When You Should File an Adversary Proceeding

The U.S. Bankruptcy Code defines the 10 types of circumstances when an Adversary Proceeding may be filed in a bankruptcy case.  An Adversary Proceeding is the method by which any of the parties to a bankruptcy – debtor, creditor, or trustee – can take issue with an action of another party and seek the judge to make a decision.

Filed by a Debtor

Adversary Proceedings filed by a debtor typically pertain to creditors who violate the  bankruptcy protection afforded the debtor during the automatic stay, which by operation of law, halts contact or attempts to collect by creditors once the bankruptcy petition is filed.  Debtors may also find it necessary to file an Adversary Proceeding where a creditor attempts to collect an already discharged debt.  Some debtors believe it is in the best interest of the debtor’s estate to file an Adversary Proceeding to recover money or property for the estate.

Filed by a Creditor

Creditors use the Adversary Proceeding process for a variety of reasons including to object to discharge of a debt, where the debt falls into one of the exceptions for discharge under the Bankruptcy Code. These exceptions include when the credit was obtained under false pretenses or by fraudulent means, particularly credit or purchases made in the months leading up to the bankruptcy filing.  Other reasons a creditor may file Adversary Proceeding include determining the validity of liens on the debtor’s assets and priority of claims of other creditors.

Filed by a Trustee

The Trustee may elect to file an Adversary Proceeding in order to uphold the bankruptcy procedures and rules.  The Trustee may seek to have the bankruptcy judge rule on inaccuracies or fraudulences in the debtor’s completion of the schedules to the bankruptcy petition.  The trustees role in the bankruptcy in protecting the debtor’s remaining assets for the benefit of the creditors may include filing an Adversary Proceeding to stop or recover a fraudulent transfer of money or property of the debtor.

When to Talk to an Attorney

If you are a debtor or creditor in a bankruptcy case, it is important to consult with a qualified, bankruptcy attorney if you think you may need to file an Adversary Proceeding complaint.  An attorney can best advise you of when to file an Adversary Proceeding to protect your interests.