Experienced Sacramento Bankruptcy Attorney Explains Adversary Proceedings
An adversary proceeding in bankruptcy is a lawsuit filed within your bankruptcy case. While it remains a part of your bankruptcy case, it has its own separate case number, and you may have a different attorney. Any party can file an adversary proceeding in a bankruptcy — the trustee, a creditor, or you. The purpose of an adversary proceeding is to obtain some form of relief that requires a judge’s attention and cannot be accomplished through a court motion. You will definitely need an experienced Sacramento Bankruptcy Attorney in case you have to deal with an adversary proceeding.
How Adversary Proceedings Work
An adversary proceeding starts when the person who is suing (the plaintiff) files a complaint with the bankruptcy court. The complaint lists the facts that pertain to the lawsuit and asks the court to enter a judgment based on the facts and the law. When the plaintiff files the complaint, the court will issue a summons, which the plaintiff must serve upon the person being sued (the defendant) along with a copy of the complaint.
Once the defendant receives the complaint, he or she has a certain number of days to respond, depending on the local rules of the bankruptcy court. To respond, the defendant must file an answer, which responds to the allegations in the complaint. If the defendant does not file an answer on or before the deadline, the court will enter a default, and the plaintiff can obtain a default judgment.
Common Types of Adversary Proceedings
There are multiple reasons to file an adversary proceeding. The most common types include:
Fraudulent transfers. The bankruptcy trustee can file a fraudulent transfer adversary complaint if you transfer any money or property to another within two years before filing your bankruptcy, if the trustee can prove either actual fraud or constructive fraud.
Preferential transfers. The bankruptcy trustee can file a preferential transfer adversary complaint, also known as a preference adversary, if you repaid any of your creditors more than $600 within 90 days before you filed bankruptcy (or one year if you paid back a relative).
Lien stripping. If you file a Chapter 13 bankruptcy and you have more than one mortgage on your house, you can file an adversary proceeding to strip the junior mortgages from your property and treat them as unsecured claims as long as your house is worth less than the balance due on the first mortgage.
Dischargeability of debt. A creditor can file an adversary complaint requesting that the court not discharge its debt because it alleges that you incurred the debt fraudulently, either by actual fraud or constructive fraud.
Sale of property jointly owned by the debtor. The trustee’s duties include selling any nonexempt property for the benefit of your creditors. If you own property jointly with someone else, the trustee can file an adversary complaint to sever (split apart) your interests and force the co-owner into selling the property.
Objection to discharge. Your creditors, the trustee, or the Office of the United States Trustee can file an adversary complaint to deny your entire discharge by alleging that you have committed fraud or that you have failed to comply with court orders.
What Causes an Adversary Proceeding?
Adversary proceedings happen sometimes in bankruptcy cases. But an experienced Sacramento Bankruptcy Attorney who is versed in adversary proceedings will be prepared to handle one of these cases and protect your rights.
An adversary proceeding can be brought by just about anyone. A debtor, a creditor, or even the bankruptcy trustee who is tasked with looking for things like fraud in a bankruptcy case. Almost anyone can file one if they have a legal claim against the debtor or his property.
An adversary proceeding most often happens when someone is intervening in the bankruptcy case to say that some debt is not dischargeable. Allegations of fraud are the most common reason to file one of these. Creditors or the trustee himself can file an adversary to challenge the dischargeability of some debt if fraud is suspected. These are the cases filed under the “exceptions to discharge” under 11 USC § 523(a)(2) of the bankruptcy code. In addition to fraud, but less often, misrepresentation, false pretenses or other allegations can be pleaded in these cases.
The fraud cases usually come down when a credit card company files an adversary challenging a large charge made on one of your credit cards immediately prior to filing. These same companies can also object to a large cash advance taken out on a card especially if the cash advance is taken out at a gambling casino.
With all of these types of cases if the other side wins then the debt they are challenging the debt will be deemed not discharged in bankruptcy and you will still owe it when the bankruptcy case is finished. This tends to defeat the whole point of bankruptcy and therefore these cases must be dealt with quickly and correctly.
Other reasons for adversary proceedings would be when a creditor believes a bankruptcy was filed in bad faith. A debtor can also file an adversary proceeding against a creditor for violations of the bankruptcy automatic stay when a creditor attempts to collect a debt which he cannot because of the bankruptcy. There are adversary proceedings filed by the debtor’s attorney to strip off second mortgages.
Experienced Sacramento Bankruptcy Attorney
We are experienced Sacramento Bankruptcy Attorneys. We have helped thousands of individuals and businesses get the relief they need from their creditors through the use bankruptcy by filing a Ch. 7, Ch. 13, credit card debt negotiation or debt settlement and have successfully dealt with adversary proceedings brought by difficult creditors. Our bankruptcy attorneys have achieved proven results and can give you the great legal advice and strategy needed to get you the results you want. Contact us today to schedule your complimentary attorney consultation by clicking HERE or by calling 916-999-1376. We look forward to helping you with all of your Sacramento bankruptcy needs.
