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IN Alternatives to Small Claims Court

Is a former landlord refusing to return your security deposit or some of your personal belongings that you left in your old apartment? Or maybe a customer won't pay for repairs you made to her car? These are the types of disputes that are handled by the Indiana small claims court, which is designed to be a fast, informal, and inexpensive way for people like you to get the money they're owed or their property returned.

But, maybe you're like many people and you don't want to file a lawsuit, not even in small claims court, because you don't like courtrooms or dealing with the "legal process." There are some alternatives to filing a lawsuit in small claims court, such as:

  • Personal negotiation
  • Mediation
  • Arbitration

Any one of these methods may help you get your money or your property without having to step foot into a courtroom.

Personal Negotiation

Personal negotiation should be your first step, even if you're prepared to file a small claims lawsuit. All this involves is a simple phone call to the person who owes you money or has your property (this person would be called the "defendant," if you filed a lawsuit) asking that she pay what's owed to you. Be polite and cordial. Maybe you can work out an agreement that benefits everyone.

If your first attempts don't work, then consider writing a demand letter. It's exactly what it sounds like: A letter demanding that the other person pay you within a specific period of time, like 15 or 30 days. To be effective, the letter should:

  • Briefly explain why you think she owes you money
  • State exactly how much money you're demanding
  • Clearly state that you intend to take legal action, including filing a lawsuit in small claims court, if you're not paid within 15 or 30 days, or whatever time frame you choose to give her

At the very least, you should mail the letter certified mail, return receipt requested. This way, the person who owes you has to sign for the letter when it's delivered and then you'll get a return receipt showing that she got it. Make sure you keep it (along with a copy of your letter) so that, if necessary, you can prove that the letter was delivered to her.

Mediation

Mediation is an informal meeting between you, the defendant and an impartial third party, called a "neutral" or "mediator." Most of the time you'll meet together, but sometimes you and the defendant will meet separately with the neutral. The neutral's job is to help you both reach an agreement. She can suggest different options to help you reach that agreement, and she may even suggest a particular way of settling the dispute, but she can't force or order either of you to do anything.

In most instances, mediation will be offered at no or little cost to you or the person who owes you money. Depending on how much both of you are willing to negotiate and compromise, it can lead to a very quick and mutually satisfactory resolution of your claim.

The courts like mediation, mainly because it saves time and court resources. In fact, in Indiana, if you file a lawsuit in small claims court the judge may ask if you and the defendant would like to mediate the dispute. If you both agree, the court will send or "refer" your case to a neutral and "stay" or postpone the trial until after mediation. If you and the defendant don't settle the dispute in mediation, the case will go back to the judge for trial.

Some Rules to Know

There are some things to keep in mind about mediation, such as :

  • It's not binding, meaning that, even if you and the defendant reach an agreement, the mediator can't enforce it. So, if the defendant later breaks or "breaches" the agreement, you may need to start the whole process over again (personal negotiation, writing a demand letter, filing a lawsuit, etc.)
  • The mediator can't provide legal or personal advice. She can only suggest possible ways to settle the matter and help you both make sure that you reach an agreement that's good for you both
  • It's you and the defendant that make the terms of the agreement, not the mediator. The mediator will only write down or document what you've agreed to
  • The mediator doesn't make a "decision" in the case like a judge would in the small claims court. That is, she doesn't decide who "won." Rather, she merely helps you reach an agreement
  • At any time, either party can withdraw from mediation
  • If you and the defendant don't reach an agreement through mediation you can still file a lawsuit in small claims court. In other words, you don't waive your right to file suit simply because you agree to mediation. This is true for the defendant, too, if he has a "counterclaim" against you, that is, she claims that you owe him money
  • Attorneys are usually not present during mediation. You can, however, hire an attorney to advise you about your claim, if you'd like

Arbitration

Arbitration is very similar to mediation. Here, a neutral third party, called an arbitrator, listens to both sides of the story, just like a neutral or mediator does, in the hopes of helping you reach an agreement. However, there are some important differences between arbitration and mediation:

  • If you and the defendant can't reach an agreement, the arbitrator will make a decision in the case, that is, decide if you're going to get paid and how much
  • The arbitrator's decision is binding, unless you and the defendant agree beforehand that it isn't binding. This means that it can be enforced by the arbitrator and, if necessary, the courts, if you or the defendant don't follow the decision
  • After going through arbitration, you can't file a lawsuit in an Indiana small claims court
  • Arbitration can be expensive. An arbitrator may charge over $125 for a four-hour block of time to listen to and decide your case. But, if you win, the costs of arbitration are usually added to the amount the defendant owes you

As with mediation, you and the defendant have to agree to arbitration. However, you both also have to agree on the arbitrator. The clerk of your local court may have a list of arbitrators that you may contact. Or, you can contact the American Arbitration Association for a list of arbitrators in your area.

Questions for Your Attorney

  • I can't get the person who owes me to answer my phone calls or letters. Is there any benefit to offering to mediate?
  • The defendant agreed to mediate my claim, but now she won't meet with or talk to the mediator. What should I do now?
  • How much will you charge me to file a lawsuit and represent me in small claims court? I mean, will the suit and the court fees cost me less than an arbitrator?

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