Bankruptcy Mediation for the Little Guy – Part 2: Nebraska in the Lead

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By Matthew Gillespie

In my previous post, I discussed the Nebraska’s Federal Practice Fund: a fund based on attorney admission fees that, inter alia, allows parties in bankruptcy proceedings to apply for funds to pay their portion of mediation fees when they’re unable to pay themselves. Nebraska’s District Court adopted this measure under the umbrella of the Guide to Judiciary Policy, Vol. 13, Ch. 12.

To my chagrin, I could not find another federal court fund that will pay for an indigent party’s portion of a bankruptcy mediation tab.

Other districts may have enacted programs to redistribute attorney admission fees, but  they have not been applied to bankruptcy mediation. Two illustrations are:

  • Plan for Administration of the Attorney Admissions Fund of United States District Court for the District of Maryland (Attorney Admissions Fund inapplicable to mediation); and
  • Local ADR Rules, E.D.N.C. Rule 101.1b(c) (if a party is unable to pay its share of mediator’s fees, upon court ruling, the party is discharged of his or her obligation to pay, and the mediator remains uncompensated, “a circumstance that reflects the mediator’s duty of pro bono service.”).

Nebraska’s Federal Practice Fund for bankruptcy mediations facilitates speedy and efficient resolution of bankruptcy disputes. Without this fund, a party unable to pay for mediation will either pass off their obligations to other parties (or to the mediator, as in the Eastern District of North Carolina, above), or be forced to abandon any hope of resolving their disputes in mediation whatsoever. This serves neither the creditor nor the debtor in a bankruptcy proceeding – both sides have an incentive to avoid the unnecessary stress and expense of resolving disputes in front of a judge.

By making these funds available for bankruptcy mediation, the District of Nebraska is taking a bold (and leading) step toward helping parties resolve their disputes without the expense of litigating through the court.

Nebraska’s common sense approach to encouraging bankruptcy mediation by allowing parties to utilize the Federal Practice Fund benefits both courts and parties to the proceedings. With any luck, other courts will follow Nebraska’s lead by enacting similar provisions – after all, promoting cost-efficient and mutually-beneficial resolutions to bankruptcy disputes is at the heart of a court’s goal of administering justice.

ACTION ITEM: Consider what your courts can do to facilitate speedy and efficient resolution of bankruptcy disputes through mediation.