The process begins when the debtor contacts a company to act as his mediator. The individual who actually conducts the mediation will probably be an attorney and will be trained in negotiating with creditors. However, during these times when many people are finding themselves in need of this service there are many unscrupulous individuals who are out to scam those in need out of what money they still have. So study out the company you are considering and if possible get a recommendation from someone else who has already dealt with them. At the very least check their reputation out online and through the Better Business Bureau.
Those who can honestly negotiate in your behalf will be able to get your total debts reduced between 40 and 60 percent. Once you have hired a particular company to mediate for you, the credit companies attempting to collect will only be able to contact your mediation company and their calls to your home and/or work should cease.
The first step you need to take in the process is to stop making monthly payments on your unsecured debts. The mediator or negotiator will have you make monthly payments to him. This money is to be saved in an account in your behalf. It will need to reach a certain amount before it will be paid out in your behalf. In the mean time the mediator will negotiate the price of your debts down to a lower amount to be paid off in a lump sum. The money being set aside by the mediator will eventually build up to the necessary amount and be paid off.
This process will damage your credit rating. This can't be avoided. Even the act of negotiating a payment that is not the original debt you incurred will do this to your credit. Once you cease making payments, once again your credit will be affected. But, by eventually negotiating an amount everyone can agree upon and then paying that amount, it will be reflected on your credit as well that you took the matter in hand and settled it.
Not all of a person's debts can be managed in this fashion. It only functions with unsecured debts, such as credit cards, school loans and medical bills you've accrued. Mortgages or car loans are not typically qualified for this kind of mediation since they are secured by real property. These debts you will need to continue to make payments on.
Should you find yourself in the position that you have substantial credit card and medical debt which you can no longer make payments on as well as your living expenses, you might want to consider debt mediation. If your inability to make timely payments includes mortgage and other secured loans, then you may want to consult with a bankruptcy attorney.