What is an Adversary Proceeding in a Bankruptcy Case?

There are three parties in a bankruptcy court case who can file an adversary proceeding by bringing an individual in front of a judge to explain their actions in a hearing or trial.  Those parties include, the creditor, the trustee, and the debtor.  Each type of adversarial proceeding means that the judge will make a decision regarding the issues presented.

Types of Adversarial Proceedings in Bankruptcy

If a creditor files for an adversary proceeding, it’s usually because the creditor is arguing that the debt owed should not be discharged in bankruptcy.  They may feel that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, or a personal injury.

The second type of adversarial proceeding may be filed by the chapter trustee or the United States Trustee.  They may argue that the schedules were not accurately filled out or were intentionally fraudulent.  They may file a motion to dismiss is the paperwork is not filed on time, improperly, or if the debtor misses a court date without an acceptable reason.  The United States Trustee may also file a proceeding to force the debtor to move from a Chapter 7 to a Chapter 13 bankruptcy if the U.S. Trustee believes that the petition was done in bad faith.

Thirdly, a debtor may file an adversary proceeding against one of their creditors.  The debtor may recover damages for the creditor’s action taken in violation of the U.S. Bankruptcy Code, in violation of the automatic stay or the discharge injunction.  Once the debtor has received a discharge, the former creditors are no longer allowed to make any attempt at collecting the discharged debts.

Get Help From an Experienced Bankruptcy Lawyer

In any adversarial proceeding, it may be difficult to determine who will win the case.  Therefore, it is extremely important to retain legal counsel while going through these proceedings.  A bankruptcy attorney can advise you of your rights and help you navigate the complex bankruptcy laws.