Sometimes after you file for bankruptcy, a dispute arises concerning a debt you included in the bankruptcy. If this happens, you, the creditor, the trustee, or some other interested party must file a separate case in the bankruptcy court, called an "adversary proceeding."
Read on to learn what types of disputes must be filed as adversary proceedings, when a dispute is not an adversary proceeding, how to file an adversary proceeding, and more.
Rule 7001 of the Federal Rules of Bankruptcy Procedure has a non-exhaustive list of disputes that must be filed as adversary proceedings. Those include:
Not every lawsuit is filed as an adversary proceeding. Bankruptcy judges can only rule on issues that are “related to” the bankruptcy (called “core proceedings”). So, for example, a bankruptcy judge cannot grant a married couple a divorce, even when the couple has debts and assets that are part of the bankruptcy case.
Likewise, not all disputes within the bankruptcy are filed as adversary proceedings. Some disputes are called “contested matters” and are not filed as separate lawsuits. An objection to a proof of claim and an objection to a claim of exemption are examples of contested matters that are not adversary proceedings.
Debtors are most likely to face an adversary complaint if a creditor wants to challenge the dischargeability of a debt. If a creditor contests the discharge of a debt based on fraud, or because it believes the debt was caused by a willful and malicious injury, it must file an adversary proceeding within 60 days after the first meeting of creditors.
(To learn more about nondischargeable debts, see Debts That Cannot Be Discharged in Bankruptcy. To learn about creditor challenges to the dischargeability of credit card debt, see Prebankruptcy Credit Card Charges: Legal v. Fraud.)
Specific rules apply to adversary proceedings to ensure that issues are tried quickly and fairly. To start an adversary procedure, the creditor or debtor must file an adversary complaint and pay a filing fee (the fee is waived if filed by the debtor). The clerk of the bankruptcy court assigns a separate case number to the adversary proceeding and issues the summons which must be served within 120 days of filing the complaint.
The defendant in the adversary proceeding has an opportunity to respond to the complaint, either by filing an answer or a motion (for example, a motion to dismiss the complaint). If the defendant does not file a responsive pleading, the bankruptcy court can enter a default judgment against the defendant. If an answer is filed, the court will hold a trial with testimony and exhibits offered as evidence.