What are Adversary Proceedings?
An adversary proceeding is a lawsuit brought in connection with a bankruptcy case. It is essentially an entire civil lawsuit tried under the bankruptcy court. Like a civil lawsuit, it begins with the filing of a formal complaint and formal service of process (service of the documents) on the parties being sued.
What Can Adversary Proceedings Accomplish?
Additionally, parties to a bankruptcy case use adversary proceedings to accomplish several goals. Below is a list of reliefs available in an adversary proceeding and a brief explanation of each.
Recovery of Money or Property
Moreover, parties can initiate adversary proceedings to recover any money or property belonging to the estate.
Determining Validity, Priority, or Extent of a Lien
Also, parties can use an adversary proceeding to determine the validity, priority, or extent of a lien or other interest in the debtor’s property.
Selling a Co-owner’s Interest in Property
If a party needs an approval for the ale of both the interest of the estate and the interest of a co-owner in the debtor’s property, they must file an Adversary proceedings.
Objecting to or Revoking a Discharge
If a party objects to a discharge or they want to revoke a discharge, then they must file an adversary proceeding.
Revoking a Confirmation Order
Also, Parties must file an adversary proceeding to revoke confirmation orders.
Determining the Dischargeability of a Particular Debt
Parties must file an adversary proceeding to determine the dischargeability of a particular debt. For example, if a debtor has a default judgment against him on the basis of an allegation of fraud, the judgment creditor may file an adversary proceeding to request that the bankruptcy court not discharge the default judgment debt.
Seeking Injunctive Relief
An injunctive relief is a court order to do or refrain from doing something. To do this, parties must open an adversary proceeding to obtain an injunction or other equitable relief in connection with a bankruptcy filing.
Subordinating Claims or Interests
Additionally, an adversary proceeding is necessary to subordinate any allowed claim or interest on property, except when subordination is provided for in a Chapter 13 plan.
Obtaining Declaratory Relief
A declaratory relief is a judge’s determination of a party’s rights under a contract or statute. Here, parties must open an adversary proceeding to request declaratory relief relating to any of the above actions.
Litigating a Removed Action
Finally, when parties transfer State or Federal Court lawsuits to bankruptcy court, the litigate these cases as adversary proceedings.