Bankruptcy and Adversary Proceedings

If you haven’t experienced enough stress simply by being squashed under untenable debt and then by filing for bankruptcy, now you learn that there is an adversary proceeding against you! It sounds alarming, and it is! It means that someone–probably a creditor or the trustee– wishes to fight the discharge of a particular debt, get an injunction, or otherwise pursue you for financial remuneration. This party likely already filed a complaint laying out the reasons for their lawsuit and asking the court for a remedy. It turns out you may be responsible for a debt that you previously believed might be discharged.

Why This Happens

When a debtor is accused of fraud, creditors or the trustee may object to having debt discharged. Accusations of fraud may occur if a creditor believes that:

• Money or property was recently transferred by the debtor to friends or family.
• The debt was incurred fraudulently through identity theft, falsifying applications, misrepresenting the value of collateral, forging signatures, or taking out loans knowing a bankruptcy was in the near future.
• The debt was incurred with no intention of paying it back, as the debtor knew they would soon be filing for bankruptcy.
• There was a preferential transfer to a particular creditor within three months of filing for bankruptcy, meaning one creditor got paid at the expense of others.
• The debtor has shared property and creditors want to force a sale so the proceeds can be applied to the debt.

These actions would make the debt non-dischargeable in a bankruptcy proceeding.

Opposing the Adversary Proceeding

Unless you want the court to default in favor of the plaintiff, you now need to respond to the complaint through your bankruptcy attorney. It is a process connected to, yet outside of the bankruptcy proceeding. The process thereafter will involve a number of steps:

• During discovery information will be gathered by each party in the form of depositions, requests for admissions, interrogatories and more.
• An attempt will likely be made to settle the dispute out of court.
• The court may suggest mediation as a means to resolve the issue.
• If a settlement is not possible, there will be a formal trial and the judge or jury will determine the outcome.
• The losing party will have the opportunity to appeal if they wish.

Looking Out for You 

The experienced Miami bankruptcy attorneys at the Law Office of Julia Kefalinos always look for the best possible outcomes for our clients. We stick by you from beginning to end and protect you from as much disruption and harm as feasible. To discuss your situation, schedule a confidential consultation in our Miami office today.

Source:

law.cornell.edu/wex/adversary_proceeding