The main objective of Barangay Justice System is to informally settle cases through the Lupon members acting as mediators. Mediators do not apply the rule of criminal law but they are to facilitate harmonious settlement through agreement of both parties. In this role of the mediators, this study investigated the challenges encountered by mediators during settlement, how did they deal with these challenges and do they have innovations in the Barangay Justice System to respond barriers of successful settlement. This study is qualitative in nature with Focused Group Discussion n(FGD) and personal interview of the Lupon members as the data gathering instrument. Data was transcribed, coded and analyzed themes and patterns. Results shows that that the barangay justice system is effective, the themes that emerge challenging the mediators during settlement are: Disputants Ability to Comprehend, The Challenge of Persuading Disputants who do not Cooperate for Settlement, the of challenge of not Exceeding from the mandated Authority of the Lupon in Execution of Agreement in selected cases and The Challenge of Dealing with Disputants Negative Attitude Towards Barangay Justice System. Innovations in amicable settlement are Coordination with other government or non-government agencies who has specialization with the dispute, On-site Dispute Settlement and single-out counselling of both complainants and disputants and Giving sanctions and reprimand.