What Are Adversary Proceedings in Bankruptcy?
Most people who file bankruptcy only experience the administrative aspect of bankruptcy. They have no exposure to bankruptcy’s adversarial or litigation-side. Yet, creditors can oppose or challenge certain aspects of your bankruptcy case, which opens the door to litigation.
Bankruptcy is a unique area of law that uses different terms than many other legal areas. The term adversary proceeding takes on a different meaning in the context of a bankruptcy case.
An adversary proceeding is basically a lawsuit initiated within a bankruptcy case by one party (the plaintiff) against another party (the defendant). When a party files a complaint, the litigation that follows is the adversary proceeding. Just as with a civil or criminal lawsuit, the first step of litigation proceedings involves discovery where parties exchange information, engage in depositions, interrogatories, and other fact-finding procedures. Once discovery is over, the lawsuit moves to trial and opposing counsels present their arguments. The bankruptcy judge then renders a decision regarding the complaint on which the trial was based.
Bankruptcy cases must follow a set of specific procedures. Federal Rules of Bankruptcy Procedure (http://www.law.cornell.edu/rules/frbp) are complex rules unto themselves. Even lawyers with great skills in other types of civil litigation find themselves out of their element in a bankruptcy court if not well versed in the federal bankruptcy rules.
Types of adversary proceedings
In complicated bankruptcy cases, many different adversary proceedings may arise. Common types of adversary proceedings include complaints for the purpose of—
- Objecting to a discharge
- Revoking reorganization plan confirmation
- Obtaining an injunction
- Recovering money from property sale
- Determining validity of a debt
- Determining priority of a lien
- Subordinating another creditor's claim
- Recovering money or property for an estate
The U.S. Courts recommend that anyone filing bankruptcy obtains advice from a bankruptcy lawyer, rather than trying to go it alone.