Is it possible to update the Debian distribution without losing the old settings, configuration, files and folders?
You're not very specific in your question as to what you have already read or tried.
This comprehensive guide will inform in depth on how to keep your system up to date.
Short Answer: You do not have to use an ISO file, in most cases Debian can be upgraded using
apt-get upgrade or
Yes! I'd use the command 'apt' as opposed to 'apt-get'(It's the new thing apparently). 'apt update',upgrade and full upgrade should suffice. Also one is usually prompted to overwrite yes|no when configuration files are updated. Installing apt-listchanges should help in this regard too.