How Can Mediation Help Creditors Resolve Debt Collection Disputes?

 Posted on August 17,2023 in Debt Collection

Creditors often face challenges when it comes to collecting outstanding debts. As a creditor, you may have experienced difficulties when trying to recover money owed to you from borrowers who default on their payment obligations. When traditional methods such as debt collection agencies or legal action prove ineffective or costly, mediation can provide an alternative approach to resolving debt collection disputes.

The Benefits of Using Mediation to Address Debt-Related Issues

Mediation offers several advantages for creditors when it comes to resolving debt collection disputes, including:

• Cost-effectiveness: Mediating a dispute is often less costly than pursuing litigation through the courts. By reducing legal fees and associated expenses, creditors can make the process of recovering debts more efficient.

• Time savings: Court proceedings can be lengthy and time-consuming. Mediation enables quicker resolutions by providing an opportunity for direct negotiation with the other party.

• Flexible solutions: With mediation, creditors have greater control over the resolution process, especially when compared to court proceedings in which decisions are made by judges. This allows for agreements that will suit both parties' needs.

• Promotes communication and ongoing relationships: By engaging in mediation, creditors have the chance to directly communicate with borrowers. This open dialogue promotes better understanding and helps maintain relationships even after reaching a resolution.

The Process of Debt Collection Mediation

When mediation is used to resolve debt-related disputes and reach agreements between creditors and debtors, the process will usually entail the following steps.

1. Gathering relevant information: A creditor will compile all documentation related to the debt owed. This may include loan agreements, payment records, correspondence with the borrower, and any previous attempts made toward resolution. 

2. Joint Session: During the initial joint session facilitated by the mediator, the creditor may present their case, explaining why repayment is sought and providing evidence supporting their claim. The borrower will have an opportunity to share their perspective on any challenges they have faced which have affected their ability to repay the debt. A discussion moderated by the mediator may be held to ensure that the parties understand each other’s positions and can begin exploring potential solutions.

3. Caucus sessions: The mediator may then continue with individual sessions in which they will work privately with each party. The mediator will help facilitate communication between the creditor and the borrower. They may identify areas of agreement and propose creative solutions. The goal of these sessions will be to reach a final agreement regarding how much of a debt will be paid, the payment arrangements that will be followed, and any other relevant details.

Contact Our Chicago Debt Collection Mediation Attorneys

If you are facing difficulties resolving debt collection disputes, Dimand Walinski Law Offices, P.C. can help you determine whether mediation may be a good solution for resolving these issues and ensuring that you can collect the amounts owed. Our Illinois debt collection lawyers are dedicated to protecting the rights of creditors, and we will advise you of your options and provide the representation you need as you resolve debt-related concerns. Contact us at 312-704-0771 to set up a consultation.