“How to resolve bankruptcy disputes outside the court system” Workshop
IFC provides guidance to AmCham members on creditor-borrower negotiation details
How to resolve bankruptcy disputes outside the court system
Resolving business disputes out of court in bankruptcy cases was the topic of a workshop organized by the American Chamber of Commerce in Albania and IFC. AmCham believes it is important to guide its members through forums and workshops on the new legal and administrative measures put in place to guide business activity during the COVID-19 pandemic crisis.
IFC provided guidance to AmCham member businesses through the best experts in the field, including on how to promote alternative dispute resolution methods such as negotiation and mediation between creditors and borrowers.
Contractual disputes and debt obligations for borrowers on the verge of bankruptcy are often the subject of court proceedings, which require time and costs. But the process of resolving disputes out of court can help both parties benefit greatly.
Listing the advantages of negotiation, experts explained that the process takes place outside the courts with the consent of both parties, as an informal process, which has low costs and does not need to be made public. Moreover, the process remains unsupervised and is quick.
However, this process, which is seen as informal, has its limitations. The process requires trust and can see resistance from creditors, who, being of different types, also have different interests. Thus, when drafting the agreement, the parties must provide real information and provide access to the debtor’s information and assets and his financial situation. Confidentiality is another element that must be taken into account when drafting an agreement, forcing the parties not to make public any information that has been exchanged during the negotiations.
In the end, the agreement, even though it is a deal between the debtor and the creditor, must be approved by a qualified majority and is protected from avoidance actions.
Features of an out-of-court settlement
- Negotiated and fully completed out of court.
- An informal process.
- A collective process.
- A voluntary and compulsory process for the parties.
- Agreement concluded in writing.