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What is an Adversary Proceeding and Its Types?

During any time within the bankruptcy process, any of the parties involved may choose to file for an adversary proceeding. This article will seek to explain what an adversary proceeding is, how it works, and what are its main types.

What is an Adversary Proceeding?

An adversary proceeding is a type of lawsuit that is separate but related to the bankruptcy case. It may be filed for any complaints related to the bankruptcy for which a court motion cannot suffice. For instance, the debtor may choose to file an adversary proceeding against a creditor in response to the transgression of the former in regard to the automatic stay period. Typically, because it is its own case number, the filer can have a different attorney from the one leading the bankruptcy case.

How It Works

To get started, the interested party first needs to file a complaint with the bankruptcy court and request for their judgment. A summons is then served on the defendant and a copy of the complaint is sent to them as well. They are given a certain number of days to respond to the complaint and file an answer. If they fail to do so, the court will grant a default judgment in favor of the plaintiff.

Main Adversary Proceedings Types

There are numerous reasons under which an adversary proceeding may be filed. Some of its main types are listed below.

Preferential Transfer

The bankruptcy trustee could file a proceeding if it is known that you were insolvent and paid any of your creditors more than $600 within the last 90 days before you filed for bankruptcy.

Bankruptcy Fraud

If you have suspected of engaging in bankruptcy fraud, any of your creditors, the bankruptcy trustee, or the Office of the United States Trustee will file an adversary proceeding against you to deny you your debt discharge. Depending on its severity, you may also incur a number of other harsher penalties. (HYPERLINK: Bankruptcy Fraud – Beware of the Consequences)

Violation of Automatic Stay

A debtor can choose to file an adversary complaint against any creditor that may have violated the automatic stay period in which all debt collection activity is required to be stalled. Depending on the severity of the violation, the creditor may be required to pay the debtor any legal fees involved as well as a sum in damages determined by the court.

Sale of Jointly Owned Property

In a Chapter 7 bankruptcy, if a debtor jointly owns any property with another party, the bankruptcy trustee could file a proceeding to force the sale of the said property in order to pay back your creditors. Have any question regarding adversary proceeding or in need of legal advice regarding it, please don’t hesitate to get in touch with us through our live chat or by calling 512-640-3440.