Debt arbitration is also known as debt settlement or debt negotiation. It is one of the most common options for debt ridden individuals to gain financial freedom from their creditors.
If a borrower is suddenly left unable to pay their debts due to job loss or irresponsible financial handling, the creditor will be forced to take drastic measures to get them to pay. In the beginning, they will pester you with collection letters and follow up phone calls. If you still refuse to pay, they may be forced to sue you in court.
When they file a case against you, that is the time when you have the option to go for debt arbitration.
What can Debt Arbitration do for you?
The ultimate goal of debt arbitration is to give you a lower debt amount to pay and have the rest forgiven by the creditor. That is done by convincing them that your current financial situation no longer allows you to pay the original balance of your debt. When you have convinced them that your claims are true and the creditor agrees to settle your debt, they will indicate the amount that you have to pay. This is usually a certain percentage of what you originally owe them.
There are two options for paying. You can pay for the whole amount – at least if you have enough saved up for it. The other is to pay for it through an agreed payment term, say 3-4 months.
Hiring a Debt Arbitrator to Help
While you may have the guts to go about this on your own, that is rarely advised. A trained professional is needed to make sure you are given the right settlement deals by your creditors. Even though it is your debt and you know your finances well, a debt arbitrator is trained to negotiate with creditors to arrive at an agreement that will benefit you. Most of the time, these people have a working relationship already and that makes it easier for them to work on your behalf.
A debt arbitrator can also do more than just get your debts lowered. They can help identify points in your financial life that you may need to reconsider in order to correct bad spending habits.
The Debt Arbitration Process
Once you have chosen an AFCC (American Fair Credit Council) certified debt relief/debt arbitrator company, you will begin to discuss your financial capabilities. You will identify the debts that you will be paying off first. Once you have successfully created a plan of action, you may be advised by the debt relief expert that instead of paying minimum payments to your creditors, you should save that money into a settlement fund.
Most likely, you have stopped paying them already at this point. If not, you may need to cease payments and instead, direct those payments to an FDIC insured account that the debt arbitrator will set up for you. Do not be afraid because you maintain full control over that account.
Once the creditor realizes you haven’t paid and haven’t responded to their past due notices or calls, they will file a case in court. This is the time when the debt arbitrator will step out to offer the creditor a debt settlement plan.
Why Creditors Will Choose to Settle
You may be wondering why creditors will choose to settle if it will mean lower payments from you. Given the choices that they have, debt arbitration is sometimes the best option to regain what they have lost from your loan. They want you to avoid bankruptcy just as much as you want to avoid it.
If you think about it, instead of receiving nothing, they will mostly likely be inclined to accept a lower payment amount. Even if that means forgiving a certain percentage of the original debt amount, it is still more appealing than not being paid at all.
If you are forced to declare bankruptcy after a court hearing, their chances of getting paid is dimmed too. Not to mention the costs to hire a lawyer and the other fees associated in court.
Also, you are still a client of theirs. If your creditor agrees to help you by lowering your debt, they would have retained a customer. Your chances of using their credit card in the future still means good business for them. Despite your credit history, you are still considered a profit providing consumer.
Want to know more about debt arbitration? Give us a call and we will gladly sit down to help you with your financial troubles. NationalDebtRelief.com exists to help people with consumer loan problems. You can fill out the form on this page and someone will get in touch with you shortly.