Adversary Proceeding


From: Cale
Date: March 18, 2013


Contested Matters in Bankruptcy Court

A bankruptcy discharge typically provides that all of debtor’s debts, except those listed in the order or exempt by law, are discharged. From a practical standpoint, that means there are numerous debts that survive a bankruptcy discharge. Some of these debts may include child support, alimony or other Domestic Support Obligations, many Tax debts, student loans and some debts procured by fraud.

In some situations, a debtor may file an adversary proceeding to seek an order from the Court to have certain debts specifically declared dischargeable. Tax debts are a good example of this. Since the statute relating to tax debts is self-authenticating, debtors who don’t seek guidance from the court often find themselves in a disagreement with taxing authorities after bankruptcy with respect to whether their tax debts were discharged in their bankruptcy.

In connection with debts related to divorce, child support is not dischargeable in bankruptcy, though an arrearage of back child support may sometimes be repaid in a Chapter 13 plan. Generally, debts between spouses listed in a divorce decree are automatically excluded from both a Chapter 7 and Chapter 13 discharge, unless the debtor files an adversary proceeding seeking to have the bankruptcy judge rule on their dischargeability after a contested hearing. This is the case even if the debt is identified as a "property division", unless the debtor can convince the judge it should be discharged.

Other debts, including those procured by fraud, are automatically discharged in bankruptcy, unless the relevant creditor files and prosecutes an adversary and establishes that the debtor committed fraud in connection with the debt. (For other debts that can be exempted from a discharge, see 11 U.S.C. 523). If there is no such formal allegation that a debt is nondischargeable as a result of fraud via an adversary, the debt is discharged, along with the debtor’s other consumer debts.

Once an adversary proceeding is commenced, the case commences much like any other civil law suit. Discovery proceeds in accordance with applicable Discovery rules, and the Bankruptcy Court renders a judgment after a hearing on the merits of the case (typically in a non-jury setting). The result is appealable to the Federal District Court.
Adversaries are typically complex matters that require more effort than the typical bankruptcy filing. If you have a debt that should be the subject of an adversary, contact an experienced bankruptcy attorney today to discuss your options.