16 May Adversary Proceedings in Bankruptcy: What Are They?
Filing bankruptcy is usually an administrative process. Information is gathered, forms filled out, and thereâ€™s a brief hearing conducted by a trustee. But in some cases an â€œadversary proceedingâ€ occurs.
An adversary proceeding is essentially a case within a case. Itâ€™s a lawsuit within your case about something related to the bankruptcy case.
All this is a little abstract, so let me give you a common example of a typical adversary proceeding in a consumer bankruptcy case. Letâ€™s say that you obtained a large cash advance prior to filing your case. Maybe you didnâ€™t know youâ€™d be filing bankruptcy and were trying to get some money to pay your mortgage, or to prevent your car from being repossessed. The card car issuer, however, might not see it that way if you borrowed $5,000 in the form of a cash advance only a few months prior to filing bankruptcy.
As weâ€™ve explained in numerous posts here at bankruptcy law network, debts incurred by fraud are non-dischargeable. So if you obtained the cash advance with no intention of paying it back, thatâ€™s fraud.
The credit card issuer would then have to make the decision whether to file a complaintâ€”an adversary proceedingâ€”to ask the court to determine whether you incurred the debt fraudulently.
The litigation following would be the adversary proceeding. Like any other litigation, there would be a complaint, an answer, discoveryâ€”where documents, witness lists, and information is exchanged, and perhaps even depositions. And after all that, there would be a trial. At the trial, the judge would determine if you committed fraud when you obtained the cash advance.
There are many other situations in which adversary proceedings arise. In other instances, the debtor brings the adversary proceeding to bring a claim or to obtain a determination from the court. The Bankruptcy Rules of Procedure specify the situations in which parties must file adversary proceedings.
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