When to Hire an Arbitrator

Written by Small Business Magazine on May 7, 2019. Posted in Judge dennis cavanaugh, Mediation, Qui tam actions

Courts of law exist across the United States, and they are used for more than criminal prosecution. Some of these courts are used for bankruptcy filings, for example, or for matters of environmental law (when companies pollute the natural environment) or even employment law. Such courts of law and the judges who preside over them may be used to settle all sorts of disputes, but in some cases, a party would rather make use of arbitrator firms instead. An arbitrator firm may offer some perks over a court of law, although not all disputes may be settle in this manner. When is it time to make use of an arbitrator firm, and why might a court of law by used in other cases?

Using an Arbitrator

An arbitrator firm may act as an alternative to using a court of law for litigation if so desired, and many cities may have these arbitrator firms in them across the United States. Why might an interested party use an arbitrator firm rather than a court of law? In some cases, a dispute such as employment law disputes or bankruptcy may be handled here because arbitrator firms are more discreet than courts of law and litigation, and some parties want to keep these affairs strictly a secret. What is more, these arbitrator firms may bring a resolution to the case faster than a court of law might, and some parties may prefer to expedite matters. What is more, a party may suspect that the other party in the dispute would use a court judge who would be biased against them, so using an arbitrator firm may circumvent that. Some parties may end up facing an unfair playing field in a court of law, and that may bring disaster to them. But in some cases, a court of law is the best route to take, such as with bankruptcy cases. How might that play out?

Bankruptcy

Why might a company or a wealthy individual end up declaring bankruptcy? Doing so is a formal announcement that the bankrupt party is incapable of paying off its debts with its current financial state of affairs, so that party may seek debt relief in a court of law. Smaller companies in debt, for example, may file for chapter 11 bankruptcy, a common course of action. Such companies are typically small, having under 50 employees and under $10 million in assets and liabilities and under $10 million in yearly revenue.

Sometimes, a company is bankrupt because of poor business decisions or taking out ill-advised loans. In other cases, however, the debtor company was the victim of a crime. Stock broker fraud and embezzlement are common white collar crimes today, and they result in considerable losses for a company. An internal audit may be performed to determine the extent of the damage and possibly uncover the guilty party. But in other cases, the bankrupt company may be the victim of a cyber-crime. Cyber crimes are increasingly common, and they involve breaking into business servers and Cloud accounts to steal passwords, bank account or client information, and more. This can result in large losses of money that may badly hurt larger companies and drive smaller ones into bankruptcy entirely. This calls for court.

“Bankrupt” doesn’t have to mean “broke and hopeless.” Rather, a debtor party will hire a bankruptcy lawyer to help them and go to court with creditors to find debt relief. In fact, many debtors take the initiative to do this, and don’t need prompting from their creditors at all.

The debtor company may undergo an audit, and if that debtor has been behaving honestly so far, it may retain ownership of its enterprise an be considered DIP, or “debtor in possession.” Dishonest behavior such as crimes or taking on new loans without permission may result in the loss of DIP status.

Meanwhile, the debtor company will be asked to devise and later present a reorganization plan, a plan to restructure the company and downsize it to make debt repayment easier. If this plan is accepted when it is presented in court, it will be set into motion. This may involve liquidating the debtor partially or completely to facilitate debt repayment to whatever extent is possible to the creditors.

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