An adversary proceeding is a lawsuit within a bankruptcy. In most instances, the issues being litigated are related to the underlying bankruptcy case.
Who May File An Adversary Proceeding?
An adversary proceeding may be filed by the debtor, the bankruptcy trustee, the U.S. Trustee, or a creditor. A debtor may file an adversary proceeding to sue a creditor or another party. The bankruptcy trustee and the U.S. Trustee may file an adversary proceeding against the debtor or a creditor. A creditor usually files an adversary proceeding against the debtor.
How Does an Adversary Proceeding Work?
An adversary proceeding proceeds in much the same way as a lawsuit filed in state or federal court. A party initiates an adversary proceeding by filing a Complaint with the Clerk of the Bankruptcy Court. The complaint must set forth matters related to jurisdiction and venue and state the petitioner’s claims and the relief he seeks.
The complaint, along with a Summons in Adversary Proceeding, must be served on all named defendants within 10 days of the date the Summons was issued. Once served, the defendants must file an Answer within 30 days of the date the Summons was issued. The defendants must also serve a copy of the Answer on the debtor.
After the Answer has been filed, the discovery period begins to run. The discovery period is usually six months or the period established by the federal court in which the bankruptcy court sits.
Discovery is a means of gathering evidence in the case and narrowing the issues. The most common forms of discovery are:
- Requests for Admissions; and
- Requests for Production of Documents.
All responses to discovery requests must be served on the opposing party within the timeframe established by the Federal Rules of Civil Procedure or within the timeframe agreed to by the parties or ordered by the court.
The bankruptcy court will hold a pre-trial conference after an Answer has been filed. The purpose of the pre-trial conference is to discuss scheduling, the possibility of settlement, and other relevant matters. After the pre-trial conference, the court will enter a Pre-trial order which will govern all subsequent matters, including the exchange of exhibits and witness lists.
If the parties are unable to settle the matter, it will go to trial. At trial, the parties will be allotted a certain amount of time to present their evidence and examine witnesses. At the conclusion of the trial, the judge will make a ruling. In some instances, the court may take the matter under advisement and issue a final ruling at a future date.
Getting Legal Help
Because an adversary proceeding is a very complex and technical process, a debtor who wishes to file one or who has had one filed against him needs to have an experienced and knowledgeable bankruptcy attorney on his side. A qualified bankruptcy attorney will work aggressively to protect the debtor’s interests.