What the heck is an bankruptcy adversary proceeding? Why would someone bring one against me?

Adversary proceedings happen sometimes in bankruptcy cases.  I write about this because a debtor will sometimes file for bankruptcy and then get a notice of an adversary proceeding that has been filed in the case.  This can cause tremendous worry to the client.  But don’t despair, a good attorney will be prepared to handle one of these cases and protect your rights.

An adversary proceeding is literally a lawsuit within a bankruptcy case.  A case within a case.  It means that someone objecting to or fighting about something in the bankruptcy case.  Somebody is letting you know that they have a problem with some aspect of your bankruptcy and they are going intervene in your case to get their problem/objection dealt with.

An adversary proceeding can be brought by just about anyone.   A debtor, a creditor, or even the bankruptcy trustee who is tasked with looking for things like fraud in a bankruptcy case. Almost anyone can file one if they have a legal claim against the debtor or his property.

An adversary proceeding most often happens when someone is intervening in the bankruptcy case to say that some debt is not dischargeable.  Allegations of fraud are the most common reason to file one of these.  Creditors or the trustee himself can file an adversary to challenge the dischargeability of some debt if fraud is suspected.  These are the cases filed under the “exceptions to discharge” under 11 USC § 523(a)(2) of the bankruptcy code.  In addition to fraud, but less often, misrepresentation, false pretenses or other allegations can be pleaded in these cases.

The fraud cases usually come down when a credit card company files an adversary challenging a large charge made on one of your credit cards prior to filing.  These same companies can also object to a large cash advance taken out on a card especially if the cash advance is taken out at a gambling casino.  (I have had a number of these cases over the years as this is more common than one might suspect).

There can be other larger allegations of fraud that can allege fraud over some asset like real estate.  These cases can reach into the millions.  If you find that an adversary was filed against you for very large debt then it is even more important to contact an attorney right away to protect your rights.  With all of these cases is the other side wins then the debt they are challenging will be deemed not discharged in bankruptcy and you will still owe it when the bankruptcy case is finished.  This tends to defeat the whole point of bankruptcy and therefore these cases must be dealt with quickly and correctly.

If it is the trustee who is trying to recover property for the bankruptcy estate (property that was transferred out of the estate prior to filing) then he would file an adversary action alleging fraudulent transfer.  In that case he would go after the recipient of the property which could be a problem if it is a relative or friend of the debtor.  (See here for more on fraudulent transfer).

Other reasons for adversary proceedings would be when a creditor believes a bankruptcy was filed in bad faith.  A debtor can also file an adversary proceeding against a creditor for violations of the bankruptcy automatic stay when a creditor attempts to collect a debt which he cannot because of the bankruptcy.  There are adversary proceedings filed by the debtor’s attorney to strip off second mortgages.

There are numerous reasons for adversary but contact a bankruptcy attorney right away if you get one filed against you.  There are distinct timelines to respond to one of these and definite procedures for doing so.

I am bankruptcy attorney in San Diego who handles adversary proceedings for both settlement and trial.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com for more info. about any of these topics.  Or call my office for a free consultation at (619) 702-5015.  Call now for free credit report and analysis!

For a free e-book: “13 THINGS YOU SHOULD DO TO PREPARE FOR YOUR BANKRUPTCY FILING” please send a request by e-mail to: farquharesq@yahoo.com.

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Go ahead and file bankruptcy! What are you waiting for? Those debts don’t get any better with age!

Debts are not like wine.  They get much worse with age.  All sorts of fees, penalties, attorney costs, and other costs get added to them including interest.  The total amount owed can double or even triple in size.  As time goes on even more and more money is owed to these creditors.

The creditors will not go away either.  This is something that I continually warn my clients about.  They will continue to sell you debt and increase it as it goes.  Debt collection is one of the biggest industries in this country because it is so profitable.  It is also the one that is complained about the most to government agencies because of alleged abusive practices.

Collection agents are not nice people as you may have experiences first hand.  They don’t care what you problems or limitations are.  You may be on your death-bed or so disabled that you are completely unable to work.  When you tell the collectors that they will not care in the least and they will just demand that you pay them unreasonably high payments.  They will tell you to go borrow the money.  They have told disabled clients of mine just to pay immediately or they will sue them.

If one agency gives up on you then they will sell it to another and another.  They will never go away and always come after you.  They will ring you phone hundreds of times a day.  They will fill your mailbox with bills.

Eventually they will sue you in court.  You probably will not go to court or answer (most people don’t) and they will get a default judgment against you.  Now they can collect anytime they want.  They can lien homes, garnish wages, take your bank accounts or even get you into court for a debtor’s exam.  All of these things are bad, unpleasant and to be avoided.

Bankruptcy can end all this nonsense though and it is the only way I know to get out of these debts short of paying these people.  If you don’t have the money then paying is out of the question and that only leaves bankruptcy.  It may be time to admit this fact and begin to look into filing.  Bankruptcy will stop all collection efforts and stop these collectors from calling or suing or garnishing or liening or taking any other action to collect your debt.  (See here for additional reasons for why you should file for bankruptcy).

After your discharge you no longer owe the debt.  It’s a wonderful happy feeling on that day.  So think about it, call a bankruptcy attorney, and begin considering the real possibility of escaping your debts before they drown you.

Please visit my website for more blogs and really good bankruptcy information at www.farquharlaw.com or www.freshstartsandiego.com.   Or call my office for a free consultation at (619) 702-5015.  For my e-book, 13 things you should do to prepare for bankruptcy, e-mail me at farquharesq@yahoo.com.