What You Need to Know About “Alternative Dispute Resolution” in Corporate Bankruptcies


Bankruptcy cases, especially those involving business or corporations, can take years to finalize as the entities are restructured and assets are distributed. It is not unusual for many parties to be involved in bankruptcy proceedings, further adding to the complexity of the case. Bankruptcy courts are often backlogged due to the lengthiness of these trials.

Alternative dispute resolution is gaining popularity in corporate bankruptcy cases. Alternative dispute resolution often provides faster, more efficient solutions; keeps the case in the hands of the parties; and reduces expenses. Both mediation and arbitration offer multiple benefits in corporate bankruptcy cases.

For parties that own small businesses, or businesses that are suffering from financial problems, alternative dispute resolution is an excellent resource because it offers a wide array of solutions to the parties to handle restructuring. In addition, bankruptcy litigation can take years to finalize, damaging the value of businesses that are in limbo while waiting for the case to be concluded. For clients who need to keep expenses at a minimum, alternative dispute resolution should be seriously considered.

In addition, alternative dispute resolution has been used in complex bankruptcy cases to settle certain issues that are not so complex that they require a court decision, but are too complicated for the parties to work out themselves. Using mediation to resolve such issues allows the parties and their attorneys to focus on more complex matters.

Many attorneys are concerned that by conducting mediation, there will be insufficient discovery on which to base settlement negotiations. However, discovery schedules can easily be coordinated with the mediator, and the parties can set their own discovery limits before attending mediation. This way, the parties and their attorneys can be certain that they have all of the information they need to make an informed decision about settling the case.