Adversary proceedings are claims brought by a creditor, trustee, or debtor in a bankruptcy case. Adversary proceedings begin when a plaintiff (usually a debtor or creditor) files a lawsuit in bankruptcy court. A creditor, trustee, or debtor can raise an issue or dispute by filing a claim in bankruptcy court.
Typically, a creditor who initiates adversarial proceedings files and files a lawsuit in bankruptcy court in an attempt to prevent the payment of their debt in the bankruptcy case. Debtors often initiate adversarial proceedings to determine the maturity of a debt or to protect their bankruptcy settlement from harassing creditors. The bankruptcy trustees often threaten or effectively pursue legal initiatives against third parties and/or the debtor if they believe they have the conditions to do so, initiating a controversial procedure in the case assigned to them.
Fraudulent transfers. If there are suspicions of fraudulent transfers on behalf of the debtor, the trustee may have grounds for initiating controversial proceedings and taking evidence in court. Fraudulent asset transfers are particularly difficult because the trustee may be acting under the US bankruptcy code or state law. Bankruptcy law relating to the objection or reversal of termination and fraudulent transfers can be found in the Bankruptcy Code under Section 11 U.S.C.
In some cases, the bankruptcy trustee may file an objection to the property by initiating a court hearing to ensure that the asset in question is adequately protected by creditors. If the debtor believes that the creditor has violated the Bankruptcy Code or court order in his actions, he may initiate controversial proceedings against him for the recovery of damages. The creditor or trustee may present evidence to the court and challenge the settlement of the bankruptcy trustee’s debt.
The creditor may file a claim for recognition of overdue debt by the court, as well as on other grounds. In addition, the United States Bankruptcy Code (Section 523) provides that a creditor may challenge the payment of a debt under certain circumstances. The United States Bankruptcy Code provides that a debtor affected by a willful breach of suspension provisions by creditors is entitled to recover actual damages, including attorney’s fees and expenses. For example, a debtor may sue a creditor if the creditor violates the automatic suspension of debt collection when filing for bankruptcy.
For example, the trustee may file an application with the opponent seeking to restore (or avoid) a pre-bankruptcy transfer, or the debtor may file with the opponent to set aside payments to which the debtor is entitled since the date of the bankruptcy filing. If a debtor uses an attorney to file for bankruptcy, the debtor cannot assume that the same attorney is dealing with an adversary. In many cases, the debtor separately hires an experienced bankruptcy lawyer. A bankruptcy attorney also has negotiation skills, which may include resolving a claim rather than full litigation. Defending or pursuing adversarial proceedings in bankruptcy court is a powerful tool for the trustee, creditor, and/or debtor because bankruptcy proceedings are unique in that they give an advantage to those who are familiar with bankruptcy law and due process.« Back to Glossary