What are Adversary Proceedings?
An adversary proceeding is a lawsuit filed within the context of an existing
bankruptcy case. An adversary proceeding may be filed by a creditor, a
bankruptcy trustee, or even the debtor. When a creditor files an adversary
proceeding, it is typically to challenge the debtor's right to a discharge.
This type of adversary proceeding begins when the creditor files a complaint
to determine dischargeability of the debt. There are two types of objections
that a creditor may lodge:
- "523 objection" is made where a creditor seeks to challenge the
dischargeability of only the debt owed to that particular creditor and
is commonly filed when the debt in question was for money, property, services,
or an extension, renewal, or refinancing of credit obtained by false pretenses,
a false representation, or actual fraud.
- "727 objection" is made when fraud is committed by the debtor
in connection with the bankruptcy case itself. If sustained, a 727 objection
prevents the debtor from obtaining a discharge of all debts.
In both Chapter 7 and Chapter 13 cases, a creditor who wishes to file an
adversary proceeding objecting to discharge must do so within 60 days
following the "341 meeting." In a Chapter 11 case, the adversary
proceeding must be filed no later than the first date set for the hearing
on confirmation. Notwithstanding the foregoing deadlines, a motion to
extend the time for filing an objection to discharge may nevertheless
be filed by a creditor with the Court. A creditor will often seek such
an extension where it is necessary and advisable to have counsel conduct
a so-called "2004 Examination" prior to filing the adversary
proceeding. Rule 2004 of the Federal Rules of Bankruptcy Procedure allows
any "interested person" to require the debtor or third parties
to testify and produce documents on matters related to the debtor's
bankruptcy case. A 2004 examination is tantamount to a deposition wherein
the primary goal is to uncover facts that bolster the creditor's objection
to discharge if an adversary proceeding is filed.
Should I file an adversary proceeding?
Whether or not to file an adversary proceeding almost invariably will boil
down to the financial interests at stake for the creditor. If the contract
underlying the debt in question contained a provision for attorney's
fees and costs, the creditor may seek recovery of said fees in costs in
the event that the creditor prevails in the adversary proceeding. If the
case for nondischargeability is strong, however, the action may never
get to trial as the debtor may be overwhelmed into throwing in the proverbial
towel early on in the process.
D. Baker Law Group, P.C. files adversary proceedings for creditors in both
the United States Bankruptcy Court-District of Massachusetts and the United
States Bankruptcy Court-District of Rhode Island. Our office thoroughly
evaluates every potential adversary proceeding and candidly advises the
client as to the reasonable likelihood of success in the underlying action
and the long-term collectability of the debt in question.
David M. Baker, Esq.-
your Massachusetts and Rhode Island Creditors' Rights Law Attorney!
schedule your case evaluation? Simply
call our firm today.