June 3, 2020
We often receive calls from individuals who are confused about the term: “Adversary Proceeding“. What are adversary proceedings? What can you do through an adversary proceeding? Do you need to do anything if you are a debtor and served with an adversary proceeding? These are all questions that we have received before. Let our are qualified Los Angeles Bankruptcy Attorney answer some of those questions to help individuals (or businesses) involved in a California Bankruptcy.
What are Adversary Proceedings in California?
To put it in simple terms, Adversary Proceeding is “a lawsuit within a bankruptcy”. An adversary proceeding is similar to a lawsuit held in state or federal court, with the exception of where the lawsuit proceedings. Adversary Proceedings are filed in bankruptcy court, and heard by a bankruptcy judge.
The procedure of an adversary proceeding is similar to that of a state court lawsuit. That is, a Complaint has to be filed, then served on the Defendant (sometimes the Debtor, as explained below), and then litigated (sometimes through trial) proceedings in Bankruptcy Court. Adversary Proceedings can be filed in Chapter 7 bankruptcies, Chapter 13 bankruptcies, and Chapter 11 cases.
Adversary Proceedings generally have to involve some issue in the bankruptcy, and must not be entirely based on state law. For example, a persona injury lawsuit resulting from a car accident will not be subject to an adversary lawsuit, even if the debtor was a party to the accident.
The Types of Adversary Proceedings in California
Just like state court lawsuits, there are various reasons for filing an Adversary Proceeding. These are some common reasons:
1) Adversary Proceeding to Deem a Debt Non-Dischargeable – This is a lawsuit normally filed by a creditor, where the creditor is asking that the the Court not erase a debt that would have been otherwise erasable in the bankruptcy. Only certain types of debts are eligible for this, and one should consult with a qualified Los Angeles Bankruptcy Attorney to determine if an adversary proceeding would be proper.
2) Objections to Discharge – In some situations when there is fraud or illegal activity in the bankruptcy case itself, creditors (or the trustee in the case) can object to discharge of all debts in the bankruptcy. The result of such a lawsuit is very harsh, so it needs to be properly defended by the Debtor.
3) Adversary Proceeding to Avoid Fraudulent Transfer – This is the kind of case normally brought by a Trustee, where the Trustee is alleging that the Debtor who filed the bankruptcy transferred some property (normally a home) to another person with the purpose of avoiding listing it as an asset in the bankruptcy. The outcome of such a lawsuit, if successful, is that the property transferred would be taken over by the Trustee, who will then liquidate that property.
4) Adversary Proceedings Filed by the Debtor – In some situations, a debtor can file an adversary proceeding against a creditor in the bankruptcy case. For example, the debtor may file an action against a creditor if the creditor violates of the automatic stay by trying to collect on a debt after the bankruptcy is filed, without seeking permission from the bankruptcy court beforehand.
What to Do if One Needs to File an Adversary Proceeding
Contact a qualified Los Angeles Bankruptcy Attorney IMMEDIATELY. There are deadlines for filing adversary proceedings. The failure to file an adversary proceeding can be deadly to the lawsuit.
What to Do If One Needs to Defend Against an Adversary Proceeding
If you were sevred with an Adversary Proceeding, you should consult with a bankruptcy attorney about your options. The outcome of such lawsuits can often be devastating to the Debtor, and thus, defending against such lawsuits is extremely important.
Want to Learn More About Adversary Proceedings in Bankruptcy, Consult With a Los Angeles Bankruptcy Attorney Now!
Give us a call now. We would be happy to talk to you. At Katz Law, we are known to have some of the most competitive pricing in the market. Also, we are upfront in our prices, so you will know what you are getting before you sign an agreement with our firm. If you would like to learn more about Adversary Proceedings in Los Angeles, give us a call now at (310) 444-9444.