Adversary Proceedings—Lawsuits Within Your Bankruptcy Case
Posted on: 7 July 2023
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Your bankruptcy is a legal case brought before a specific type of court specially designed for this purpose. However, the actual bankruptcy isn't the only type of litigation seen by the bankruptcy court. It also handles adversary proceedings. What are these? When are they used? And how can you protect yourself? Here are some answers to your questions.
What Is an Adversary Proceeding?
An adversary proceeding is simply the legal term for a type of lawsuit brought before the bankruptcy court. They concern a particular bankruptcy case, which is why they are adjudicated in this court. In general, an adversary proceeding challenges some aspect of the bankruptcy. For instance, a creditor might start a proceeding in order to argue that their debt should not be discharged in your case. A judge hears the arguments and rules on this issue so the bankruptcy can move forward.
There is a milder form of adversary proceeding known as a contested matter. This more streamlined version is used for less complex issues like modifying a Chapter 13 payment plan or contesting a creditor's claim.
Why Are Adversary Proceedings Brought?
As mentioned, these are challenges to specific components of bankruptcy. Therefore, the most common proceedings are made by creditors trying to recoup their money.
Along with the challenge to dischargeability described above, a creditor may argue that there was some kind of fraud involved in that debt so it should be exempt from discharge. The creditor might also request that the automatic stay is waived so they can repossess or foreclose on an asset.
The trustee may also start an adversary proceeding in order to gain access to assets that should be part of the bankruptcy. For instance, perhaps the debtor transferred their second home to their cousin before filing their case. The trustee can seek to get that transfer reversed.
Finally, the debtor themselves may start a proceeding. This may sound strange since it's their case, but these actions are used to do things like get the judge to rule on a disputed issue or remove liens.
Where Can You Learn More?
Whether you need to start an adversary proceeding or another party may file for one, it's important to win the outcome you need and deserve. It could be the difference between getting complete debt relief and still having financial problems when you exit your bankruptcy.
Contact a local bankruptcy lawyer to learn more.