Debt Mediation – For a debt free world

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“Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt” Henrik Ibsen.

As a Mediator and an Arbitration Counsel in Finance and Banking for the last 15 years in India, I have noticed that DEBT often becomes a normal part of life that we don’t give much importance to, and the warning signals are ignored.  DEBT IS A BURDEN, and it makes the individual, families, and a clan sad, angry, scared, depressed, and disappointed. Debt keeps one enslaved to a bank or a financial institution or to the state. Debt and stress are like co-joined twins. The very thought of getting a legal notice on default in payment end with shortness of breath, and causes a headache, dry mouth, shakes, rapid heartbeat, panic, anger, and frustration which leads to migraines, heart disease, hopelessness, despair, and further lead to family disturbances including marriage breaks, ruining relationships, and even ethnic-community clashes. Out-of-control debt problems often push one to bankruptcy, and which in turn impact economic independence permanently.

YOU JUST NEED TO GET OUT OF DEBT. If one is in a deep financial crisis, and overburdened with debts, what to do? Where to go? Whom to be approached? Often, in my involvement with financial defaulters, I found that all were jumbled and finally land with a lawyer, who promises to give a stay of the matter, or for a permanent resolution on the ground of technicalities in the litigation process and procedures. Believing the same, the disputants with the debt burden, spent a lot of money and waste time, and end with compounded delay in penal charges on interest and litigation costs.

DEBT COUNSELING or CREDIT COUNSELING is the only solution for many, and it is suggested by many regulatory bodies in many countries, including in India, by the Reserve Bank of India (RBI). As a result, there are agencies under the Financial Literacy and Credit Counselling Centers (FLCCCs) appointed through RBI that are established in India. Unfortunately, they are acting as a sponsored body of the Banks and Financial Institutions, and more of a credit counseling center inactivity. Debt Counselling is a process that is used to help individual debtors to come out from debt crisis through credit counseling agencies or debt counselors. The method used by these resolution experts will empower the debtors to negotiate in a professional way to come out from a debt crisis. The traditional method used by them is awareness creation, education, and budgeting. Regulations on debt counseling and credit counseling agencies vary from country to country.

DEBT COUNSELING to be followed by DEBT NEGOTIATION. The debt negotiators like me often propose lowering of interest rates, waiving the late payment penalties, options like step-up repayment, loan restructuring, and loan take-over assistance e.t.c. followed by debt consolidation, debt relief, and reduction schemes, and debt settlement. However, the same is completely dependent on In-House Counsels in the Indian backdrop. In –House counsels who are trained in Negotiation and Mediation skills do the much-expected resolution of disputes in the Banking and Finance domain segment is the case study of India.

DUTY OF A DEBT COUNSELOR like us is that: -ensure the evaluation of the financial position of one’s client to find better solutions to manage funds by strategically paying off debts. Empowering the debtor with Self-Help Tools, budgeting, tracking the spending patterns, identify necessary expenses, and prioritizing the expenses are the traditional tools, to ensure that he or she meet the ends. Debt settlement programmers and Lok Adalaths (people’s court/community dispute resolution clinics) in the Indian context and the use of mediation services are advised to the debtors and creditors.

DEBT MEDIATORS IN INDIA to know the law involved and proceed. Mediation in India is recognized statutorily as Conciliation, in the absence of a Mediation Act. The parliamentary law committee is working on a Mediation Act for India. The present Conciliation is covered under the Arbitration and Conciliation Act, 1996. A settlement Award by a Conciliator is binding and can be enforced in a court of law. Subsequently, the introduction of Lok Adalaths to the justice system in India, for resolutions of pending court litigation, was introduced through the Legal Services Society’s Act, 1987. As such, cases can be referred to Lok Adalath with the consent of disputants, or even by one of the party. If the court is satisfied, the matter shall be referred Lok Adalath. The settlement in Lok Adalath shall be guided by the principles of justice and equality.  Permanent Lok Adalath ( PLA) in India, provides an opportunity for a disputant to file the application to raise the dispute, and the respondent shall be directed to file a written statement with appropriate proof. Thereafter the PLA shall proceed with Mediation / Conciliation of the dispute and resolves it.

DEBT COUNSELING to NEGOTIATION & MEDIATION – A Case Study of FLM – Farmer – Lender – Mediation in the USA, by the University of Minnesota, under the Agricultural Credit Act, 1987.

Agricultural Credit Act of 1987 was passed in the USA to create a nationwide FARMER-LENDER-MEDIATION (FLM). The programmer is required that Federal agencies help and facilitate negotiations about credit problems. FLM is having 22 years of history and 35 states in the USA participate in FLM.

FLM PRACTICES: – Trained and Neutral Facilitator / Mediator to assist parties in Negotiation in a dispute. The Mediation process followed is confidential, informal, cheap, and quick. It facilitates open communication between parties, and creates a non-hostile environment, and treats parties with dignity with well-defined rights and liabilities of parties, and produces agreements that are acceptable to all the parties.

The first step in FLM is an ORIENTATION SESSION, where the Mediator and a Financial Analyst meet with the borrower and creditor to explain the process and determine the requirements for financial information or clarity needs to be prepared and explained.

The second step is that the parties sign an agreement to MEDIATE, followed by explaining the confidentiality, immunities to the Mediator, good faith in participation e.t.c.

Thirdly, over a period of 60 days, the borrower/creditor and Mediator meet regularly to design an acceptable agreement.

In 2008, the Minnesota FLM, opened 2002 mediation cases, and nearly 80% of the mediated cases reached some kind of settlement, which helped the farmers to stay in business, lenders got paid and people stayed in their communities. The total debt addressed in the Mediation case session was over 156.3 million US Dollars.

FLM – Minnesota Extension MANDATES that a creditor with a secure debt for more than 5000 Dollars against an agricultural property MUST offer mediation before proceeding with foreclosure or repossession or cancellation or collection of a judgment against a farmer.

FLM Mediator may advise, counsel, and assist the parties’ ways to come to an agreement. Mediation often requires compromise on the part of the debtor to change the operation to make it more profitable; or to liquidate the asset the creditor ( bank) may need to do by restructuring debt and security; or by re-scheduling loan re-payment.

The face-to-face joint decision-making process, with trust built-in, is the hallmark of Debt counseling and Mediation. The resolutions found in the process are mutual, self-respecting, and consensual by avoiding the usual tension and frustrations to a win-win debt recovery process.

Thus, the non-adversary process and informal practices, with a perceived value of certainty, objectivity, openness, in the mediation process, along with the pre-mediation counseling session, has reposed greater confidence in the minds of debtors to rely upon these alternative procedures and practices over the traditional adversary litigation practices, and the practice of debt counseling cum mediation is all set to inspire the opulence of debtors and creditors equally.


Considering the backdrop of the case study of the University of Minnesota, USA, and my Indian experience in Debt Mediation, I understand that the scope of Mediation, especially with a domain-specific Mediation in Banking and Finance, is enormous for India and the rest of the World, in the context of exhaustive process and procedures of litigation in Court of Law.

Hence, DEVELOPING PROCESS & STANDARDS for GLOBAL DEBT MEDIATION is the need of the hour, and the Global Mediation Institutions can take a lead to facilitate DEBT MEDIATION services is recommended, by creating a pool of DEBT MEDIATORS, and by expediting with global standards, process and programmers, in consultation with national rules and regulations in the backdrop of general mediation practices, and to develop programmers in specified regional and cultural environments can be marvelous for the Mediation in the coming days.

This Post Has 4 Comments

  1. Daniel Erdmann

    Dear Antony,

    thank you very much for this article. Debts in all its aspects and with all its consequences is a topic that challenges our society at a very critical level. In many countries you can witness that the wealth of an upper and maybe still a middle class of society is based on the exploitation of the lower class. Yes, basically this is nothing new. But we can see a very dramatical change. Namely the fact that the middle class declines to the lower income class due to the fact that a specific vision is no longer communicated.

    So, when I talk about a ‘vision’ – I mean the fact that people lost the vision of being free and correspondingly they are not self-focussed anymore. Being self-focused does not deal with being selfish, but more likely with the fact that people do not focus on their proper capabilities. Alien concepts intrude their mindsets and they no longer live in line with their financial resources, but start to look for a lifestyle that they can not run without making use of external financial resources.

    But how come? Well, first of all – we face an employment market with the lowest payment ever. More often than not, the payment does not differ between an academic and a technical trained person. The payment is that low that both parents or partners in general are forced to work full-time. So, the first generalization takes place by accepting the few payment. At the same time, commercials show people what they shall buy in order to guarantee their happiness. Weak characters follow such calls as it is nothing else than dopamine to them in order to get out of their dilemma. But the dilemma of the few payment gets worse, namely at the moment when they get involved in the debts trap.

    Even more serious and false seems to be the fact that governments generally welcome this step as it is a perfect manner of controlling its citizens. At this point, it is communicated that having debts belongs to a modern lifestyle. Too sad, but this statement is no longer challenged by the younger generations but blindly accepted.

    The last and darkest point is that parents who both work full-time, have no financial or time resources in order to educate their children. That means that automatically a new generation of blind consumers is build.

    My point is that people have to open up their eyes and start challenging all the circumstances that we live in. Only by critical thinking and mental strength, we can escape from such traps and create our own balanced life again. Be happy with what you own, be happy to have proper goals, and be happy with the day that belongs to you.

    1. Krusch Antony

      Thank you Prof Daniel Erdmann for your comments and observations.
      Krusch Antony.

  2. Aleksander Jakobcic

    Thank you for this article. I find it extremely interesting. Debt is a major concern in Europe as well in several ways. One of them is the question of a generation (millennials) and their access to the real estate market for example, also the issue of entrapment (circular indebtment) – poverty and legislation regarding insolvency law etc. Following from this I find that mediations role (in the broader meaning) as you have presented it, is the way forward as it provides a plethora of solutions. And of course your humane and well argued approach to debt understanding is my favourite part of the article. Thank you.

    1. Krusch Antony

      Thank You for the comment.

      I do agree that the existing problem of circular indebtedness is a vicious circle , unless and until it is resolved under the Alternative Dispute Resolution mechanism, is my opinion.

      Insolvency, which are currently litigated and decided , and why not Mediated or Arbitrated? Experts view are awaited in this subject of Insolvency in the context of Mediation and Arbitration.

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