An adversary proceeding is a separate hearing that is filed within your bankruptcy case. Although it is related to the original bankruptcy you filed, it is assigned a different case number and, therefore, becomes a separate case that requires a separate resolution.

Essentially, an adversary proceeding is a vehicle used to let the judge know that the petitioner (whoever files the adversary proceeding) wants another form of relief. Either the creditors, the bankruptcy trustee (person assigned to oversee your bankruptcy case) or the debtor may file an adversary proceeding.

What are Some Common Examples of Adversary Proceedings?

There are several types of actions that are commonly seen among adversary proceedings that are filed within bankruptcy cases:

  • Objection to discharge of a debt. This is one of the most common actions filed as an adversary proceeding. It is filed by a creditor, typically, who objects to the discharge of a debt that the debtor has against them. 
    • They may claim that the debtor is attempting to fraudulently escape the debt. The creditor may also file to have a discharge item revoked if it has already been discharged. There are deadlines for filing this type of action, typically, 60 days after the first meeting of creditors.
  • Action to recover property debtor sold immediately prior to filing for bankruptcy. This may be filed by the trustee.
  • Action to determine validity, priority or extent of liens. The debtor may file this themselves, to have a lien on property removed.
  • Action to discharge taxes owed or to discharge student loans owed (these types of debts are not generally dischargeable, but the action may be filed).
  • Action to determine whether a certain debt is dischargeable.
  • Action to obtain an injunction or other type of equitable relief.
  • Action to lower a claim in level of priority (known as subordination of claim).
  • Action to have proceedings moved to a different court.

Of the reasons for adversary proceedings listed above, the most common are: the objection to discharge of a debt, action to determine validity of lien, and action to recover property that has been sold prior to bankruptcy.

Other types of actions that are not normally included among adversary proceedings may still be treated as such by the court, if it is related to the bankruptcy, and/or needs to be resolved before the bankruptcy. Existing cases might also be transferred to bankruptcy court from other courts if they are related to the bankruptcy matter. Items that are related to the bankruptcy are often considered along with the bankruptcy.

How Does an Adversary Proceeding take Place?

The party who wishes to file the adversary proceeding must follow certain steps in order to initiate this action. Since this is a separate case, the petitioner for the adversary proceeding may differ from the petitioner in the overall bankruptcy proceeding (as mentioned above, it may be the debtor, bankruptcy trustee or a creditor).

Therefore, the person who files the adversary proceeding becomes the petitioner/plaintiff of the adversary proceeding, and the opposing party against whom the adversary proceeding is filed becomes its defendant. There are approximately four steps in an adversary proceeding:

  1. The petitioner, or person filing the adversary proceeding, case, must file a detailed complaint in the bankruptcy court seeking relief. 
    1. The complaint must include a statement of the issue, the claim against the defendant and the relief sought by the petitioner. 
    2. They must also pay any necessary filing fees to the court clerk.
  2. The petitioner must serve the opposing party, or defendant with the complaint.
  3. The opposing party must file a formal reply to the complaint.
  4. The judge will then hold a hearing to determine the resolution of the adversary proceeding.

If the opposing party does not file a reply, the petitioner will automatically win the proceeding, and will be awarded judgment in the matter of the adversary proceeding..

What is a Contested Matter?

A contested matter is one that needs to be resolved within the bankruptcy, but does not rise to the level of an adversary proceeding. These may be handled by filing a motion within the bankruptcy, rather than by filing a separate lawsuit. Examples of contested matters include:

  • Motions to have an automatic stay lifted. An automatic stay is placed when a debtor files for bankruptcy, to keep creditors from collecting while the bankruptcy is resolved;
  • Objections to the validity of the amount a creditor claims they are owed by the debtor; and/or
  • Objections to the debtor’s “claimed property,” or property held exempt from the bankruptcy.

Do I Need an Attorney for a Bankruptcy and Adversary Proceeding?

Bankruptcy is a complex and intricate area of the law. When faced with an adversary proceeding, you should consult an experienced bankruptcy lawyer to lessen your liability. Moreover, a bankruptcy lawyer can lessen your anxiety with their keen knowledge and procedures to take during your case.