Bankruptcy: The Role of Debt Mediators

Summons from creditors is one of the expected outcomes of a bankruptcy. Your creditors will file a case against you when you fail to pay. When this happens, you need to seek debt mediation. This kind of arrangement is also known as debt settlement. Usually, the creditor you owe money will hire a credit collection agency to represent them in the case. This action is normally after 90 – 180 days since you stopped making payments. The debt collector will push you to pay off the debt, and if you fail they’ll forward the case to the court. But with debt mediators bankruptcy experts, the case doesn’t have to be settled by a judge.


The debt mediation process

You’ll receive summons once your case is filed in court. Normally you have 30 days to respond to the summons. This is an ideal time to seek debt mediation. You’d be surprised to find out that your creditor doesn’t want to go to court just like you. After all, no one likes the time consuming and costly court processes. Your creditor will be more pleased to settle the case out of court than in court. This is the point where debt mediation comes in.

 A debt mediator, sometimes known as a debt relief expert, will review your financial position and offer your creditor a payment procedure that you can afford. The opposite happens sometime whereby the creditor’s lawyer offers your mediation team a payment plan.  There’s no need to worry – you can always negotiate the terms. This is where you can rely on the negotiation skills of your debt mediation expert. You can do it yourself, but an expert will do it much better than you. Besides that, it’s possible that the expert has dealt with the creditor before, thus a professional relationship already exists. Your debt mediator will also answer some questions you may have such as, what debts are cancelled in a bankruptcy?


There are two types of outcomes in a debt mediation arrangement during bankruptcy. The first one is to pay off the debt in a lump sum payment. A good debt mediation expert will advise you to stop paying your creditor immediately you’re pronounced bankrupt. Instead, start depositing the money in an insured account. This way, you will have a sizable saving that can be given in lump sum once the case goes to court. Your debt relief expert can also negotiate for a reduced priced now that you have offered to pay off the debt in lump sum.

The second arrangement is paying in lower monthly installments. In this case, your debt mediation expert will show your creditor exactly how much you can be able to pay every month. Both sides will then agree on an unbiased figure.

It’s not always a guarantee that the creditor will accept the terms that you are offering. Sometimes they will totally disagree with the amount you have proposed. In this case, you will be forced to proceed with the court case and have the judge make the verdict. If the ruling favors the creditor, you might in danger of losing your assets. But, just by the fact that you hired a debt mediation expert, you stand a chance of settling the case out of the court.

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