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If you’ve ever watched a court room show on TV where people come before a judge to have their disputes resolved, you haven’t seen a real court case.
Views: 886 Created 10/08/2010

        Shows like this include Judge Judy and the People’s Court, just to name two examples.  A real court case does not take place in a sound studio, but in a court room in a courthouse with the authority of the law behind it.  What you see on TV is called Arbitration.

           Arbitration, like mediation and negotiation, are forms of Alternative Dispute Resolution or Alternate Dispute Resolution (ADR).  ADR is designed to help people settle their disputes without resorting to a formal lawsuit in court.  All three forms of ADR will not only save you money, but time as well.

            When you decide you have your dispute arbitrated rather than file a lawsuit, the way your case will precede will be different. 

            If your lawsuit involves debt, then your case is primarily a paper battle.  Instead of standing before the judge and presenting your case to him orally, making a formal opening or closing statement, providing witnesses, etc you present pleadings.  Pleadings are the documents you use to present your arguments, both factual and legal, to the judge.  The judge reads the pleadings, and then makes his decision.  Occasionally, the judge may allow one party to make an oral argument, but it’s rare.

            Of all the forms of ADR, arbitration is the closest to a court hearing.  During arbitration, you and your opponent (and their legal counsel) meet before an individual called the Arbitrator.  The Arbitrator can be a judge, but most often they’re just a licensed Arbitrator.  A licensed arbitrator is a legal professional, and may be a lawyer, but doesn’t have to be.  In addition, arbitration doesn’t have to take place in a courtroom, but can take place anywhere. 

            Like a court case, Arbitration has the force of law, meaning any decision reached by the arbitrator is just as legally binding as a court case.  This means that if one party is unhappy with the arbitrator’s decision they will make a formal appeal if the judgment is not considered final.  If the judgment is considered final, in most cases neither party will be allowed to appeal the arbitrator’s decision.

            Arbitration is perhaps the most controversial of the three forms of ADR.  A lot of businesses, including mortgage lenders and credit card companies, include “dispute resolution” clauses in their standard contracts and specify the terms of arbitration.  Many companies refuse to do business with anyone who will not agree to resolve any dispute the way the company wants, making arbitration mandatory. 


            This can lead to problems for consumers who do not read the entire service contract, including the fine print.  Signing a contract/agreement that includes an arbitration clause can deny you your right to have your case heard by a judge in a courtroom. 

            Many people may think, how can someone deny me my day in court?  I’m guaranteed the right to be heard in the Constitution! 

            Well, it’s true.  You are guaranteed the right to be heard in court under the 7th Amendment in a civil case.  However, the 7th Amendment only applies to civil cases in federal court, and has not been incorporated into the 14th Amendment.  This means that you do not have the right to be heard in state court for a civil matter.    

            When you voluntarily sign a mortgage agreement or a credit card agreement that contains an arbitration agreement the law will assume you read the contract in its entirety and are agreeing to all the terms it contains.  The fact that you really did not read the contract and did not know about the arbitration clause, will, unfortunately, not be a legal defense.

            One thing you can do to avoid getting tied to a form of dispute resolution you don’t agree with is to not agree to the contract.  Unfortunately, this is not the best way, because most lenders and creditors will not modify their contracts for each individual consumer.  In order to save time and their operating expenses, most companies use pre-printed form contracts that are the same for each customer.

            The best thing you can do to avoid being caught by an arbitration clause is to not breach the agreement between you and your creditor, i.e. keep paying on your debts.  If your debts become more than you can handle, you should try another form of ADR: negotiation.  Or, if you don’t think that will work, debt consolidation or a debt management program can help you avoid arbitration.

.  Shows like this include Judge Judy and the People’s Court, just to name two examples.  A real court case does not take place in a sound studio, but in a court room in a courthouse with the authority of the law behind it.  What you see on TV is called Arbitration.

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