Alternative Dispute Resolution

New York Attorneys Guiding Creditors through Commercial Debt Collections

Litigation is very expensive, and it is not always the best way to resolve a commercial debt collection dispute. It can be especially inefficient if the debt being collected is smaller than the cost of the litigation. Sometimes alternative dispute resolution methods are quicker and have more value than filing a civil lawsuit. In some cases, a contract specifies the use of a particular alternative dispute resolution method, like arbitration, in the case of a disagreement between the parties. In other cases, alternative dispute resolution is brought up when other informal negotiations are not successful. The New York lawyers at Klapper & Fass can advise you on the commercial debt collections process and help you explore your options.

Understanding the Processes of Mediation and Arbitration

The two primary methods of alternative dispute resolution are mediation and arbitration. Mediation tries to resolve a dispute with the help of a neutral third party, known as the mediator. The mediator works to broker a resolution. In many mediations, attorneys represent the parties. The mediator goes back and forth between the parties, hearing their versions of events and their legal arguments, before making recommendations. The parties can elect to follow the mediator's recommendation or not. Mediation is less expensive than litigation, but since both parties have to agree to a particular resolution, there is no guarantee that the case will actually be resolved.

Arbitration is not as formal as litigation, but it is more cost-effective. Generally, the parties present their case, including evidence, to between one and three neutral third parties, known as arbitrators. Special rules are followed, and after the close of each party's case, the arbitrator or panel of arbitrators renders a decision.

In both arbitration and mediation, the neutral third party will apply the appropriate law to the facts as they are presented by the parties. Most collections cases are based on a breach of contract. Commercial accounts that are related to the sale of goods or services that are worth more than $500 are also covered by the Uniform Commercial Code.

Under UCC § 2–725, you must bring a lawsuit for a breach of contract within four years after accruing a cause of action. The four-year period will start to run once there is a breach of contract, even if you did not know about the breach at the time. Other types of lawsuits have different statutes of limitation.

The first step will be to send a demand letter to the debtor long before the statute of limitations runs. If you send the demand letter early in the process, there is a chance of participating in alternative dispute resolution before having to file a lawsuit. The demand letter usually includes your name, the name of the debtor, the amount and nature of the debt, any fees that were incurred, and what action will be taken if there is no response.

Once a lawsuit is filed and the debtor responds, you have another chance to go to arbitration or mediation. If the debtor does not respond, you may be able to take a default judgment.

Explore Alternatives to Litigation with a New York Lawyer

If you need to collect a commercial debt in New York or another state, you may want to consider an alternative to litigation if it is available. The experienced attorneys at Klapper & Fass can tell you whether ADR may be appropriate under the circumstances of your case, and we also can present your case to an arbitrator or mediator. We assist creditors from our offices in Manhattan and White Plains, serving all five boroughs of New York City. We also provide legal guidance in Rockland, Orange, Suffolk, Dutchess, Nassau, and Westchester Counties, as well as in states such as Texas and Connecticut. Contact our office at 914.287.6466 or use our online form to schedule an appointment.