In New York, if you have been sued for a debt, you can send the opposing party a settlement offer at any stage of the lawsuit and get your finances back on track. Debt settlement can help you save money and get back on track financially. If you wish to settle a debt in New York, you must respond to your lawsuit by the deadline, send a settlement offer to begin the negotiations, and then get it in writing once you have settled.
A debt lawsuit against you is scary. You’re probably wondering what will happen if you lose and how it will affect your paycheck and bank account. Fortunately, there’s a better option: You can settle it now, so you don’t get hit with a judgment.
As a result, if you have been sued in New York for debt, this article will explain what you need to do to respond to the suit and how to settle the case before your court date.
Debt can be settled in New York in three steps
You have three simple steps to follow to settle your debts in New York:
- An answer to the debt lawsuit should be submitted.
- To start the negotiation process, you should make a settlement offer.
- Make sure you get a written copy of your settlement agreement.
Here’s a breakdown of each step.
An answer to the debt lawsuit is required
Creditors or debt collectors that decide to file a lawsuit against you in New York will file a Summons and Complaint in your local court, and they will also have to deliver these documents to you as stipulated by state law if they intend to do so.
The Summons informs you of the proceedings and gives you some basic details about the case. The Complaint outlines the specific claims against you, including why they are suing you for debt, the amount of the debt, and any accrued interest on the debt.
The first mistake many New Yorkers make is to respond to the Summons and Complaint with an Answer. If you don’t provide any defense to the claims against you, the creditor or collector might be able to ask the judge for a default judgment towards you.
If you intend to settle your account before the court date, you should still file an Answer to prevent the opposing party from obtaining a judgment against you without a thorough investigation of your case. Your responsibility is to provide the judge with as much information as possible regarding your matter, including your arguments. You may also defend yourself in court.
In New York, depending on how the court documents were delivered to you, you have 10, 20, or 30 days to respond to a debt lawsuit. The creditor or collector can garnish your wages or seize your property if you answer after the deadline. You will lose your case automatically by default if you do not respond before the deadline.
Debt collectors often use nefarious tactics to collect the total amount of an obligation, even after you have repaid it. They may allow the collection case to proceed and fail to notify the court of the settlement. The judge will only have a reason to know if there is a dispute regarding the debt if you tell them about it.
You can avoid these problems by drafting an answer and giving yourself time to work out a settlement without being concerned about a default judgment.
You must respond to each claim against you in your answers and defenses.
Offer a settlement to start the negotiation process
After you’ve decided on the amount you will be paying in the settlement, the next step is to determine how much money you have saved and how much you will be able to save over the next few weeks. Assess your savings and the money you can spare.
It might be a good idea to sell a few things you don’t need or ask your family and friends for financial assistance if you don’t have much money to offer in a debt settlement.
When working with a debt settlement company, most consumers can settle their debt for 50%. However, the best way to begin is to offer at least 60% of the total value of the debt. That should demonstrate that you are making an honest effort to reconcile the payment while also allowing you to save some money simultaneously.
For example, if you owe $2,000 on a debt, you can offer $1,200 to settle it. When you send your first offer, you should write something like this in it:
“I see you’re suing me for $2,000 for [case number]. I don’t have that kind of money and I don’t agree with the amount. But I do have $1,200 that I can pay within 30 days to settle the debt in full. Let me know if you accept.”
You should start the negotiations with an acceptable offer if you cannot afford 60% of the value of your debt. Usually, creditors will give you a lot more leeway if they understand what you’re going through, and you can preface your proposal with an explanation of your financial circumstances.
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Whenever you make an offer to your creditor, they will most likely counter with an offer of their own. Only feel pressured to accept the offer if you can afford it. Keep trying till you come up with a deal you can live with and realistically repay.
Make sure you have a written settlement agreement
You should only transfer money to a debt collector or creditor after you have obtained a written settlement agreement. A written settlement agreement ensures that you and your creditor are entirely in agreement about the terms of the settlement agreement, including the amount you will pay and the due date for the payment.
As part of your settlement agreement, you should also include language that releases you from any future collection activity concerning the debt. As soon as you make your payment, your creditor will eliminate the rest of the debt from your credit history.
Before you sign the agreement, make sure you take the time to read it carefully. You will notice that it includes a place for a notary to sign it for both you and your creditor. If you notarize a contract, you will ensure that there is a witness to the agreement, which will further protect you if the debt collector reneges.
In most cases, the creditor or debt collector will be responsible for drafting the settlement agreement, which will eventually be filed in the court of law along with the lawsuit.
Let’s look at an example of settling a debt in New York.
For example, Mario was sued in New York City for a $3,000 credit card debt. The court papers were personally delivered, so he had only ten days to respond. By drafting and filing an Answer to the lawsuit before the deadline, Mario had time to figure out how to settle the debt. Mario looked at his finances and decided he could pay $2,250 (or 75% of the debt) upfront.
As a result, he sent the debt collectors an offer starting at $1,800 (or 60% of the obligation), starting at a lower figure. After a few rounds of negotiation, they reached an agreement of $2,100 (70%). As outlined in the settlement agreement, Mario paid off the debt to restore his credit score and financial health.
How do New York’s debt settlement and collection laws work?
A recent amendment of the Telemarketing Sales Rule by the Federal Trade Commission has led to the expansion of debt settlement regulations to cover all debt relief organizations and companies. All 50 states, including New York, are and will continue to be governed by this Rule as it relates to debt settlement practice.
To comply with the new Rule, any company that offers debt relief services, namely debt settlement companies, cannot:
- It is illegal for debt settlement companies to collect fees before the debt is settled or otherwise resolved. Consumers cannot pay any fees to debt settlement companies before the debt has been effectively settled.
- The company must disclose certain information about its services before a consumer enrolls in the program. Among these are the costs associated with the service, the length of time it takes to see results, the amount of money that must be saved before a settlement offer can be made, the consequences that may occur if the consumer fails to make payments as agreed, the rights of the customer, and many other factors.
- It is illegal for debt settlement companies to make false or unsubstantiated claims about the services they provide. It is unlawful for them to make unsupported or inaccurate claims.
Besides the federally mandated Fair Debt Collection Practices Act (FDCPA), New York also has its own set of debt collection rules known as the Consumer Credit Fairness Act (CCFA).
CCFA states that debt collectors have only three years from when a consumer makes a payment toward a debt in collections to pursue them for outstanding obligations. In addition, the statute of limitations does not restart if a debtor makes a payment toward a special obligation.
There are additional rules in the CCFA that are favorable to consumers, such as protections against default judgments. Whenever a creditor or debt collector files a lawsuit against a consumer, they must provide instructions for the consumer regarding how to respond to the lawsuit and what will happen if they do not.
A creditor or debt collector is prohibited from doing the following under the FDCPA law:
- Make a call to a consumer at an odd hour of the day, such as before 8 a.m. or after 9 p.m.
- The debtor should not be contacted more than seven times over seven days.
- The debt collector will not call a consumer at their workplace if they expressly ask the debt collector not to do so.
- Let people know about the debt.
- Post information about the debt so that other people can see it.
In terms of debt collection, consumers have rights. They don’t have to put up with harassing debt collectors.
Which debt settlement companies are The best?
Many companies can assist you with your debt settlement journey if you’re ready to start. You can work with these companies to negotiate with your creditors to reduce the debt you owe to them. In addition to helping you create a repayment plan for the remaining balance over time, they will also be able to offer advice and support so that you can keep on paying your debt on time.
You may want to consider the following debt settlement companies to settle your debt:
- The New Era Debt Solution is a company that offers several debt solution options and recommends the most suitable debt solution for your needs.
- With United Settlements, an expert in the field of debt settlement will first discuss with you what the state of your finances is like and determine the best course of action.
- The certified debt specialist at Century Support Services first analyzes your debt situation and only charges a fee once they have implemented a debt settlement plan on your behalf.
Start the debt settlement process with your debt collector or creditor
You should contact your creditor if you are ready to begin the debt settlement negotiation process. You can do so by phone, email, or by writing.
To initiate the negotiation process, consumers should email their debts to kick off the process as quickly as possible. Using an email to negotiate your debt settlement offers a written record of your attempts and is much faster than sending a letter. You can reach an agreement by email within a few hours or days with your creditor.
Speaking with your creditor directly to negotiate a settlement is also possible. You can record the conversation if you talk now with your creditor. In New York, recording a phone conversation is legal if one party consents to the recording under the NY Penal Law 250.00.
As long as you record your conversation, you can use this record as evidence if the debt collector attempts to renege on their agreement at a later date.
New York debt settlement FAQs
Debt settlement is a process where a borrower negotiates with a lender to pay off a debt for less than the amount owed. During this process, borrowers must understand their legal rights and the rules that govern debt settlement to ensure they receive a fair and reasonable settlement.
The debt settlement issue needs to be clarified, and many questions from New York borrowers need assistance with this process. Here are some of the most common questions borrowers ask.
New York debt becomes uncollectible after how long?
The statute of limitations for debt in New York is three years. After three years, creditors and debt collectors are prohibited from pursuing the collection of unpaid debts through the courts. However, they are still allowed to keep reporting your account adversely, sending you letters, and contacting you until you repay or settle the debt.
In New York, can debt collectors sue you?
It is correct that debt collectors can sue you in New York for failure to repay your debts. However, if they decide to do so, they must adhere to the state’s statute of limitations on debt, which is three years. If the debt has passed the three-year limit, they will not be able to file a lawsuit against you.
Debt settlement is better than not paying a debt?
When repaying your debt, you should do so by the terms of your agreement. Having a good credit score is beneficial when you apply for loans. However, debt settlement is recommended if you cannot entirely repay your debt.