Mediation and Financial Distress

Mediation is an alternative method of dispute resolution that occurs outside the courtroom.  It involves a neutral person working with the parties to achieve a voluntary resolution of a dispute.  Other types of alternative dispute resolution include arbitration, early neutral evaluation, mediation-arbitration, and summary jury trials or mini trials.  While all these processes may benefit individuals or companies in resolving financial disputes, mediation is often the most productive method.  There are two distinct mediation models: facilitative and evaluative. In the facilitative model, the mediator encourages the parties to talk openly with each other, assess their interests and positions, and generate options for solving the dispute.  In the evaluative model, the mediator provides an informal assessment of the dispute which the parties may use as a starting point for settlement discussions.  Regardless of which model is used, the process results in the parties assessing their goals, interests and positions, and focusing on solutions rather than persuading a decision maker their position is valid.  The goal is a “win-win” resolution rather than the “win-lose” model of the legal system. 

Mediation offers substantial benefits which are unavailable in the legal system.  Our legal system determines the rights of parties and resolves disputes based on information provided to a decision maker under a complex system of rules and laws.  The process can be expensive, lengthy, and inflexible.  If litigation does not result in a favorable decision, the appeal process can take years.  Alternatively, mediation provides an opportunity for parties to communicate directly with each other and express not only the strengths of their legal case, but other real world issues that factor into potential solutions.  In mediation, all parties are given the chance to express their goals and interests, and to suggest solutions.  The focus on generating solutions as opposed to proving one’s case is a positive force.  In situations where financial distress exists, it may be crucial to maintain relationships with the other parties such as lenders, suppliers, landlords, and customers.  Bringing one or more of these groups to the mediation table allows the parties to collaborate on potential solutions which address the various interests of the parties.  Other benefits of mediation include lower costs than litigation, and the ability of the parties to address underlying issues which led to the financial difficulties.  While the legal system may decide a dispute, mediation addresses the underlying causes of the problem, and attempts to keep them from recurring. 

In addition to offering mediators experienced in bankruptcy and debtor/creditor rights, the DelCotto Law Group uses collaborative mediation skills in and outside of formal mediations.  It has been said that bankruptcy itself is a form of alternative dispute resolution.   In or out of the bankruptcy system, individuals and businesses in financial trouble need an economical method to alleviate the financial distress.  Cooperation and collaboration with lenders, creditors, and others who might normally be adversaries can lead to a better result at a lesser expense.  By using mediation techniques, the attorneys at DelCotto Law Group assist their clients in restructuring and strengthening the numerous relationships which are crucial to a successful business. 

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Robert J. Niemic et al. Federal Judicial Center, Guide to Judicial Management of Cases in ADR, at Section III. D. (2001).