When you file for bankruptcy protection, the automatic stay prevents creditors from filing lawsuits against you. However, there is a procedure within the bankruptcy court called filing an “adversary proceeding,” which is a lawsuit that is filed within your bankruptcy case. An adversary proceeding addresses issues that are more complex than what can be accomplished by filing a motion with the court.
An adversary proceeding is initiated when a party files a complaint with the bankruptcy court. It is similar to a complaint filed in a regular civil court because it lists facts and allegations, while also seeking a judgment. The party being sued must be served with a copy of the complaint and summons which sets the deadline for the defendant to respond. If the defendant fails to file a timely answer, the court will enter a default judgment in favor of the plaintiff.
In bankruptcy, the most common types of adversary proceedings include:
· Fraudulent transfers. If the bankruptcy trustee discovers the debtor fraudulently transferred money or assets to another party within the two years prior to filing for bankruptcy, an adversary complaint can be filed.
· Preferential transfers. If the debtor paid creditors within 90 days (or one year if the payment was made to a relative) prior to the bankruptcy and the trustee can prove certain factors, a preferential transfer adversary complaint can be filed to recover the funds or assets transferred.
· Non-dischargeability of debts. An adversary proceeding can be filed by a creditor asking the court to deny the discharge of their debt, typically because fraud was involved when the debt was incurred.
· Objection to discharge. An adversary proceeding can be filed to request the denial of an entire discharge due to fraud or other significant failures committed by the debtor.
If you have questions regarding bankruptcy or what actions creditors can take, let us help. We are bankruptcy lawyers who know how to make a difference in your financial situation. We have experience you can rely on and we care about your results. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..