Small Claims Court Kills Your Credit Rating

Even those who ends up winning in small claims court usually aren't happy about it. After the time, expense and general frustrations facing the other party, about 15% of all cases filed in small claims court actually land in front of a judge.  Of those, not all are ruled in your favor. If you win, you might not ever collect the amount for which you sued.  But if you lose, it can be even worse:

Most people don't know that if you lose in small claims court, credit rating agencies will use that loss and can downgrade your credit rating even if you pay off the entire amount in a timely fashion.

That's right, in the United States, court decisions are public record.  Anyone can go through them to see who's sued whom, when they sued, for how much -- and whether they won or lost.  The bad news is that credit scoring agencies are constantly reviewing those records and updating them.

This is one more reason why you want to avoid small claims court and use an online settlement service instead.

With an online settlement service, there are no courts, no lawyers, no mediators or arbitrators. You simply file your case online at your convenience. The other party is notified and does the same. After that, the online settlement service calculates the best amount for the two of you.  Once you both agree, the owing party pays the settlement fee by credit card and the other party gets his check within ten business days.

The best part of an online settlement service, however, is that its records are not public.  Even though its Certificate of Final Resolution is totally binding and legal as a court decision, it's completely outside and independent of the court system.  That means no credit company can access its record, keeping your credit score healthy and strong.

More and more people are opting for online settlement services instead of small claims court.  Shop around to see how much faster and better they are for you, too.

Why online small claims courts don't work

If you search the internet for phrases like "online small claims court," you're bound to find all kinds of solutions that claim to remedy disputes better than small claims courts, but the fact is that every one of them is no better than small claims court.  In fact, some are actually worse.

If you really want an online alternative to small claims court, your best bet is an online settlement service.  Here's why:

1. You still have to use a judge: No matter if it's court, mediation or arbitration, online or offline, all those systems require adjudication. Adjudication means that someone, or some people, are authorized to review and judge the merits of your case.  When you allow some other person to hear your case, you take the risk of them being biased, ignorant about your situation or, to put it plainly, just not very smart.
   
   An online settlement service has no judge. The system handles everything for you and the other party. The two of you never communicate.  The system does all the work for each of you and provides all the solutions each of you need to settle the case.
   
2. Your judgement isn't final.  in all other systems, even the ones offered by state and local governments, the judgement you receive can be appealed by the other party, which means you can go through the entire process all over again, including paying more fees and wasting more time.
   
   All decisions from an online settlement service are final and cannot be appealed.  Once the matter is settled, each party can download a Certificate of Final Resolution that states, in writing, that the matter has been settled to each party's satisfaction. The CFR also includes a "hold harmless" clause that states neither party may ever litigate the matter again.  No appeals.  It's over and both of you can get on with your lives.
   
3. Courts don't honor credit cards. If you lose in court, you must pay the full amount in cash or by check. That can put the losing party in a tough position, or even worse, prevent him from paying at all (and many judgements do go unpaid).
   
   Online settlement services allow payment by credit card, which makes paying the judgement in full much more likely. When the losing party realizes he can pay the judgement over time, he's much more likely to pay in full.
   
4. Online court systems are slow. Like any government institution, online courts move at glacial speed. Your case review could take weeks or months.
   
   Online settlement services can be over in as little as a day.  It's true! If both parties respond efficiently, the entire matter can be disposed of -- forever -- in as little as one day.
   

Before you sign on to any "online small claims court," be sure to do your homework.  It may not save you time or money. In fact, it could cost you plenty more of each.

Why arbitration is worse than small claims court.

Just because you have a legal dispute with someone doesn't mean you must end up in small claims court. There are lots of alternatives to small claims court, most of which are called alternative dispute resolution or ADR.  Until now, there were very few methods of ADR:

1. Mediation: This is when a third party shuttles back and forth between you and the other party, trying to make a compromise deal. The good news is that mediation allows you to avoid small claims court.  The bad news is that mediation costs money. And the longer it takes, the more expensive it is, because mediators usually charge by the hour.
2. Arbitration: Arbitration is more like a private small claims court, where a private arbitrator listens to the two of you and renders a decision, just like a judge.  There are two kinds of arbitration: binding and non-binding. Binding arbitration leaves you at the mercy of the arbitrator, who could be great -- or could be a dumb as a doorknob. You never know what kind of arbitrator you're going to get (I once had an arbitrator actually fall asleep during the session and everyone around the table had to wait an hour until he woke up!). If you choose binding arbitration, it means both of you agree to abide by the arbitrator's decision.  Non-binding means that neither of you are obligated to follow his decision. In other words, everyone has just wasted a lot of time and money.

Arbitration is the choice of big corporations who don't want to spend a lot of time and money in court.  That's why if you look closely at your financial contracts, there's often a clause about forfeiting your right to litigation in favor of arbitration.

Fortunately, there is now another means to settle your dispute for a lot less, a lot faster: Online settlement services.  With an online settlement service, you submit the offer and the other party submits his. No judges, lawyers, mediators or arbitrators get in the way, slowing things down or  screwing things up. No charging high fees. You write up your description of the case, the other party approves it and the online settlement service does the rest of the work, settling and paying out the matter, usually within a week.

Because it's online, the online settlement service is more convenient, too.  Everything is done at your convenience, from any internet device, anywhere in North America. No missing work. No driving and parking. No chasing the other guy all around the country: If you have his name, e-mail address and phone number, you're good to go.

Before you commit to arbitration, find a reputable online settlement service first. Most don't charge a dime until both parties agree to use them, and even then, it's far faster and less expensive than courts, collections, mediators and arbitrators.

Can I sue in small claims court across the country?

For many disputes, small claims court seems to be the way to win a dispute. Whether the dispute is personal or business, you can get your case decided with legal authority.  But there are some drawbacks:

1. You might win. But you might also lose. In a substantial number of cases, the judge "splits the baby," compromising both parties and leaving neither with satisfaction.
2. Court fees and serving summons are going to cost you money, up to a few hundred dollars.
3. Assuming you win, collecting the money could cost you even more, assuming the other party pays.
4. If the guy you're suing is across the country, all bets are off. The person you sue has to be in the same jurisdiction as the small claims court. If he's not, you can't sue him.

That last one is the big small claims court killer. These days, with everyone doing business on the internet, there's a much better chance the person giving you trouble is out of state or across the country.  In that case, you have two choices left:

1. Call a collection agency, wait a few months and maybe get 60% of whatever they collect.
2. Use an online settlement service.

Online settlement services are relatively new, but solve a lot of the problems plaguing small claims court:

1. Because they're not a court, they can settle any dollar dispute between any two parties anywhere in North America.
2. They're as fast as e-mail. Totally online.
3. They're way less expensive than small claims court and collection agencies.
4. Because there are no lawyers or judges, the whole process is managed between the two of you without either of you having to contact the other.
5. The is motivated to pay the plaintiff because he gets a small discount and he can pay be credit card (which small claims courts don't allow).
6. Once the matter is settled, both parties download a legally binding Certificate of Final Resolution, enforceable throughout North America.

If you have business outside your city or county, you no longer are out of options. Try using an online settlement service to see how fast and effectively you can win and get on with your life.

You don't always get a real judge!

Most people who think about resolving a matter in small claims court believe it's simply a matter of showing up to a courthouse, telling a judge their side of the story, and having the judge force the other guy to pay up.

Nothing could be further from the truth.

In the first place, all courts, including small claims courts, are to backlogged that the average duration of time from filing forms to the actual trial date is over 90 days. Some take even longer. Second, nobody just walks into court. There are forms to file and summons to be served and papers to be processed. All of that costs time and money, but eventually, you're assigned a court date. What happens next may also surprise you:

The person hearing your case might not even be an official judge.

Due to overloaded court schedules, backlogs of cases and the usual budget shortages, it's not unusual for court to find themselves in need of judges to hear cases. When they don't have official judges, they recruit nearby lawyers or elected/appointed commissioners to hear cases. These judges are often called judge pro tem, and are authorized to hear cases, but if you feel you'd rather have a real, live, qualified judge, you're within your rights to insist on one.  The only problem there is that if you do, it's likely that your case will be reassigned to another date, which means even more wasted time.

This is just one more reason why it makes sense to use an online settlement service.  Since over 85% of small claims court cases settle before getting to trial, (chances are good that the judge, commissioner or judge pro tem is going to twist your arm to settle anyway) online settlement services make way more sense: they're faster, they're less expensive and way more convenient because both you and the other party can do everything from any internet device.

Before you head to small claims court, think hard about the time, money and who's really going to hear your case. An online settlement service might be a better choice all the way around.

The secret small claims court won't tell you.

No matter where you live or who you live with, as long as there are more than two people, you're going to get into some kind of disagreement. It's just human nature. Most of the time, you can solve the issue between yourselves, but there are times -- especially when money is involved -- that the problem is so bad that someone else has to render an impartial, binding decision.  In most western countries, that decision is made in court.

The small claims court is where most ordinary citizens go to have their cases decided, mainly because the disputed amounts are low (usually way under US$10,000) and because they can't afford to have a lawyer represent them (attorneys aren't allowed to represent you in small claims court; you have to speak to the judge on your own behalf).

Small claims courts fees can run into the hundreds and can cost you lost wages from work. But the biggest secret that small claims courts won't tell you is this:

Over 85% of all small claims cases settle before they get to trial.

Think about that. You can spend hundreds in time and money expecting to have your case heard by a judge, only to end up settling your case with no trial at all. If that makes you wonder why more people don't simply settle their cases, you're not alone.  There are good reasons why they don't, and the top reason is this:

The only thing people hate more than talking to a judge is talking to the person they're suing.

Research shows that if more people could resolve their disputes without court, without costs and without facing the person they're suing, they'd do it.  This is why it's in your best interest to use an online settlement service.  Services like OneDayDecisions.com, for example, offer both parties up to three chances to accept a settlement amount calculated to be acceptable to both parties. Once both parties agree, the deal is sealed with a credit card payment (which is not allowed in small claims court) and there's no harm done to anyone's credit rating (small claims courts report when you lose to credit agencies, which can lower your credit score).

Online settlement services also are faster than small claims courts. Instead of taking months, the entire process can be completed in as little as one day. And unlike small claims courts, online settlement services can settle a dispute with any two parties anywhere in North America, instead of being limited to city or county jurisdictions.

If you have an 85% chance of settling your case, it makes sense to use an online settlement service before you spend the time and money on small claims court, where you likely will never get to trial.