What Is Arbitration for a Loan?
Arbitration is a sort of parallel court system that allows people and companies to opt out of using the courts of the United States to resolve disputes. It is very popular for lending companies like credit card and car loan companies. These big companies like to use it because fewer lawyers know how to use arbitration, and are less likely to sue them when they make mistakes or treat their customers poorly.
How Does Arbitration Apply to Bankruptcy?
During a bankruptcy, creditors might still try to collect even if someone is protected by a bankruptcy stay. It might be letters, attempts to collect over the phone, but those things aren’t lawful during an active bankruptcy. If that sort of thing happens, we expect to be able to do something about it. We might file some sort of claim or adversary. But sometimes we don’t get our day in court. Instead, we might find ourselves sitting in the building of the company who cheated us, across the table from their lawyer. No judges, no juries, just you and that company who’s cheating you. That’s Arbitration.
What Arbitration Should Be
People should arbitrate when they don’t want to go to the trouble of taking each other to court. In arbitration each party sits on their side of a table and talk it out. The people at the table are supposed to have roughly equal bargaining power like two business or corporations. Arbitrators are the neutral party who makes sure everything stays fair and civil. But that’s not how arbitration looks anymore.
Today nearly every company has a mandatory or forced arbitration clause in all their contracts, and agreements. When you sign up for a credit card: arbitration clause. When you buy a house: arbitration clause. Even when you play a video game: arbitration clause. They’re everywhere, and companies use this tool to prevent being sued, to get around class action lawsuits, and to prevent people who are filing bankruptcy from challenging their violations of Fair Debt Collection Laws. Even worse, the arbitrators who run these things are usually directly employed and paid by the people cheating you.
How to Spot and Deal with Arbitration Clauses
The good news is that most arbitration clauses have the option to opt out. The bad news: arbitration clauses can be ‘buried’ in contracts, and they make the process of opting out extremely complicated. Here are some things to keep in mind:
- Most arbitration clauses are in those online agreements where it’s easy to click agree without reading. It’s good to look for that clause before agreeing.
- Arbitration clauses usually have a heading like: “Forced Arbitration,” “Legal Disputes,” or “Dispute Resolution.”
- If you opt out of arbitration !Keep Records! companies will always say: “prove it.”
- Because arbitration prevents your claims taken seriously, there’s no upside to remaining in a mandatory arbitration agreement.
- Even if you opt out, you can still choose arbitration to settle a dispute, so there’s no downside to opting out.
During your bankruptcy with Walker & Walker we want to be able to take your claims seriously. Opting out of arbitration agreements can help us do that.