An “Adversary Proceeding” is essentially a lawsuit within a Bankruptcy case about something related to the bankruptcy case. It is initiated by filing a complaint with the court and may be filed for numerous reasons, including but not limited to objecting or revoking a discharge, determining the dischargeability of a debt, or to recover money or property of the debtor. Such proceedings are primarily governed by rules found in Part VII of the Federal Rules of Bankruptcy Procedure, and may be initiated by the bankruptcy judge, the creditor, or the bankruptcy trustee and the debtor.

When such a proceeding is filed by a creditor, it is usually because the creditor is disputing that the debt owed should not be discharged. For example, the creditor may argue that the debt falls within one of the exceptions to discharge, or that the bankruptcy filing was done in bad faith. Or, if a debt is obtained prior to Bankruptcy with no intention of paying it back, the creditor may sue in Bankruptcy Court claiming that the debt was incurred by fraud. Under the Bankruptcy Law, debts that are incurred through fraud are non-dischargeable. Thus, ofterntimes an adversary proceeding is initiated by a creditor who files a complaint asking the Bankruptcy Court to determine whether the debt was incurred fraudulently.

When an adversary proceeding is filed by the bankruptcy trustee, it may be for a variety of reasons such as the paperwork being inaccurate and intentionally fraudulent, or to undo a transfer of real property. The United States trustee may also file an adversarial proceeding to force the debtor to move from a Chapter 7 to a Chapter 13 filing if the trustee believes the filing was done in bad faith.

In certain circumstances, it is also possible for a debtor to file an adversarial proceeding against a creditor. When a debtor files an adversary proceeding against a creditor, he/she is usually taking action because the creditor has violated a bankruptcy law such as, ignoring an automatic stay, or collecting on a debt that was discharged in bankruptcy. There are many other situations in which adversary proceedings arise. In other instances, the debtor brings the adversary proceeding to bring a claim or to obtain a determination from the court. The Bankruptcy Rules of Procedure specify the situations in which parties must file adversary proceedings.

Sometimes, a bankruptcy case can be reopened after it is closed for the purpose of filing an adversary proceeding. While adversary proceedings are rare, they do occur in some cases.

The litigation in an adversary proceeding is like most other litigation, there will be a complaint, an answer, discovery where documents, witness lists, and information is exchanged, and perhaps even depositions. And after all that, there would be a trial, where the creditor(s) and the debtor make arguments to the Bankruptcy Court as to why the debt(s) should or should not be discharged in the bankruptcy. This hearing is held in a federal courtroom in front of the bankruptcy Judge assigned to your initial bankruptcy case. At the trial, the judge would determine if you committed fraud when you obtained the cash advance. If the Judge determines, based on the arguments presented, that the debt(s) at issue should not be discharged in bankruptcy, then you will be responsible for those debts even upon the discharge of your other debts in the bankruptcy.

The attorney who filed your bankruptcy petition or claim may or may not represent you in the adversary proceeding. You have the choice to hire the attorney who filed your petition or claim, or to find a different attorney to represent you in the adversary proceeding. Along the same lines, in most cases your initial bankruptcy attorney has the option to not represent you in the adversary proceeding. The reason for this is that the adversary proceeding is considered to be a new, separate proceeding within your initial bankruptcy case.

Your attorney will contact you if an adversary proceeding becomes a possibility in your case. You will need to assist your attorney in preparing for the defense of the adversary proceeding, because you know the facts of your case better than anyone, and the outcome of an adversary proceeding usually depends on the specific facts of the case.

NOTICE: The above information was derived from a publication of the Administrative Office of the U.S. Courts on behalf of the Federal Judiciary, entitled “Bankruptcy Basics”. It is provided here for your general information only, and not as legal advice. While the information presented is accurate as of the date of publication (April 2006), it should not be cited or relied upon as legal authority. The above information should not be used as a substitute for reference to the United States Bankruptcy Code (title 11, United States Code) and the Federal Rules of Bankruptcy Procedure, both of which may be reviewed at local law libraries, or to local rules of practice adopted by each bankruptcy court. Finally, the above information should not substitute for the advice of competent legal counsel.