In consumer bankruptcy filings, sometimes individuals and companies are faced with an adversary proceeding within their filed bankruptcy case. This proceeding is a lawsuit that is related to the bankruptcy case but is filed separately. A bankruptcy adversary proceeding can be filed by a creditor to object to the discharge of a particular debt because they believe there was fraud involved in obtaining the credit or fraudulent charges. Adversary proceedings can also be filed by a bankruptcy trustee. These federal bankruptcy court adversary proceedings follow similar procedural requirements and discovery procedures that typical civil state cases require. There are due process, discovery and notification guidelines that assure that the legal process is fair to all parties involved in the adversary litigation.
These proceedings are not common but do happen on occasion. They take place in less than ten percent of cases and the lesson is always the same however: There should always be complete disclosure of all assets, debts and income. There should also be complete disclosure as to affairs, including transfers and business relationships. When it comes to your bankruptcy filings, it is important that you are 100% honest with your bankruptcy attorney. A well informed, experienced bankruptcy attorney will be able to review your list of creditors and assets and advise you of any issues or potential adversary proceedings before your case is even filed. If you decide to withhold information from your bankruptcy attorney, the bankruptcy trustee or the court, you may cause a lot more legal and financial problems for yourself in the long run.
If you filed your bankruptcy on your own (or pro-se), it is recommended that you find a bankruptcy attorney who would be able to assist you in defending you in the adversary proceeding. This is a complex legal matter and the court, judge’s chambers, or the trustee will not be allowed to answer any of your questions.
Just because a bankruptcy adversary proceeding is filed doesn’t mean that you have lost your case or you will not receive a discharge. Depending on the nature of the adversary proceeding, the state of the law and the material facts of the case, the debtor may be able to have the matter dismissed or settled. In the latter case, the adversary proceeding stipulation is signed explaining the agreement entered by all parties resolving the matter without prolonged litigation.