Bankruptcy Mediation for the Little Guy – Part 1: Financial Assistance

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No money in the wallet, no mediator?

By Matthew Gillespie

Of all the benefits mediation provides, the perennial favorite is this: it saves money! Not only can a successful mediation conclude a dispute without the rigmarole and expense of a hearing (or worse, trial), but even unsuccessful mediations can bring the parties closer to resolution of the dispute another time.

But what happens when both parties to an adversary proceeding or contested matter are open to mediation, but, perhaps predictably, the consumer debtor doesn’t have the capital to pay for his or her portion of a mediation?

There’s a simple solution, at least in the District of Nebraska:

  • R. Bankr. P. 7016-1(A)(4)(b) provides that the District Court’s Federal Practice Fund “applies to bankruptcy mediations” and is available to pay “Mediation expenses of litigants who . . .  are without adequate funds to pay mediation expenses themselves . . . .”
  • Further, the Mediation Plan for the United States District Court District of Nebraska provides: “If any of the parties is unable to pay the expenses of mediation, counsel for that party, or the party if proceeding pro se, may apply to the judge for approval to incur mediation expenses reimbursable from the Federal Practice Fund. [. . .]”

Nebraska’s Federal Practice Fund was created in 2011 as a means of disbursing attorney admissions and related fees in a manner that benefits “members of the bench and the bar in the administration of justice.” Parties unable to pay their portion of the costs of mediation can apply to have Federal Practice Funds cover their share of the cost – regardless of whether they’re in forma pauperis or not.

Here’s a Nebraska example of a Chapter 7 debtor and the bankruptcy estate taking advantage of this Fund – in In re Rose, No. BK05-83572, Adv. Proc. No. 05-08088 (Bankr. D. Neb. Aug. 29, 2011).  The parties in this case (i.e. the creditor, the debtor and the Chapter 7 Trustee) jointly requested, and received, payment of the debtor’s and the Trustee’s portions of mediation expenses from Nebraska’s Federal Practice Fund at a sum of $715.00.

ACTION ITEM: Consider how having funds available to debtors for mediation can benefit all parties involved in an adverse proceeding.

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