Facing An Adversary Proceeding In Bankruptcy

October 29, 2011 by  Filed under: Bankruptcy 

An adversary proceeding can be filed at any point during the bankruptcy process. The creditor, bankruptcy trustee and even the debtor can file it during the bankruptcy if they have a grievance or want to challenge something in the case. Something like a trial, the proceeding allows all parties to state their case before a judge who will decide which party is correct. Below are some of the most common adversary proceedings in bankruptcy:

Creditor

Adversary proceedings brought by creditors are some of the most common in bankruptcy. Usually, the it is filed because the creditor believes that a certain debt should not receive a discharge in bankruptcy. Or, the creditor may file it because they believe the debtor engaged in fraud, filed the bankruptcy in bad faith or ran up debt with no intention of repaying it.

Trustee

Bankruptcy trustees may decide to file an adversary proceeding if they want to dismiss a case due to procedural issues, fraud, or a bad faith filing. The filing can arise for simple missteps such as forgetting to fill out a form when filing the petition or much more complex issues such as hiding assets or income in an effort to deceive the bankruptcy court.

Debtor

A debtor can bring an adversary proceeding against a creditor or even the trustee if they wish. This usually happens if the creditor has violated the automatic stay or engaged in behavior that violated the debtor’s rights before they filed for bankruptcy. For example, if the creditor used deception to indebt a bankruptcy debtor, that debtor might file a proceeding to seek sanctions or damages against the creditors, or to have the debt invalidated. This is often the case where elderly debtors are tricked into signing their houses over to scammers who promise to rescue them from foreclosure. A debtor who files on these grounds will need to prove that fraud took place and if they can do that, they might save their home from foreclosure and invalidate the debt lien against their property.

Whether the debtor is filing or fighting an adversary proceeding, they need the help of an experienced bankruptcy attorney. Adversary proceedings can be both complex and grueling. To find success in filing or fighting an adversary proceeding, knowledge of the law is required. Without appropriate knowledge and advocates, some bankruptcy debtors have found that adversary proceedings have morphed into giant issues that suck up both time and money.

Reed Allmand, sponsoring attorney for Bankruptcy.net, is constantly looking for ways to provide the best financial information for his clients. Whether you are considering filing for bankruptcy, or are currently going through a Chapter 7 or Chapter 13, visit http://www.bankruptcy.net for up to date news and information you need to know.

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