How does mediation work for Chapter 11 bankruptcy?

| Jun 30, 2020 | Chapter 11 Bankruptcy |

As your corporation prepares for Chapter 11 bankruptcy, making it viable again will be a high priority. The team you’re working with to steer it through proceedings may be competent. But you may still worry that the terms agreed upon during your hearings could cause further harm. If your corporation chooses to mediate its bankruptcy, though, the odds of this could decrease. Many companies that have filed Chapter 11 bankruptcy recently, like McClatchy and PG&E, have pursued this route because of the flexibility it offers.

Mediation’s benefits

Because your corporation is already facing financial challenges, mediation may help it save money. Litigation can be costly and drawn out, especially if you’re settling claims with many creditors and needing many assets valued. By contrast, mediation – even in complex cases – is comparatively affordable. Negotiating with your creditors may seem difficult. But a mediator can help your corporation work with them rather than against them. Instead of settling on their terms, mediation can help you reach a common ground that litigation might not have achieved.

Mediation considerations

Your mediator cannot provide you legal advice during your proceedings. Their role centers around guiding you and your creditors toward an agreement. Furthermore, keep in mind that mediation is voluntary. If your corporation decides to mediate your bankruptcy, you might still end up in court if any of your creditors refuse to participate. And mediation does not have to lead to an agreement. If negotiations fall through, you will either restart the process or litigate your bankruptcy.

Corporate bankruptcies are often difficult to navigate. Yet, mediation can prove a clear and effective solution to the process’ complexities. An attorney with bankruptcy mediation experience can help you assess your options for moving forward.