An Adversary proceeding in bankruptcy is a lawsuit that takes place within a bankruptcy. The adversary proceeding begins by when a complaint is filed with the bankruptcy court. A trial then takes place within the context of the bankruptcy. Typically an adversary proceeding is filed by a creditor; however, your trustee may also file one on behalf of the bankruptcy estate.
adversary proceeding filed by a creditor
When a creditor files an adversary proceeding, it is typically because the creditor believes that a specific debt owed to them should not be discharged in the bankruptcy. The creditor may argue that the debt falls within one of the exceptions to discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by drunk driving.
adversary proceeding filed by a trustee
Additionally, a trustee may file an adversary proceeding if he or she believes that you intentionally tried to hide assets. The trustee would then liquidate any non-exempt assets to collect money back from a creditor who received funds or property from a debtor. A trustee may also file an adversary proceeding to undo a transfer of real property. The U.S. Trustee may file an adversarial proceeding to try and force a debtor to move from Chapter 7 to Chapter 13; if he or she believes that the filing of the bankruptcy petition was done in bad faith.
Adversary proceedings are very rare, they are filed in less than 1% of all bankruptcy filings. So unless you are trying to commit some type of fraud the chances of an adversary proceeding being filed in your case are very small. Typically, prior to even filing the bankruptcy we have a good idea if an adversary proceeding is going to be filed.
If you have questions about whether an adversary proceeding will be filed in your bankruptcy case then call us at 480-702-1608 or message us HERE.
* These blog posts are not intended, nor shall they be deemed to render legal advice. Reading these blog post does not create an attorney-client relationship, nor shall it impose an obligation on the part of the law firm to respond to further inquiry. The Dunaway Law Group limits its practice to the great states of Arizona and New York.
