How does arbitration differ from other debt relief options?
Debt arbitration occurs when you are unable to amicably work something out with your creditor and when the issue gets referred to arbitration. Arbitration is in many ways similar to going to court, but there are some important differences that you need to be aware of.
- Arbitration is considered a form of alternative dispute resolution
- Generally, when an issue goes to arbitration, it does so either because the parties signed an arbitration clause prior to the dispute arising or because the parties decide to arbitrate to keep their costs lower than a court trial or because they do not want the legal issue to become public knowledge. In most cases, if you are going to arbitration because of your debt, it will be because you signed an arbitration clause when you signed up for the credit card or took the loan. This means the arbitration clause is going to be legally binding and you are going to have to settle your disputes in arbitration instead of in court.
- In arbitration, a third party arbitrator (who is paid by the parties) will hear arguments and evidence from both sides. This process may be formal and similar to a court hearing or it may be conducted on a more informal basis.
- After the arbitrator hears both sides, he or she will make a decision. This may involve ordering you to pay a set amount of debt, or ordering your lender to do some action like ceasing from collecting the debt
- Whatever the arbitrator decides is legally binding- while you might be able to appeal in court, the appellate court is generally going to look only at whether there were problems in the arbitration process and not reconsider the arbitrators decision on facts.
This is distinct from other debt relief options where you settle debt on your own with creditors or where you take out a debt consolidation loan to repay debt. If you are going to arbitration over a debt, you nee to have legal help to protect your rights, so call a lawyer as soon as possible.