Many people file for bankruptcy protection because they need relief from their creditors. A personal bankruptcy filing can be shelter from the harassing collection efforts of debt collectors. However, while rare, it is possible for a lawsuit to be filed against you in your bankruptcy case. This type of action is commonly referred to as an “adversary proceeding.”
A creditor can file two forms of complaints against you in your bankruptcy:
· An objection to the discharge of the debt you owe to the creditor
· An objection to your receipt of a discharge of debt
An adversary proceeding begins in the same way as other lawsuits. The party filing the action must file a complaint setting forth the claims against the debtor, including the facts that support the allegations and the remedy being sought. A summons must be issued to inform the defendant (debtor) that the complaint has been filed and that the deadline for a response has been set. The defendant must be properly served with a copy of the complaint and summons.
It is also important to note that the trustee assigned to supervise your case can file a lawsuit against a debtor seeking the denial of the discharge. This is typically done when the trustee believes the debtor filed a fraudulent petition.
The trustee also has the ability to pursue third-parties for money the debtor paid prior to his or her bankruptcy filing if they constitute a preferential transfer or a fraudulent conveyance. A preference occurs when you pay a creditor before you file for bankruptcy that results in that creditor being preferred over other similar creditors. To learn more about preferential transfers, click here. A fraudulent conveyance occurs when a debtor transfers money or property to another party to prevent it from being included in the bankruptcy filing.
If you are concerned that an adversary proceeding will be filed in your bankruptcy case, it is essential to obtain the advice and guidance of an experienced bankruptcy attorney.