An adversary proceeding is a part of the bankruptcy process in which opposing parties go before a judge to explain their points of view and receive a ruling on the issues they present. In this regard, it is very similar to a trial.
Both debtors and creditors can initiate an adversary proceeding, and they may do so for a number of reasons. Adversary proceedings can also be filed by the trustee in a bankruptcy case, or by the United States Trustee. A San Diego bankruptcy lawyer can help you navigate any adversary proceeding that arises during your Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Adversary Proceedings Brought by Creditors
When a creditor initiates an adversary proceeding, it is usually because the creditor wants to convince the judge that a certain debt should not be discharged in the debtor's bankruptcy case. This is often because the debtor believes that the debt falls within an exception to bankruptcy discharge, such as debt incurred as a result of fraud or maliciousness, or debt arising from drunk driving by the debtor. If the creditor succeeds, the specific debt in question will not be discharged, even if the debtor is otherwise successful in filing for bankruptcy.
Adversary Proceedings Brought by Debtors
A debtor may also file adversary proceedings against a creditor whose collection practices violate U.S. Bankruptcy Code or who fails to comply with an order for discharge. Creditors are prohibited from attempting to collect debts that have been discharged through bankruptcy, and a creditor who persists may be liable to the debtor for damages.
Adversary Proceedings Brought by Bankruptcy Trustees
In yet another type of adversary proceeding, a trustee may try to have a bankruptcy case dismissed on procedural grounds — for instance, by arguing that the debtor filled out paperwork incorrectly or missed an important deadline or court date without good reason. If the U.S. Trustee believes that a debtor has filed for bankruptcy fraudulently or in bad faith, he or she can file an adversary proceeding to have the case dismissed.
It is important to keep in mind that the party filing an adversary proceeding does not win simply by filing; just like in a trial, each party will have a chance to present a case to the judge, and the judge will issue a decision after hearing all sides of the controversy.