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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Do debt settlement companies have some “new information that credit card companies don’t want you to know”?

No!  They don’t have any secret information.  They don’t have access to some new law and they are not working on your behalf.  I believe that they are in fact working for the credit card companies.  They are acting, in effect, as collection agents for the credit card companies and they collect your money to pay off these big banks which you owe money to.

What the don’t want you to know is that bankruptcy can discharge the full balance of all of your credit cards!

I don’t know if the debt settlement companies are owned and/or financed or controlled by the credit card companies or if the debt settlement companies are actually independent.  All we hear are rumors of control.  But it makes little difference to you as the debt settlement companies are operating as if they were collection agents for the credit card companies.

These debt settlement companies make good money settling your debts by charging you very high fees.  They often want an up front fee, a percentage of what they save you, and you still have to pay off the credit card companies a portion of your original debt.  Check out my earlier blogs to see how expensive this process can be.

Also you are not protected from a lawsuit if one of your credit card companies does not want to wait to get paid by this system.  A credit card company can easily sue you when you are in a debt settlement situation and you will have no protection if they do.  (If you are in bankruptcy they cannot sue you because of the automatic stay).

Remember though that there is no new information that these debt settlement companies have access to that credit card companies don’t want you to know.  The credit card companies in fact want you to settle with them for less than the full balance if you cannot pay them in full.  What they don’t want is for you to file bankruptcy and pay them nothing.

Bankruptcy is probably what you want and need though and information about bankruptcy is what the credit card companies really don’t want you to know.

I am a bankruptcy law practicing bankruptcy law in san diego.  Please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com.  Or call me for a free consultation on debt or bankruptcy.  Call now for a 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.