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NC Alternatives to Small Claims Court

Is a customer refusing to turn over some property that he used as collateral on a loan you made to him? Does a tenant owe you a few months of rent? These are the kinds of disputes over money and property that are handled by the North Carolina small claims courts, or "magistrate courts." These courts are designed to be a fast, informal, and inexpensive way for people like you to their property returned or get the money they're owed.

Not everyone with these types of problems wants to file a lawsuit, though, not even in a small claims court. That's OK. A lot of people 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 tactics may help you get your money or 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 one or two simple phone calls or letters to the other person (he'd be called the "defendant" if you filed a lawsuit against him) asking that he pay what's owed to you or turn over the property you want. Be polite and cordial. Maybe you can work out an agreement that benefits everyone.

If your initial conversations aren't getting you anywhere, 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 the other person owes you money or why the property belongs to you
  • State exactly how much money you're demanding, or what specific property you want
  • Clearly state that you intend to take legal action, including filing a lawsuit in small claims court if you don't get the property or money within the time you give (15 or 30 days, for instance)

At the very least, you should mail the letter certified or registered mail, return receipt requested. This requires the other person to sign for the letter when it's delivered to him. After it's delivered, you'll get the return receipt. Make sure you keep it, together with a copy of your letter, so that, if necessary, you can prove later that the letter was in fact delivered.

Mediation

Mediation is an informal meeting between you, the other person, and a neutral third party, called a "mediator." Most of the time you'll meet together, but sometimes you and the other person will meet separately with the mediator. The mediator'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 settlement agreement, but she can't force or order either of you to do anything.

The courts like mediation, mainly because it saves time and helps clear the courts' busy schedules. In fact, in many North Carolina small claims courts, after you (the "plaintiff") file a lawsuit and you and the defendant show up for trial, you and the defendant may be asked if you you'd like to try to mediate the dispute. In some other courts, the magistrate (the "judge" who'll decide the case) may "refer" your case to mediation, that is, require you and the defendant to try to settle the case. The case will actually go to trial only if you can't reach an agreement or if one of you refuses to mediate (if you've been asked to mediate.

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 other person reach an agreement, the mediator can't enforce it. So, if the other person 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 other person who 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 magistrate 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 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 other person, too, if he has a "counterclaim" against you, that is, he 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

You should contact the clerk of the superior court in your area for more information about mediation.

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 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 a North Carolina small claims court
  • Arbitration can be quicker than filing a lawsuit, but in most cases it will be more expensive

As with mediation, you and the other person have to agree to arbitration. However, you both also have to agree on the arbitrator. The clerk of the superior court in your area 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 defendant to answer my phone calls or letters. Is there any benefit to offering to mediate?
  • The defendant agreed to mediate my claim, but now he 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? Will a lawsuit and the court fees cost me less than an arbitrator?
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