6 Benefits of Choosing Mediation to Handle Your Business Bankruptcy Case
Bankruptcy can be a complex process, but by putting a mediator in place – an option that’s especially well-suited for commercial bankruptcy filings, as long as legal counsel for both parties is on board – the process can have a successful outcome that’s more favorable to both parties.
How does bankruptcy mediation work?
Mediation is a form of alternative dispute resolution that is held as a way to create a more agreeable bankruptcy proceeding. Mediation has been trending as an option in bankruptcy cases, primarily because it allows the two parties to come to an agreement together, generating a solution that, if agreeable to both parties, will rarely fail to be approved in court.
The mediator – chosen by both parties – is not a legal counsel, but instead acts as an advisor to help each party determine an acceptable option for each of them with their own legal counsel present.
There are several benefits to mediation, which has been legal in federal court since 1998. It is most often used in Chapter 7 bankruptcies, the most common type of bankruptcy in the United States, and one that allows businesses to liquidate their assets, collecting outstanding debts and pay off creditors with a payment plan if possible, which allows them to stay in business.
- Mediation is quicker.
A mediator hammers out issues before they go to court. Once a mediator has been selected that suits both sides, a mediation session will be set with a time, date, and place that can be attended by a representative from both parties. During that session, the details of the bankruptcy will be addressed. That will save lots of time when the case goes to court.
- Mediation is fair to both parties.
By working with creditors, businesses in debt can often come to an agreement that is affordable to them and acceptable to the creditor.
- Mediation is more flexible.
Bankruptcy mediation helps businesses that are experiencing financial difficulties work with their creditors in a way that can potentially save the business without leaving the creditor holding the entirety of the debt. Mediation can help establish a workable repayment plan that won’t leave the business filing bankruptcy so strapped for cash that it can’t stay afloat despite the respite Chapter 7 provides.
- Mediation gives both parties more control.
In a courtroom, parties are no longer allowed to negotiate, and attorneys will do that for them. Mediation opens the door to comfortable negotiations, which can be an important part of future business dealings between the two companies.
- Mediation helps find common ground.
If both parties are far apart in negotiations, mediation will help parties overcome impasses.
- Mediation can help retain relationships.
Businesses will develop a better understanding of the other’s needs during mediation, which helps preserve working relationships going forward.
Getting Help with Bankruptcy Mediation
If your business is in the red and you are considering bankruptcy, mediation may be an excellent way to maintain business relationships while relieving your debt. For more information about bankruptcy mediation – and details about why it is a growing trend for businesses filing bankruptcy, contact Maxwell Dunn’s team for advice and information about the different options available to you. Contact our team today at 248-246-1166.See all videos