Does Mediation Have a Role in Arizona Bankruptcy?

Have you wondered about the role bankruptcy mediation can play in resolving debtor-creditor disputes? Arizona bankruptcy mediation is an important process, particularly when worker unions are involved and collective bargaining agreements are on the table for cuts.

 

Arizona Bankruptcy Mediation

Mediation is a form of alternative dispute resolution (ADR), a process that is available to parties in both consumer Arizona bankruptcies (Chapter 7 and Chapter 13) and business bankruptcies (Chapter 11). Some mediators are compensated, others are uncompensated. In either case, the mediator is a trained professional whose job it is to facilitate agreements between adversaries.

 

As a neutral third party, an experienced mediator can work miracles in positioning the parties to a point where they are willing to sign a mediated agreement. The written agreement is presented to the judge for review and final approval (absent objection to the contrary).

 

Some features of mediation are:

● any legal issue may be presented for mediation;

● it’s a completely confidential process;

● the parties maintain control over the outcome (they choose to agree or not agree);

● it saves the parties money.

 

Many people use ADR in Arizona civil cases, too, as a way to resolve issues before a trial becomes necessary. Avoiding trial is a laudable goal for the parties and a great motivator for attempting mediation. Paying attorneys to litigate disputes is very expensive, and the parties must live with the judge’s final decision after the trial is concluded.

 

Who Are the Bankruptcy Mediators?

Arizona’s bankruptcy mediators are appointed by the U.S. Bankruptcy Court – they’re referred to as panel mediators. These highly trained mediators are experienced attorneys and bankruptcy trustees with a special gift for getting people to cooperate toward potential agreements. Private mediators may also be asked to resolve bankruptcy disputes. The mediator always remains neutral, so no panel or private mediator can represent a party in the case or have a personal or financial interest in the outcome.

 

Is Bankruptcy Mediation Voluntary?

Bankruptcy mediation is a consensual process. No party can be forced into attending mediation, it’s voluntary. The very reason it’s so often successful is that the parties must cooperate enough to at least agree to try mediating their dispute. While the bankruptcy case is pending, mediation is available so long as the parties and their bankruptcy attorneys agree to it.

 

In a Chapter 7 bankruptcy, for example, disputes asserted by parties and trustees in adversary proceedings (concerning issues over preferences, avoidances, non-dischargeability, fraudulent conveyances, and claims allowance actions) are often mediated.

 

Hostess Tried Bankruptcy Mediation

Not long ago, the judge presiding over the Hostess Brands, Inc., Chapter 11 reorganization bankruptcy asked the debtor and the Bakery, Confectionary, Tobacco Workers and Grain Millers Int’l Union to give mediation a try. There was much at stake. Hostess wanted the judge to rule on a motion to liquidate after the Bakers union refused to call off their strike. And from those seemingly polar opposites the judge asked for what many believed to be the impossible – Will you both try mediation?

 

At the eleventh hour, in an effort to resolve their well-publicized impasse, the parties agreed to meet with a bankruptcy mediator. That was the initial agreement between two adversaries and it came as a surprise to many who were closely following the case.

 

What didn’t surprise bankruptcy attorneys was that mediation didn’t lead to any new agreements. The parties were clearly intransigent going in, deeply set in their respective positions. There were also significant trust issues.

 

The fact that this particular mediation did not resolve the parties’ dispute is not a reflection on the mediator or the ADR process. At the judge’s invitation, the two agreed to attend the party but couldn’t be ordered to dance.

 

AZ Bankruptcy Mediation Resource:

Bankruptcy Judge Approves Hostess Liquidation