An adversary proceeding (AP) is a lawsuit filed separately within the overall bankruptcy case. This type of proceeding, also known as bankruptcy litigation, can be filed by three specific people in the case: The bankruptcy trustee or creditor and the debtor. Even though it’s within the bankruptcy case, it’s essentially a civil lawsuit that will have a separate court hearing. Both sides will have time and resources to research the disputed issues and present their evidence for or against them.

What Does an Adversary Proceeding Do?

You might have noticed the clue in the name: When an “adversary” is involved, there’s a dispute between the lender and the borrower. The debtor can file an AP if they think there’s proof of fraud or violation of state laws in the contracts involved in the debts. The creditor can file an AP if they believe the debtor has engaged in fraud, such as the debtor transferring assets to someone else immediately before filing bankruptcy, or if the debtor built up the debt with the intention of filing bankruptcy. A bankruptcy trustee can file an AP against a creditor or other person to force them to turn over the property being held for the debtor or that the debtor fraudulently transferred before filing bankruptcy or recover money paid to a creditor shortly before the bankruptcy was filed.

Does an Adversary Proceeding Happen in Every Bankruptcy Case?

No. Many bankruptcy cases conclude without an AP being filed by any party. When the filing is straightforward and clear that the debt wasn’t built up with the deliberate intent to file for bankruptcy to avoid paying it, or assets weren’t given away or hidden to keep them from the bankruptcy court, the trustees or creditors have little reason to pursue an AP. If the debtor has no evidence that the creditor behaved fraudulently or violated state laws, they also won’t need to file an AP.

Do I Need a Lawyer for an Adversary Proceeding?

Legally, someone can represent themselves both in bankruptcy and in an AP. However, these are both highly complex areas of law. The creditors and bankruptcy trustees will likely have experienced, knowledgeable attorneys working their sides of the case. For both straightforward bankruptcy and APs, having a specialist on the debtor side of the case can potentially make a massive difference in the outcomes. They will have experience and knowledge, too, and can advise the debtor in ways the debtor may never have considered.

Let Us Advise You

If you or someone you know is working through bankruptcy and either wants to file an AP or has had one filed against them, call us at 708-575-1500 to work with one of our experienced bankruptcy law attorneys. Bankruptcy is complicated to work through, especially if an AP is involved. You don’t have to handle it alone.