Since the COVID-19 pandemic, many people have suffered financial setbacks. Millions of people in the United States have lost their jobs. They may be struggling to make their mortgage payments and stay on top of their other bills during this uncertain economic time. Some may risk having their wages garnished by creditors. Rather than litigating the issue, some debtors and creditors may agree to resolve their issues through mediation.
Mediation is a form of alternative dispute resolution that ultimately helps parties confronting a legal issue to resolve their case out of court. This often saves both parties time and money. Going this route may help the creditor obtain some portion of the unpaid debt back rather than facing receiving nothing if the debtor files bankruptcy. The debtor may be able to avoid more aggressive collection efforts, such as foreclosure, repossession, or garnishment by resolving the issue directly with the creditor and avoiding the legal system.
Mediation is also private, which benefits both parties from having their grievances become public fodder. Additionally, the process is confidential, so if the parties are unable to resolve the matter in mediation and continue to court, what they say during mediation generally cannot be repeated in court.
Mediation also requires and encourages the participation of both parties to help come up with solutions that work for both of them that may be outside the purview of the court to order, such as agreeing to a temporary moratorium on collections while the debtor regains his or her financial footing or waiving late fees or other penalties so the debtor can catch up more quickly.
When the parties are both parts of the solution, they are more likely to adhere to the agreement, preventing future litigation, appeals, and expenses that may otherwise result.