An adversary proceeding is a lawsuit within your bankruptcy filing-a case within a case. An adversary proceeding is often filed by creditors who stand to lose if your debt is discharged, but other interested parties may also enter the fray: the bankruptcy trustee or an ex-spouse, for example. You might even have cause to commence an adversary proceeding in your own bankruptcy, if a creditor has continued to harass you after your filing.
Having an adversary proceeding filed in your bankruptcy is no cause for panic, as long as you have an aggressive San Diego business and bankruptcy lawyer working for you. At Contreras Law Firm, we are generally able to negotiate with the party filing the proceeding and move forward to a successful discharge of your debt.
WHO MIGHT FILE AN ADVERSARY PROCEEDING AND WHY CREDITORS
A creditor will sometimes file an adversary proceeding in an attempt to prevent the debt owed from being discharged. If the debt was incurred right before the bankruptcy, when you already had formed the intention to file, or if the debt was obtained fraudulently, it might not be dischargeable.
An ex-spouse may file an adversary proceeding if your divorce decree required you to pay off certain debt that was incurred by both of you during the marriage. If the debt is discharged in your bankruptcy, the creditor can go after your ex-spouse, who will have the right to recover that amount from you, because in general, you cannot use a bankruptcy to avoid the obligations created by your divorce settlement. To protect his or her interests, it makes sense for an ex-spouse to file an adversary proceeding in a bankruptcy if the settlement included a division of responsibility for jointly-acquired debt.
THE BANKRUPTCY TRUSTEE
The bankruptcy trustee can file an adversary proceeding in an attempt to prevent your bankruptcy discharge. If the trustee has reason to believe you lied or falsified filing documents, or that you concealed assets or were attempting to misuse the bankruptcy process, the trustee may try to stand in the way of your discharge. If you made a preferential payment, for example paid a debt to a family member before filing for bankruptcy, or if you transferred non-exempt property to a relative or friend, the trustee may file an adversary proceeding to recover those payments or transfers.
Another instance where the trustee may file an adversary proceeding is if you own non-exempt property jointly with another person. The trustee may ask the court to sever your interest in the property or force the co-owner to sell so your part of the proceeds can be used to pay your creditors.
You may even file an adversary proceeding in your own bankruptcy. The typical reason for doing this is when creditors continue collection efforts after you’ve filed; your filing bankruptcy imposes an immediate stay of all recovery efforts by creditors, but they may not honor it.
You might also file an adversary proceeding bankruptcy if you have a second mortgage or home equity line of credit that you want to eliminate and have treated as an unsecured debt for the purposes of the bankruptcy. This is called lien stripping.
THE PROTECTION YOU NEED WHEN AN ADVERSARY PROCEEDING IS FILED
Dealing successfully with these obstacles to a smooth bankruptcy generally requires that you have a bankruptcy lawyer with the skill and passion to launch a powerful case in support of your position. Ideally, you should have a skilled San Diego attorney from the very beginning. If you’ve attempted to represent yourself in your bankruptcy up until now and have received notice of an adversary proceeding, it is time to rethink going in it alone. This is a time when you need a powerful advocate to avoid a costly mistake that could potentially prevent your debt from being discharged.
In San Diego, when you are contemplating a bankruptcy, schedule a free consultation at Contreras Law Firm before you act. Our attorneys are experienced, skilled, and aggressive. We know the law, and we can make it work for you. If you have already filed for bankruptcy and a complication has arisen, contact us for the help you need now. You have too much to lose, so don’t wait; call today.