Some creditors voluntarily decide to participate in mediation for debt collection. For others, mediation may be mandatory based on the terms of the underlying agreement between the parties or ordered by the court. As such, it’s important to understand how non-binding mediation can affect your overall debt collection case.
One of the most important aspects of debt collection is maximizing a client’s return on investment. You’ll want to select a debt collection attorney who offers favorable collection fees, minimizes your involvement in the claim, and limits the amount of out-of-pocket and mediation fees needed to pursue the claim through mediation.
Mediation for Debt Collection
Meditation requires the cooperation of all parties. One party can not mediate without the other party. A mediator facilitates the mediation process, which can last anywhere from minutes to days, depending on the complexity of the claim and the willingness of the parties to participate. Clients must make themselves available and must participate in the discussion and meetings with the mediator. The exception is court-ordered debt collection mediation where the creditor has already paid a filing fee to file the case with the court. The party requesting mediation must pay an administrative fee with the claim to mediate. The fee to file averages $250.00. The mediation fee is separate from the filing fee and the attorney’s fee which could be contingent upon collection, hourly, hybrid, or fixed. The parties will need to pay the mediator hourly, the cost of which is usually shared by all parties. The number of hours may be fixed in advance or as the mediation progresses. The first two-and-a-half hours of court-ordered mediation are typically included, depending on the court. Mediation ends when the case settles or one or more parties call it quits.
When deciding whether to voluntarily elect to mediation or proceed with mediation in debt collection cases, you need to consider the time and cost invested in the mediation process as well as the likelihood of reaching a resolution in a short window of time. There is a possibility that despite the investment, you may not reach a resolution.
Mediation agreements are also non-binding. Absent a writing, the agreement reached during mediation is unenforceable. This is an important factor to consider when choosing how to pursue a debt collection matter.
To learn more about your options when it comes to debt collection, check out our blog. If you have a debt collection matter you need assistance with, contact our firm for more information.