agency cannot contact you again until it can verify the debt.

You can also write a letter asking the debt collection agency to stop contacting you. However, this won’t solve your problem; it may only force the debt collector to take legal action to attempt to collect the money.

Understanding New York’s statute of limitations

If you don’t have the money, you may decide to wait out your debt. Once a debt’s statute of limitations has passed, debt collectors cannot sue you for the debt. However, they can keep trying to collect through mail and phone calls.

The statute of limitations countdown begins from the date of your last payment. However, if you make even a single payment of as little as $1, or you make an agreement with your debt collector to make a payment, the statute of limitations clock is restarted.

New York Statute of Limitations on Debt
Mortgage debt 6 years
Medical debt 6 years
Credit card 6 years
Auto loan debt 4 years
State tax debt 6 years


If you’re not sure whether a debt’s statute of limitations has expired, consult a consumer law attorney or nonprofit credit counselor.

New York debt relief programs

If you’re struggling with debt and don’t want to wait it out six years for those debts to expire, New York has many debt relief programs available.

The state attorney general’s website offers options for New Yorkers who are amongst millions of Americans struggling with student loan debt, including loan consolidation and its Public Service Loan Forgiveness Program for qualifying individuals.

You can find free legal assistance and discover if an attorney may be able to help you with your past due debt at

Organizations such as InCharge Debt Solutions are licensed by the New York State Department of Financial Services to provide free credit counseling and debt consolidation to New Yorkers.

You can also reach out to the National Foundation for Credit Counseling, a nationwide nonprofit organization dedicated to assisting consumers in developing financially responsible behavior.

Be careful when vetting firms to help you tackle debt. If a firm promises you a 100% guarantee that they can pay off your debts or get them forgiven, approach with caution. These could be signs you’re dealing with a place that isn’t trustworthy. Another common red flag is when firms require upfront payment for services before they accomplish anything.

Payday lending laws in New York

If you’re in dire straits, payday loans may seem like an easy way to make ends meet temporarily. These loans permit you to borrow money against your upcoming paycheck and are usually due within 14 days.

However, these loans can quickly spiral out of control. A large percentage of payday loan borrowers end up extending their loans after the initial term, incurring additional interest and fees that can quickly add up.

The good news is payday loans are illegal in New York.  If you have fallen prey to a payday lender, you can file a complaint with the New York Department of Financial Service or call 800-342-3736.

Tips to tackle debt in New York

With payday loans off the table as an option to pay off your debt, let’s consider some real solutions to reducing your debt and saving money on interest charges in New York.

Consolidate your debt

There are a number of ways to consolidate debt, which is when you use a new loan to pay off existing balances. You can consolidate many types of debt, including debt from personal loans, medical expenses, and credit cards.

Debt consolidation can be a good way to streamline your finances, since one monthly bill can cover what used to take multiple monthly payments. Ideally, you should aim to secure a debt consolidation loan with a lower interest rate than the debts you are consolidating. By lowering your interest rate, you may be able to get out of debt faster.

However, debt consolidation comes with some drawbacks, too. It won’t solve all your financial problems. And if you continue using your credit cards that you just paid off using debt consolidation, you’ll be in worse financial shape than when you started.

The most common method for debt consolidation is a personal loan. If you are a homeowner and you have equity in your home, however, you may want to look into consolidating debt with a home equity loan or home equity line of credit (HELOC). Home equity loans often include closing costs and loan fees, so be sure to shop around for the lowest interest rate and be sure to compare rates, or the total cost of the loan rather than just the interest charges.


For auto loans, student loans or home loans, refinancing can be a viable option if you’re looking to secure a lower rate or more manageable payment terms.

For homeowners, a cash-out refinance can be one way to help tackle debt. With this process, you refinance your mortgage for more than you need and you’re given the balance in cash that you can use to pay off other debts.

You can refinance student loan debt as well. Just keep in mind if you refinance federal student loans with a new private lender, you’ll have to forfeit the flexible repayment options that come with federal loans.

Use a balance transfer card

If you have maintained a good credit score, you may be able to apply for a new, 0% interest balance transfer credit cards to reduce your debt. To improve your chances of approval, try to get your credit score up to 700 before you apply.

If you can secure a deal with 0% interest for 12 to 21 months, you can make a big dent in your debt without dealing with interest charges piling up.

If you take this route, it’s important to establish a plan to repay your debt. Calculate how much you’d have to pay each month at 0% interest to eliminate your debt completely, or develop a plan to transfer the remaining balance to another 0% card before the introductory annual percentage rate (APR) expires.

Most credit cards do have associated balance transfer fees, which is often 3 to 5% of the balance transfer.

One of the biggest dangers associated with a balance transfer credit card is the risk of racking up even more debt on the card you just paid off. But if you can be disciplined with credit card use, you can pay off your debt and save money with a 0% balance transfer.

Negotiate with the debt collector or lender

If a debt is long past due, a debt collector may be willing to settle your debt for less than you owe.

Keep in mind, debt marked as “settled” may show up as such on your credit report and lower your FICO credit score. You may also be liable for paying taxes on the amount of debt forgiven, as the IRS may consider it “income.” Also, in order to settle the debt, you’ll likely be asked to deliver a lump sum payment.

Before accepting or making an offer, speak with a debt settlement lawyer or a nonprofit credit counselor to be sure paying your debt is the right decision.

Consider debt settlement

If your credit score is already low and you’ve missed multiple payments on secured or unsecured credit card debt, you might consider debt settlement. If you work with a debt settlement company, the company will negotiate with your creditors, enabling you to pay off your debts at a fraction of what you owe.

The debt settlement firm will then consolidate all your remaining debt into one monthly payment, which you pay to the debt settlement firm. The debt settlement company then pays your creditors. Debt settlement firms collect a fee for the service, which is often 15% or more of the total savings.

Debt settlement should be viewed as a last resort to consolidate your debt, since debts marked as “settled” will reflect poorly on your credit report, and your accounts must already be past-due before a debt settlement firm will consider your case.

Filing for bankruptcy in New York

If debt consolidation or debt settlement don’t seem like the right options for you, bankruptcy could be your last resort.

Chapter 13 bankruptcy stays on your credit report for up to seven years, but it can be a good way to embrace a fresh start and get back on your feet financially if you are earning money but are too deep in debt to see another way out. Chapter 13 bankruptcy allows you to keep your assets, including your home and vehicle, as long as you stay current on those payments.

Chapter 7 bankruptcy, on the other hand, may help if your income is too low to pay off any of your debt or you aren’t earning any money. In a Chapter 7 bankruptcy, most of your assets are sold off to pay your creditors, and the rest of the debt is discharged.

New York offers some exemptions for personal property — notably, your home and vehicle  — which can allow you to keep your home even after a Chapter 7 bankruptcy.

New York’s homestead exemptions vary by county, with many suburbs of New York City offering an exemption of up to $170,825. For many people, this generous exemption can help them stay in their home following bankruptcy. Statewide, the New York Homestead Exemption sits at $82,775. In Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties, it is $142,350.

Likewise, New York offers a motor vehicle exemption of $4,550. A debtor with a disability can exempt up to $11,375 equity in their vehicle.

New York also offers generous personal property exemptions, including the ability to keep cash in your bank account. It’s important to speak with a bankruptcy attorney in New York to decide if Chapter 7 bankruptcy is the best way for you to get out of debt in New York.

You can find a listing of all district courts in New York State, additional information on exemptions, and a list of US Trustee-approved New York pre-bankruptcy credit counseling services here.

The bottom line

Even though New York has a notoriously high cost-of-living in the U.S., you don’t have to drown in debt to stay here. Create a budget and use our guide to develop a plan to pay down your debt. Knowing your state laws for debt relief in New York can help you seek the debt relief options best for you.

This article contains links to MagnifyMoney, a subsidiary of LendingTree.

The information in this article is accurate as of the date of publishing.


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