Category Archives: Creditor Rights

How to Maximize Bankruptcy Mediation

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Bankruptcy is ripe for the use of mediation since creditors are already intimately involved in the process.  Through mediation, the parties can all work together to achieve a settlement that they will present before the court.  There are steps that the parties involved can take to make the best settlement possible, including:

Use the Mediator’s Expertise

Bankruptcy mediators are commonly former bankruptcy judges, bankruptcy attorneys and business people familiar with the bankruptcy process.  This unique experience allows them to fully explain the process of bankruptcy to both the debtor and creditor.  Additionally, the mediator can rely on this experience when conveying each party’s position to the other side.  With this specialized experience, a mediator can quickly pick up on valid points and funnel this information to the other side in a productive manner.

Be Realistic

A mediator will urge all of the parties involved to have realistic expectations.  For debtors, it is important that they understand the bankruptcy process and what is at stake.  For creditors, it is important that they know where their claim falls in relation to other claims.  If a client continues to hold unrealistic expectations, the mediator may be more apt to deliver this message because he or she may appear more authoritative than the other parties or their respective counsel.

Think Outside the Box

One of the biggest benefits of mediation in any context is its ability to find creative solutions to the legal issue at hand.  When a complex bankruptcy is underway, the parties may consider bringing third parties in who may have insight or ideas about how the bankruptcy settlement should be worded.  There may be a buyer willing to purchase part of the debtor’s property that may be folded into the bankruptcy settlement and that allows the creditors to walk away with a little more.  Creative solutions often help tie the underlying interests of the parties with the ultimate resolutions that are made in the form of provisions in the settlement agreement.

Mediation is the Better Alternative in Creditors’ Rights Disputes

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Handshake of business partners

In a climate of increasing regulation for creditors and collections companies, it seems that the law is on the side of the debtor rather than the creditor.  Then there are consumers filing bankruptcy and finding ways to skip out entirely on their debts, despite holding on to many of the possessions that they borrowed for in the first place.

Even in this climate that is pro-debtor, creditors’ rights mediation can be a successful, inexpensive alternative to taking a debtor to court.  Creditors such as banks, finance companies, equipment leasing companies and others can benefit from this form of alternative dispute resolution without dealing with expensive litigation and collections strategies that have been ineffective.  The best part is mediation is a low-cost alternative, so creditors will save money in the process by avoiding extensive attorney fees and court fees.

Creditors’ rights mediation can be used in situations such as home foreclosures and bankruptcy, or as a method of collecting on an unpaid debt, and can assist creditors in finding solutions to unpaid debts that have threatened their company’s financial stability.  In a creditors’ rights mediation session, the disputants are able to discuss the debt that is owed in an informal environment.  A qualified creditors’ rights mediator will facilitate the discussion and assist both sides in reaching a mutually beneficial agreement.

The right creditors’ rights mediator will know the law well enough to provide suggestions regarding what the likely outcome of the dispute would be if it were litigated.  This is often enough to convince debtors that they should work out a repayment plan that they can afford and that will pay back the debt they owe.  After all—no one wants to go to court!  For this reason, finding a way to resolve the issue without litigation and through mediation is the obvious better path in many creditors’ rights disputes.