George Simons | January 10, 2024
Summary: Can't imagine how you'd endure a day in court? You might not have to if you make a motion to compel arbitration. Resolve your dispute outside the courtroom.
If you were served with a debt collection lawsuit and are terrified at the prospect of having to go to argue and make an argument before a judge, do not fret. You have options. For example, it may be possible to resolve the debt collection lawsuit before going to court through an alternative form of dispute resolution. An effective form of dispute resolution that takes place outside the courtroom is arbitration.
You can use arbitration to force your case out of court and increase the chances of winning your case. Check out this video to learn more:
Arbitration is a private process outside of the court. It involves an agreement between the disputing parties in a legal case to empower one or more neutral individuals to render decisions about the legal dispute after listening to the arguments and receiving the evidence. This individual is known as an arbitrator.
Arbitrators take fairness and impartial oath and apply the law just like the judges. However, unlike the judges, arbitrators are answerable to the parties involved in the dispute. They are also handpicked by the individuals involved in the conflict. On the other hand, judges are elected or appointed by government officials.
Many agreements and contracts contain arbitration clauses. As a result, several state and federal laws allow an individual to compel for arbitration. However, you'll need to make sure that you have a valid arbitration agreement for this to happen.
Does the idea of going to court for a debt lawsuit stress you? Filing a Motion to Compel Arbitration can help ease the stress.
Arbitration lets you settle the debt outside of a traditional court setting. It's much less intimidating than going to court, and most debt collectors would rather dismiss the case than take it to arbitration.
If you got so far behind on your credit card payments that the credit card company is now suing you, you can file a Motion to Compel Arbitration to resolve the issue outside of court.
All credit card agreements contain a section that outlines details about arbitratino. This is known as the arbitration clause. You should carefully review the arbitration clause in your credit card's terms and conditions before deciding if arbitration is a good move for you.
You can search for your card or bank's agreement here.
Arbitration and mediation differ in empowering and awarding authority to the neutral third party. In arbitration, the arbitrator has the power to render a decision considered to be final in resolving the dispute.
The conflicting parties agree on the settlement arrived at by the arbitrator. Evidence and arguments are highly regarded and written, and an arbitration award issued later.
In mediation, the conflicting parties retain the right to decide whether to agree or not to the mediator's settlement. A mediator only tries to encourage the disputing parties to work together by providing alternative directives and opinions, with the sole objective of reaching common ground with a mutually satisfying solution.
Unlike mediation, arbitration is more formal; it follows legal rules and procedures. In mediation, the disputing parties might fail to reach a common ground and end up back in the courts afterward.
For a conflict resolution process to be considered as arbitration, it must have the following characteristics:
The arbitration process is private; disclosures on submissions made or the information in those submissions and the awards given during the process are not allowed.
Before the process begins, parties involved in the dispute must agree to carry out the arbitral tribunal's final decision without delay.
Before the process begins, the parties involved ensure neutrality by:
These mutual decisions ensure that none of the parties involved has an advantage over the other.
This process can only happen if both parties have agreed to it. Should a future dispute occur involving the same parties under the contract, either of the disputing parties will insert an arbitration clause under the relevant contract. Unlike mediation, a party cannot unilaterally withdraw from the arbitration process.
Before filing a Motion to Compel Arbitration, consider the following:
Consider checking your contract to confirm that you have a valid arbitration agreement. It's almost impossible to bring to action a compelling motion arbitration if you don't have a good arbitration agreement.
Arbitration provisions contain clauses that bind the parties in a contractual agreement to resolve their issues using an arbitration process rather than the court system. The clause states the arbitration tribunal's location and always requires any court with competent jurisdiction to confirm the award.
To compel your debt collector into participating in arbitration, ensure that the legal dispute falls within the parameters stated by the arbitration provision in the contract. For instance, some arbitration agreements may contain exclusions or exceptions for what is covered. A contract might require arbitration for missing out on one payment but not debt defaulted.
If your argument is eligible for arbitration, it is important to determine the best location for the process. The arbitration provision includes such details.
Another thing to address is whether to pursue arbitration in a state court or a federal court. The Federal Arbitration Act (FAA) ensures judicial facilitation of private dispute resolution through arbitration.
It applies in both federal and state courts. However, many individuals consider filing the motion in federal courts because such courts have a firm policy of ruling in favor of arbitration.
JAMS Solutions and American Arbitration Association (AAA) are two of the leading arbitration organizations in the US. If your Motion to Compel Arbitration has been accepted by the court, it is very likely that your arbitration case will involve one of these two organizations.
According to JAMS, the arbitration process is as follows: Both parties choose an impartial person (arbitrator) who arbitrates the case by reading briefs and documentary evidence, listening to parties' testimonies, examing evidence, and offering an "award of the arbitrator" (which includes any relief, damages, outcome, or attorny/courts costs and fees deemed necessary by the arbitrator). The arbitrator must render the award within 30 days of the arbitration hearing. Finally, the award can be entered as a judgment in law after proper confirmation with the court.
Filing a Motion to Compel Arbitration can be a great option for someone who is sued for debt. In many cases, the debt collector is required to cover arbitration costs, and such costs can end up being more than the amount they are trying to recover. As a result, many debt collectors would rather dismiss the case than continue with the arbitration process. This is the ideal outcome for a defendant who has filed a Motion to Compel Arbitration.
On the other hand, if the arbitration clause states that both parties must split the cost of arbitration fees, a case dismissal may not be as likely.
Many credit agreements list the creditor as the party responsible for arbitration fees, should a debt lawsuit case move to arbitration. This means that many creditors are contractually bound to pay arbitration fees and cannot seek to recover them if they win, which leaves you off the hook! However, if your credit agreement does not explicitly state that the creditor would be responsible for fees in an arbitration case, then the cost for arbitration would be split between you and the creditor by default.
In arbitration between an employee and employer, the employer must cover the costs but can recover them if they win. Additionally, some credit agreements give the creditor the right to recover arbitration fees if they win, so be sure to carefully read your credit agreement when considering arbitration.
If you have sufficient background facts and texts of the arbitration agreement, consider following the procedures below to compel arbitration.
According to Section 4 of the Federal Arbitration Act, you can file a petition compelling arbitration without waiting for the other party to sue you. Your pleading should have the title 'Petition to Compel Arbitration.' It should also contain the following information:
Check with the court clerk about petition filing requirements and file the original petition. You should include a notice of hearing within five days.
Be sure to include the following:
When serving the other party, be sure to follow the correct methods of service.
Based on the issues provided, the judge will decide on the validity of the arbitration agreement. If these issues are not in dispute, the judge will issue an arbitration order.
Depending on your particular situation, you may want to contact the debt collector who is suing you and determine if they are willing to participate in the arbitration to resolve the dispute. If they are not willing to voluntarily participate in arbitration, you have the option to file a motion to compel arbitration.
If you want to compel participation in arbitration, it is important to make sure that the legal dispute falls within the parameters of the arbitration provision in the relevant contract (e.g., credit card agreement, personal loan agreement, car loan agreement, etc.). For example, some arbitration agreements contain exceptions or exclusions for what is covered. A contract might require arbitration for compensatory disputes but not for disputes related to the quality of work completed in a project.
Check out this flowchart that outlines all the possible routes a debt lawsuit can take, including arbitration:
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Edited by Hannah Locklear