Determining the distribution of assets in a bankruptcy may sometimes involve a procedural device called an adversary proceeding, which is initiated by filing a formal complaint within the bankruptcy court, says bankruptcy attorney Jeffrey I. Rothstein, who practices in DeWitt, Michigan, serving the entire Lansing Tri-County area and beyond. He practices in the areas of criminal and misdemeanors, bankruptcy, family law and estate law, including wills and estate planning, and talks here about how an adversary proceeding is used in court.
To me, the definition of an adversary proceeding is a lawsuit within a bankruptcy proceeding. It’s a hearing to settle disagreements regarding the distribution of assets in bankruptcy. Basically, it’s where creditors can come to object to debts being discharged in bankruptcy.
For example, the term to “cram down” means to turn a secured debt into an unsecured debt. With this in mind, a lot of different bankruptcy districts are putting debts in a different category in a Chapter 13 bankruptcy proceeding. In order to cram down the debts in the bankruptcy, or turn the secured debts into unsecured ones, a lot of courts require that the debtor proceed in an adversary proceeding.
So an adversary proceeding is usually used in two ways. The first is when the creditors can use it to object to your filing. When this happens, they are required by law to state why - and they have to specific about it. The second way is when the debtors can use an adversary proceeding to try and cram down debt, and by doing so put the creditor in a less advantageous position.
Third Way of Opening Up Proceeding
There is a third way in which an adversary proceeding can be opened up, and that is by the bankruptcy Trustee. The Trustee can open up a proceeding to get some of what the debtor objected to. When the Trustee see some assets which he feels are not protected under the Bankruptcy Code, he can file an adversary proceeding to try and put those assets into the bankruptcy estate. An example of a creditor adversary proceeding is when a creditor can object to getting his debt dismissed because the debtor obtained the debt by fraud.
Declaring bankruptcy can be a difficult process, and everyone needs a qualified attorney who knows the law. Visit the Law Offices of Jeffrey I. Rothstein today to get the representation you deserve.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
