ADR – which is short for Alternative Dispute Resolution – is a catch-all term used to describe the number of different ways that a serious disagreement can be resolved without going to court.
Debt disputes can often be complex, long-winded and stressful, whether they involve credit cards, mortgages, personal loans, business matters or something else entirely. But that doesn’t mean they can’t be resolved using one or more ADR options.
Whether you are a creditor wishing to launch a dispute, or are the respondent in such a case, pursuing ADR is highly recommended but not compulsory. And because ADR has many facets, in order to find the best course of action, the nature of the dispute, the state of the relationship between the opposing parties and the size of the debt should all be considered.
So, if you’re wondering What Is ADR For Debt Recovery And What Do I Do If It Hasn’t Worked?, read on to find out more.
In the first instance, any creditor should send a series of letters to their debtor outlining all the facts of the matter and the actions that will be taken if the debt isn’t settled. If the debtor does not respond to these letters or settle the debt in full, there are processes and procedures to follow, as laid out by the Civil Procedure Rules (CPR).
Their Practice Direction on Pre-Action Conduct and Protocols state that litigation should only be entered into as a last resort, and that both parties involved in the dispute should consider ADR before beginning court proceedings.
So, if your out of court negotiations have stalled, or there seems little prospect of the opposing parties seeing eye to eye, before initiating court proceedings, you can pursue other avenues through ADR.
Pursuing a debt recovery case through the courts is time-consuming and expensive, often taking many months and sometimes years to even reach a courtroom let alone be resolved. And, of course, taking someone to court is liable to damage your relationship with them, which could prove costly especially if the dispute is business related.
That’s why ADR is available as an alternative. When a debt dispute reaches court, it’s likely that the court will ask to see evidence that ADR has been considered. If one of the parties has refused to entertain the idea of ADR, the court may penalise that party, requiring them to pay additional costs.
Mediation: This is the most popular method of ADR and entails a neutral third person working with each of the parties and their legal teams to try and reach a deal or settlement.
A trained mediator holds discussions with each side separately, so that parties can speak openly and honestly with the mediator and specify which information they are happy to be divulged to the other side and in court if the case gets that far.
It’s important to note that the mediator cannot make an adjudication. Any settlement must be agreed between the opposing parties and their legal representatives. Also, as this process is voluntary, neither side can be compelled to take part.
That said, mediation has a high success rate, but not all debt disputes can be solved this way. Even so, at the very least, a mediator can help paint a clearer picture of the specific nature of the dispute to give both sides greater focus going forward.
It’s also worth knowing that courts do not look favourably upon those who refuse to mediate, and judges have been known to impose penalties on such parties when the case reaches court.
Arbitration: Unlike mediation, any decisions made during arbitration are binding on both parties, and there’s limited scope to challenge the outcome. The process will play out with a single or panel of arbitrators controlling the process.
Expert Opinion: A debt recovery specialist can be appointed to consider the nature of the dispute and offer up a solution. Again, it will be up to the parties involved to refuse or accept.
Adjudication: If your debt dispute relates to a construction matter, adjudication provides a means of resolving disputes quickly, so that the timings of the construction project aren’t unduly affected by delays due to court cases.
CPR Part 36: This provides parties with a strong incentive to find a settlement to their disagreement. Any settlement offers using Part 36 must adhere to strict technical rules. One side will likely make a Part 36 offer to pressurise the other side into accepting it or face a series of consequences if they refuse, which can include paying 10% higher damages in a court case. Therefore, it stands to reason that all Part 36 offers must be seriously considered.
Speed: Choosing ADR may lead to a quicker resolution of your debt recovery case.
Cost: Avoiding court proceedings usually works out less expensive for both parties.
Lower stress: The time, cost and complexity of taking a debt recovery claim to court can take a toll on your health, raising stress levels. ADR helps you to avoid this.
Greater Flexibility: ADR also helps you avoid the strict processes and procedures involved in a court case, allowing you to arrive at a solution without explaining everything to a judge in court.
Confidentiality: If you want details of your debt dispute to remain private, it’s best to pursue APR and avoid a court case.
No guarantee: Unlike a court case, ADR cannot guarantee your dispute will be settled one way or another.
No subpoenas: Mediators and arbitrators don’t have the same powers as judges to demand to see evidence and call witnesses to help with dispute resolution.
Voluntary: All ADR avenues are voluntary, and no one can be compelled to cooperate, unlike with court proceedings.
When all avenues have been explored and exhausted, the next step is to issue legal proceedings. This will require the preparation of documents by the legal representatives of both parties. The lawyers will also gather evidence and take statements relevant to your case which will be filed at Court.
Wayman & Long civil litigation solicitors have many years’ experience in helping clients navigate the complexities of debt recovery. No matter the size or nature of your dispute, we will provide the support and legal expertise you need to get the best result via APR or court proceedings.
To speak to one of our legal experts today, phone 01787 277375 or book a consultation via our website.
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