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Adversary Proceedings in Bankruptcy: What to Do When You’re Sued


One of the most powerful benefits of bankruptcy is the automatic stay. The automatic stay is an order that the bankruptcy court issues as soon as you file your petition, and it protects you from all kinds of debt collection tactics for the duration of your case. While you’re in an open bankruptcy proceeding, therefore, you won’t need to worry about calls, letters, repossession, foreclosure, and more.

Generally, the automatic stay protects you from debt collection lawsuits. In certain circumstances, however, you might still be served papers during or shortly after your bankruptcy. Bankruptcy lawsuits are called adversary proceedings, and they can be filed by a creditor, a debt collection agency, the bankruptcy trustee, or even the person or business who filed bankruptcy.

Why Would Someone File an Adversary Proceeding?

In any bankruptcy case, substantial amounts of debt may be discharged or reaffirmed, and the court’s decisions can greatly impact the financial circumstances of either the filer or their creditors. If anyone involved in the bankruptcy process believes a debt-related decision or process is unfair, they can file an adversary proceeding.

As you might guess, creditors and debt collectors typically file adversary proceedings to prevent the court from discharging a certain debt.

They may claim a debt is non-dischargeable because:

  • You incurred it through fraud
  • You misrepresented the debt
  • You took out the debt fully intending to never pay it back
  • The debt falls under another category of non-dischargeability

The trustee can file adversary proceedings, as well, but they are more concerned with ensuring the bankruptcy adheres to state and federal laws (rather than simply preventing a discharge). They may file an adversary proceeding if they believe you have committed misrepresentation, a preferential transfer, a fraudulent transfer, or another prohibited activity.

How to Dismiss an Adversary Proceeding

As is the case with all types of lawsuits, plaintiffs who file adversary proceedings must follow certain steps and present adequate evidence backing their claim. A bankruptcy litigator may be able to dismiss an adversary proceeding if the plaintiff failed to meet these requirements. In other cases, your attorney may be able to negotiate a settlement or other terms outside of the lawsuit.

You can also take certain steps to lower the likelihood of an adversary proceeding. Before filing bankruptcy, an attorney can advise you regarding paying or not paying your debts, transferring funds, and other actions that might trigger a lawsuit later on. If you fulfill all your obligations and file your petition with care, you will leave the trustee and creditors with little to no reason to file an adversary proceeding.

Reasons for a Debtor to File an Adversary Proceeding

Trustees and creditors are not the only parties who can file adversary proceedings. You may need to file one yourself for various reasons.

You may file an adversary proceeding to:

  • Avoid a transfer (i.e. reverse a transfer of funds or assets you made shortly before filing bankruptcy)
  • Strip a lien (i.e. remove a creditor’s claim to your property, such as the lien on a second or third mortgage)
  • Discharge student loan debt(by proving that you meet the “undue hardship” standard)

An experienced bankruptcy litigator can help you determine whether an adversary proceeding could help you accomplish your goals and improve your financial circumstances.

Let Our Attorney Litigate Your Case

At the Law Office of Seni Popat, our attorney provides highly effective litigation services for adversary proceedings of all kinds. With years of experience handling bankruptcies and other debt-related matters, Attorney Popat possesses the in-depth knowledge and insight needed to build a strategic defense and help you maximize the benefits of bankruptcy.

Are you facing an adversary proceeding or debt collection lawsuit? Call (718) 340-3385 or contact us online today. We can begin with a complimentary case evaluation.