How does an Adversary Proceeding work?

Adversary proceeding refers to a lawsuit within a bankruptcy that is usually related to the underlying bankruptcy case. This may be filed by the debtor against the creditor or another party, or by the U.S. Trustee, or bankruptcy trustee against the debtor or creditor. But the most common scenario is the creditor filing this lawsuit against the debtor. This type of lawsuit undergoes a similar procedure as any other lawsuit. The adversary proceeding is filed in the state or federal court by submitting a complaint with the Clerk of Bankruptcy Court. The complaint states the claims of the petitioner and the relief that he/she seeks. This complaint will be served on the defendants together with the Summons in Adversary Proceeding 10 days after the issuance of the Summons. The defendants are required to answer 30 days after the date of Summons was served. They must also furnish the debtor a copy of the Answer. Once the Answer is filed, the discovery period starts. This is a six-month period (or court-appointed period) in which the bankruptcy court gather evidence for the case and discover certain aspects such as depositions, interrogatories, admission requests, and request for the production of documents. Responses to these requests should be served on the opposing party within the timeframe stated by the Federal Rules of Civil Procedure.

The timeframe may also be ordered by the court or agreed upon by the parties. A pre-trial conference will take place after the filing of the Answer to discuss matters such as scheduling, settlement, and other related issues. If no settlement is reached, the parties will go to trial. A judge will issue a decision at the conclusion of the trial.