In a small amount of Bankruptcy cases a creditor, or other party who has an interest in the bankruptcy case, can file a lawsuit inside the Bankruptcy case. The lawsuits are also known as “Adversary Proceedings.” An Adversary Proceeding is a lawsuit, just like a lawsuit filed in the California Superior Court or Federal District Court. The case begins with a Complaint and Summons. The Defendant (usually the Debtor in the bankruptcy case) is required to respond within a statutory period of time.
The main reasons for the filing of an Adversary Proceeding is to (a) dispute whether a given debt should be subject to the Bankruptcy Discharge because of the type of debt, (b) dispute whether any of the debts should be discharged based on some improper conduct of the debtor, or (c) determine whether certain assets should be returned to the estate because of actions such as fraudulent transfers.
Like most litigation cases, Adversary Proceedings can be quite time consuming and expensive. Most attorneys charge an hourly rate to defend these cases. Items that should are generally required include discovery (written questions, depositions, and document review), settlement conferences, and preparation for trial.
For those that have had an Adversary Proceeding filed against them, it is important to know the costs to defend versus the costs to potentially settle the matter. Additionally, for those that have debts for which they question their dischargeability, it is important to look at the procedures before filing a case.
If you have further questions on filing or defending an Adversary Proceeding, please contact Henshaw & Henry, PC today.