If you are struggling with consumer debt, are thinking about bankruptcy, and you live in New York, you need to ask your debt settlement lawyer about the new lower interest rates on money judgments.

What is this new law on lower interest rates?

Governor Kathy Hochul passed Senate Bill S5724A (https://www.nysenate.gov/legislation/bills/2021/S5724) lowering the interest rate paid on money judgments arising out of consumer debt. This new statute, CPLR § 5004 (https://www.nysenate.gov/legislation/laws/CVP/5004), lowers the interest rate that debtors have to pay on judgements against them from an average of 9% down to 2%.

This means that if your are currently working your way through the debt negotiation process, and you are dealing with a money judgement (a judge granted one of your creditors a judgement against you), the lender can’t charge you more that 2% interest on what you owe. This law went into effect as of April 30, 2022, and originally stated that any unpaid judgements on that date had to be retroactively recalculated at the lower rate.

Are lenders fighting this ruling?

Of course. In fact, some parts of the law have been have already been blocked by the New York State Federal Court.

In the case Greater Chautauqua Federal Credit Union et al. v. Marks et al. (https://consumerfsblog.com/wp-content/uploads/2022/04/Opinion.pdf), the District court issued a preliminary injunction stopping the change of the interest rate previous to April 30 (the retroactive part). For any money judgements after April 30,2022, the law is still valid.

How does this law work in my favor?

This is a great law for people trying to get their debts under control through non-bankruptcy negotiated settlements. With inflation currently rising, the lower interest rates will allow you to keep more of your income. But the law is also a great tool for your consumer debt attorney to use to negotiate with your lenders.

Between this law, and the recently passed NYS Consumer Credit Fairness Act (https://www.ny-bankruptcy.com/what-is-the-nys-consumer-credit-fairness-act/) which shortened the statutes of limitations on consumer debt from six to three years, your debt settlement lawyer may have the upper hand when negotiating with your lenders.

Lenders are expected to start timely actions, but due to the shorter statute of limitation, they won’t be in a hurry to start them (and definitely not to conclude them). This is because the judgment essentially forces the creditor to reduce their interest rate from a contract or default rate (which could be high) to 2% which is much lower.

This gives you and your debt settlement attorney more time to negotiate down your debt. Normally, if your lenders won’t negotiate in good faith, they would have to get a judgement against you to enforce your debt obligation. Now with the lower interest rates, this option is less attractive to your lenders, and gives your debt settlement lawyer a stronger position at the negotiation table.

What to Do Next

If you are thinking about declaring bankruptcy, and want to know all your options, you’ll need a debt settlement attorney who knows all the everchanging laws of New York State and how to best use them to help you. For a free consultation, reach out to New York debt settlement lawyer Ronald Weiss. He can work with you to find the best way to get you back on track and help you get your case started. Call 631-271-3737 and take the first step to a fresh start.