What Does a Debt Arbitrator Do?

Most Americans have debt of one kind or another. Taking on debt is often a necessity to buy a home or finance an education; however, when an individual can no longer effectively manage his debt obligations, he may need to seek professional assistance from a debt arbitrator.

Debt Management

When an individual becomes severely delinquent on his debt obligations he may be faced with the possibility of bankruptcy. During this time, he may seek the advice of a professional debt manager. A debt manager helps the individual determine the best method to manage and, if possible, eliminate the consumers debts. This process includes assessing the debtors income-to-debt ratio. If the debt managers determines that the debtor has the money to pay his debts, the manager may recommend a debt arbitrator.

Arbitrator

A debt arbitrator is a professionally trained negotiator. The primary function of the debt arbitrator is to negotiate with your creditors and lenders to secure a mutually beneficial debt settlement agreement. This consists of convincing your creditors and lenders to agree to let you pay them a lump-sum payment that is usually significantly lower than your total amount of outstanding debt. Unlike a bankruptcy, debt negotiation and arbitration do not become a part of your public record.

Creditors

Creditors and lenders have expenses like any other business. Because of this, most creditors are willing to negotiate with a debtor to receive their money as soon as possible. Likewise, for many creditors the alternative to not negotiating is often bankruptcy, which requires time and money for both parties involved. Debtors who negotiate their own debt often accept the first offer that a creditor makes. This can result in a settlement cost significantly higher than that which a debt arbitrator would negotiate.

Uses

Stricter bankruptcy laws have made it increasingly difficult for debtors to eliminate all of their debt. If you have a relatively small amount of debt and one or two creditors, debt arbitration may not be necessary. If, however, you are faced with bankruptcy and have multiple creditors, the negotiation expertise of a debt arbitrator can save you thousands of dollars in costs and help you avoid the financial burden of bankruptcy.