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Professional Debt Mediation – What It Is and How It Works

Professional Debt Mediation – What It Is and How It Works

If you are behind on your bills and in debt, you may want to consider professional debt mediation. Learn what it is and how it works.

With professional debt mediation, you hire a company to help you settle with your creditors. The debt mediation company handles the paperwork and negotiations, saving you time and ensuring you meet deadlines.

Continue reading to learn more about professional debt mediation, including how it works and the pros and cons of this service.

Complete Guide to Professional Debt Mediation

Being in debt is never a good feeling. You may get nagging phone calls, emails, or letters. Or you may have the weight of the debt hanging over your head.

On top of the emotional toll that debt takes on you, it also negatively affects your credit score. You have a few options for dealing with debt, including paying it off, reaching a settlement, or letting it go to a hearing.

If you let the debt go to a hearing and the judge rules that you owe your creditor, your wages can be garnished. Or your property may get a lien placed on it.

This is where professional debt mediation comes into play.

debt mediation in progress

What Does Debt Mediation Mean?

Debt mediation refers to when you try to settle (i.e., mediate) your debt. In debt mediation or arbitration, you and your creditors negotiate to come up with a solution that both parties benefit from.

A professional debt mediation service is a middleman that negotiates with your creditors on your behalf.

In some ways, this is similar to what a debt collections attorney would do. However, the attorney would also handle other legal manners and represent you in a hearing if necessary.

How Debt Mediation Works

Debt mediation can begin as soon as you are past due on your payments. If you are 90 to 180 days past due and haven't made any payments, the creditor can sell your debt to a collection agency. Or they can file a debt collection lawsuit.

Your original creditor likely repeatedly asked you for payment, but the collection agency will usually do so to a greater degree.

You could theoretically begin debt mediation at this point, assuming you know you will not be able to pay the debt.

However, many people will wait to begin the mediation until they receive a court summons. This will happen if the creditor files a civil lawsuit to collect the debt.

Once you are served the papers for the suit, you have 30 days to respond. There is an official response process, and a lawyer can help you. Some professional debt mediators will assist with this as well.

As soon as you are served the suit, you should start working with a professional debt mediator if you haven't already done so.

Depending on the situation, the creditor may want to receive a lump sum payment. Other times, they may agree to a new payment plan with a reduced principal and reduced interest rate. Be prepared for both situations.

Both Parties Prefer Settling

The good news if you want to try professional debt mediation is that most creditors are open to the idea. They would prefer that the issue does not go to court. If it reaches a hearing, then they would have higher lawyer fees. They would also have to wait for payment via your seized assets, like garnished wages or liens.

By contrast, if you settle, they will usually be paid right away. This reduces the time and effort spent and lets them balance the part of their books relevant to you.

The reasons that you prefer debt mediation are also financial and time-related. You won't have to go to court, saving you the hassle of doing so. More importantly, it gives you the chance to pay less than your full debt amount potentially. On top of that, you would be in control of the payment method instead of having your wages garnished. You also aren't going to have a lien placed on your home or car if you reach a settlement.

What About Debt Settlement?

Although you may hear the term debt settlement used interchangeably for debt mediation, it can also have a different meaning.

Debt settlement sometimes refers to the process mentioned above. In many cases, however, there are a few key differences.

Most debt settlement companies have you make payments directly to a savings or similar account. Then, once you pay a sufficient amount of money, they will try to reach a settlement with your creditors. Their goal will be to get the creditor to agree to accept the amount you had saved.

By offering a lump-sum payment, creditors will be more inclined to accept the offer and settle.

However, this process comes with a long list of potential risks. They start with the fact that there is no guarantee that your debt settlement company will successfully reach an agreement with your creditor.

You won't be making any payments toward the debt, as your money will be going to the savings account set up by the debt settlement firm. This means your late fees and interest payments will continue increasing.

It also means your credit score will take a major hit.

Legally, debt settlement companies can't charge you fees upfront. But you can have various other fees, such as monthly fees and upfront fees, in addition to a hefty commission when the debt is settled.

Because of the risks, most financial advisors suggest staying away from debt settlement companies.

This contrasts with professional debt mediation, which may be recommended as long as you understand how it works and the pros and cons.

Is Professional Debt Mediation Legit?

Yes, professional debt mediation is legit. The only caveat is that you need to do your research on the company you choose to work with. Remember the above points about debt settlement and look for a debt mediation company, not a debt settlement one. On top of that, pay attention to their methods to confirm that they meet this classification.

The obvious downside of hiring a professional debt mediator is that you will have to pay them. However, the amount you save on the settlement may be well worth it. You will have to consider the cost of the debt mediation and compare it to your debt to decide if it makes sense for you.

What Are PDM Collections?

PDM collections refer to a company called Professional Debt Mediation (PDM). This is a collections agency that works on behalf of creditors. While they do offer mediations, their focus is on collections.

Pros and Cons of Professional Debt Mediation

Throughout the above information, we've touched on some of the pros and cons of professional debt mediation. However, looking at them more clearly will help you decide whether it is the right course of action for you.

Pro: You Can Settle the Debt and Put It Behind You

The biggest advantage of professional debt mediation is that you will likely be able to settle the debt. This lets you move on with your life and start putting the debt behind you. Remember that it will likely still stay on your credit report for at least seven years.

Pro: Creditors Will Stop Harassing You

Another major advantage is that mediation will stop the creditor from harassing you with phone calls and letters.

The creditor will see that you are actively working to settle the debt, so they no longer need to harass you.

imprissioned by debt

Pro: The Professional Handles Most of It

The main advantage of hiring a professional for debt mediation is that you don't have to do as much. You will not necessarily have to be involved in the negotiations or check the terms of your agreement (although you still should).

The professional will also be able to use their experience and knowledge to help negotiate.

Con: You Will Have to Pay the Professional

Professional debt mediation companies will not work for you without payment. This means that while they may save you money by helping you settle your debt, your savings will not be as large as they initially seem.

Also read: Debt To Income Ratio For Car Loan

Con: Regulations Mean You Have to Choose a Professional Carefully

One of the biggest issues with professional debt mediation is that the industry is confusing, as are the regulations. There is not much oversight, and you may end up with a mediator that doesn't have your best interests at heart. After all, your creditor can afford much better debt mediators than you can.

Nevertheless, you can minimize your risk by carefully evaluating the company you hire for debt mediation. Look at reviews and confirm that they specialize in supporting borrowers, not lenders.


With professional debt mediation, you hire someone to negotiate with your creditors on your behalf. They work to freeze fees and interest and reduce the amount of debt you owe. They also handle all of the interactions with the creditor for you, reducing your stress. Be careful before choosing a professional debt mediator, as not all strategies are equal, and not all companies have your best interests.

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