A bankruptcy adversary proceeding is a situation whereby a person is fighting with another one in the bankruptcy court. There are normally three parties in a bankruptcy adversary proceeding complaint who may file a proceeding-bringing a person before a judge to explain their actions in a trial or hearing.
These parties are the trustee (either the United States Trustee or chapter trustee), the debtor and the creditor. Each of the bankruptcy adversarial proceedings implies the judge is going to decide about the issues brought before the court. Since majority of debtors never actually meet the judge, this may be quite intimidating. When a creditor files his or her bankruptcy adversary proceeding, it’s usually because he or she is arguing that the debt owed shouldn’t be discharged in the bankruptcy. And why should this be the case? He or she might argue that the particular debt falls within one of the discharge’s exceptions, like a debt that’s created through fraud, personal injury that’s caused by drunk driving, or a malicious or willful injury. The creditor also may argue that the bankruptcy’s filing case was carried out in bad faith.These types of bankruptcy court adversary proceedings aren’t common. When the client has been truthful, and informed their bankruptcy lawyer about everything, the lawyer would have warned the client/debtor in advance of the probability of this type of adversary proceeding.
Second type of bankruptcy adversary proceeding is filed by United States Trustee or chapter trustee. A trustee might argue that the schedules were not accurately filed out and were fraudulent intentionally. The trustee might file a motion to dismiss when paperwork isn’t filed on time, is improperly filed, or when the debtor misses a court date without providing a good reason for that. A trustee might file also an adversary proceeding to try collecting money back from some creditor who received property or funds from a debtor. A trustee might also file proceeding to undo transfer of real estate. He carries more power than a debtor to get some “do over” in a bankruptcy court.
The United States Trustee might file a bankruptcy adversarial proceeding so as to force the debtor move from Chapter 7 to Chapter 13 when he believes that the filing of the bankruptcy petition was not done in good faith. He might also file a proceeding to dismiss the case when he believes filing of the bankruptcy petition was carried out to abuse the bankruptcy system.
Lastly, a debtor might file a bankruptcy adversary proceeding against his creditor. This is to recover damages from the creditor’s actions which are taken in violation of U.S Bankruptcy Code or violation of automatic stay or discharge injunction.
In any kind of bankruptcy adversary proceeding, since one is filed will not automatically imply that the filer is going to win the case. This is the job of the judge who is going to determine who is right and who is wrong. A lawyer may advise the client as to the likelihood of failure or success. However, it’s the judge who has the final word in a bankruptcy adversary proceeding.