Almost 40% of businesses have more than $100,000 in debt. Additionally, the average debt balance for households is $105,056. When people have a lot of debt, financial obligations are often not met.
This is difficult if you are the one who is owed money and cannot seem to determine when you are going to be paid. It can affect your business to the point of closing if too many businesses are not paying you.
However, instead of jumping into litigation, consider mediation. Learn how mediation for debt disputes can get your business the money you are owed without a lot of stress, resentment, and money spent.
What Is Mediation?
Mediation is a resolution process that takes place outside of the courtroom. An impartial third party professional will control negotiations between the two parties (which can or cannot include their lawyers).
The goal of mediation is to come to a solution both parties agree to without involving litigation.
How Mediation for Debt Disputes Works
Professionals will put a stop to arguments, ask questions, reframe issues, and offer solutions to encourage both parties to talk and understand one another. However, the power is in each party. They can offer deals, trades, or bargains that the other party can accept or reject.
Unlike litigation, there is no “right” or “wrong”. There is only what both parties agree to.
Here are the general steps of a debt dispute mediation:
- Consultations: A professional meets with each party separately. They evaluate each party’s needs, more often than not determining why the debtor cannot pay. They may also be looking into the debtor’s assets so they can offer potential solutions during mediation.
- Strategy: Away from the parties, the professional will create various plans based on the knowledge they gathered. Doing this ahead of the meeting can help streamline negotiations.
- Mediation meeting: Both parties meet with the professional and begin discussions. The professional will offer solutions that each party can evaluate and agree on or dismiss.
- Choice recording: Once a settlement has been agreed upon, the terms are recorded, and actions are taken to meet the debt settlement. For example, paying a smaller amount each month for a longer period to pay off debt.
Mediation vs. Litigation: Why Choose Mediation Over Litigation
There are many reasons businesses should choose mediation over litigation to resolve business debt.
- More control: Both the business and debtor have more control over the mediation process and the outcome than in the courtroom. They can also choose whether they want to hold it in person or virtually to better suit their schedules.
- Less intimidating for debtors: The idea of going to court is intimidating to any person, but especially to those facing financial issues. By utilizing mediation, businesses have a better chance of a positive outcome because the debtor is more receptive to them.
- Saves time and money: Mediation is much quicker and less expensive than litigation. With litigation, you have to work around a court’s schedule and excess hours of debating, which leads to higher costs for both parties.
- Confidentiality: Mediations are confidential for both parties. With litigation, there may be tape recordings or transcriptions. At the end of mediation, the professional destroys any notes taken, so if you want to keep things private, this is the better choice.
- Preserve relationships: Mediation is much less contentious compared to litigation, which can help preserve relationships with the debtor. Whether it is a customer or a business partner, keeping things peaceful is always a smart business decision.
5 Signs You Need Mediation for Debt Dispute
Unsure when to use mediation? Consider the following signs and how they relate to your situation.
- Difficulty Coming to an Agreement
You are struggling to reach an agreement with the other party. Maybe you have both made and rejected suggestions and have hit an impasse. Tensions are rising on both sides, and it is becoming difficult to see a potential solution.
A Ryan & Jacobs professional will better guide discussions, which will hopefully lead to an agreement both parties are happy with.
- One Party Is Being “Unreasonable”
Anything involving money can quickly become emotional, and that is when people start to act “unreasonably.” If you feel the other party is at this point, you need a professional who can help calm the other party so proper discussions can be had.
- Hit a Wall with Communication
Communication has completely broken down. You are either talking around each other, or the other party refuses to respond at this point. This could be due to a simple misunderstanding, but it is now too late to resolve it.
A professional will work with both parties to keep communication going so a solution can be found.
- Wanting to Avoid Litigation Costs
If you know the reason the other party has not paid you is due to financial reasons, mediation is the best option for both of you. As mentioned before, mediation is less expensive than litigation. You can communicate that to the other party so they are open to mediation.
If costs are a concern for you, Ryan & Jacobs is a contingent debt collection agency—if you do not get paid, neither do we.
- Dispute Is with a Close Person
If your dispute is with someone close to you, say a respected business partner, suddenly, the problem becomes much more challenging. You deserve to be paid, but you do not want to sacrifice the relationship you have.
A professional can ease tension between you and the other party to ensure communication is productive, preventing personal jabs. When working with Ryan & Jacobs, you’ll have a professional who treats each party fairly.
By the end, you both will have an agreement you are happy with and still have your relationship.
Save Yourself the Stress of Litigation
Litigation is not always necessary and, in some cases, can make things more difficult. Instead, using mediation with a trusted professional can solve your problems with minimum stress.
Ryan & Jacobs have 20 years of experience running mediations. Our teamwork mentality ensures that we work with both parties. By the end of the discussions, everyone will be happy with the result.
