Exploring the Role of Mediation and Alternative Dispute Resolution in Personal Insolvency: International Best Practices

Abstract

When individuals do not have the money to pay back financial commitments as they fall due, that is called personal insolvency. When a person is unemployed, this means they have much more debt than they can manage which reflects a difficulty structurally meeting their commitments, not just temporary problems with funds. A few things may lead to financial distress such as taking out too much credit, economic slumps, improper managements and unexpected issues such as lawsuits, leading to natural disasters or global crises. Nowadays, both the number of personal bankruptcies and the expenses for legal help have much increased. Now that cases are more numerous and complicated, the already stretched court systems must deal with court hearings that often go on for a long time and cost a great deal. Though traditional legal options still allow people to start over through selling or paying their debts, they are being overwhelmed by recent personal financial difficulties. [1]There are frequent difficulties with adjudication, mainly due to the common pool problem, disruption for the business and high expenses of taking cases to court. Since courtrooms are getting busier, it’s becoming clear we need faster and more effective ways to settle disputes. Using standard means of dealing with insolvency usually results in being unable to manage, viewed as unacceptable and high costs. In this situation, ADR creates a method that is friendlier, more flexible and easier to use. Regardless of the advantages, mediation and other ADR methods are not used very often in personal insolvency. Here, we look into how bringing mediation into Indian insolvency law by comparing successful practices from abroad and considering how it would be implemented within India