What is an Adversary Proceeding?
The bankruptcy process often involves the determination of rights or interests
through a direct legal action that is called an “adversary proceeding.”
An adversary proceeding is a complaint filed in the United States Bankruptcy
Court, to determine some of the following issues:
- The right of the Debtor to the bankruptcy discharge
- The right of the Debtor to discharge certain debts
- The validity, priority and extent of certain creditors’ liens against
- The avoidance of certain transfers and the recovery of certain assets that
are voidable under applicable law
- The avoidance and recovery of preferential transfers, which are transfers
made on account of an antecedent debt, made during certain time periods
prior to the bankruptcy filing, depending on the nature of the relationship
between the debtor and the transferee.
- Successor liability or alter ego liability matters
Call (954) 516-2566 to schedule a free consultation with a Miami bankruptcy
litigation lawyer at LSAS Law.
Representing debtors, creditors, trustees, and third parties throughout
Florida since 1994.
The Difference Between Discharge and Dischargeability
The bankruptcy adversary proceeding for discharge and dischargeability
is often confused. The words are similar, and yet have different meanings.
Discharge is one of the main reasons why people file bankruptcy –
to permanently avoid payment of ALL of their debts and obligations by
discharging them (with some exceptions). The bankruptcy trustee or a creditor
may decide to file an adversary proceeding to deny a debtor’s discharge
However, there are very specific enumerated reasons why a person’s
discharge can be denied. The bankruptcy laws favor a debtor receiving
a discharge, unless one of these enumerated factors apply. Some examples
are transferring assets with the intention to hinder, delay or defraud
a creditor, concealing or destroying financial records, making a false
oath, failing to provide the trustee with financial information, failing
to satisfactorily explain the loss of assets and failing to obey court orders.
Not All Debt Can Be Discharged
Even if a person receives his or her discharge, certain debts are specifically
excluded from the discharge. Debts such as domestic support obligations and
certain tax debts are automatically excluded from the discharge (although there are many
other categories of non-dischargeable debts). Other types of debts, require
the court to determine whether they are excluded or not from the discharge.
Those types of debts that require specific court determination may be
subject to a dischargeability adversary proceeding.
Common types of dischargeable debts include:
- Debts that arose by false pretenses, false representations or actual fraud
- Debts that are not scheduled by the debtor
- Debts that arose by virtue of fraud or defalcation while acting in a fiduciary capacity
- Debts that arose by virtue of theft or embezzlement
- Debts that arose by a willful and malicious injury to another
Issues With Bankruptcy Exemptions
Upon the filing of the bankruptcy case, the Debtor’s assets become
part of the bankruptcy estate that is formed. However, certain assets
can be claimed as exempt pursuant to applicable bankruptcy or state law.
The effect of having an asset be deemed as exempt differs depending on
which chapter of bankruptcy is being filed.
A creditor or a bankruptcy trustee may file a contested matter in the bankruptcy
proceeding to determine whether the asset should be deemed exempt. Some
examples are whether a house is entitled to homestead exemption, or whether
an account is entitled to an exemption as a retirement account, pension
Our Bankruptcy Litigation Lawyers in Miami Can Help
Our attorneys at Leiderman Shelomith Alexander + Somodevilla, PLLC have
considerable experience in bankruptcy litigation, representing debtors,
creditors, trustees and third parties. Our litigators have conducted trials
and evidentiary hearings, and have also briefed and argued bankruptcy
appeals to the United States District Court. We are prepared to help you
if you are dealing with a bankruptcy litigation matter. Reach out to us
today for a free initial case evaluation.
Contact Leiderman Shelomith Alexander + Somodevilla, PLLC today at (954) 516-2566 to get in touch with our Miami bankruptcy litigation
attorneys. We are prepared to answer your questions.