Adversary Proceedings Regarding Discharge of Debts
The major goal of a bankruptcy is the discharge of all or some of your debts, thereby giving you a fresh financial start. However, there may be grounds for a creditor or the bankruptcy trustee to object to the discharge of certain debts. This sometimes results in an adversary proceeding, which is a case within the main bankruptcy case.
An adversary proceeding is akin to a lawsuit, filed by a creditor or the trustee against the debtor. It can be used to object to the discharge of a debt on various grounds, such as if the debtor allegedly:
- Obtained credit through fraud or as the result of willful injury
- Damaged, hid or fraudulently transferred property to frustrate creditors or the trustee
- Unjustifiably damaged, hid, forged or failed to preserve financial assets, property or business records
- Made false statements or committed bribery in the course of the bankruptcy proceeding
- Failed to obey lawful orders of the bankruptcy court
- Refused to respond to material questions during the proceeding, other than to avoid self-incrimination
An adversary proceeding can also be brought in a situation where an evidentiary hearing is needed to establish whether a debt might not be dischargeable.
An adversary proceeding begins when the creditor or trustee files a complaint against the debtor, alleging the reasons why the debt isn’t dischargeable. Then comes the discovery phase, in which each party is entitled to request relevant evidence from the other, and the court has the power to enforce a valid request. Next comes a trial, at which the parties present their evidence before the bankruptcy judge. The judge then decides whether or not the debt at issue is dischargeable. If the judge finds that the debtor engaged in fraudulent or bad faith conduct during the bankruptcy, the judge can dismiss the bankruptcy itself.
The outcome of the adversary proceeding can heavily affect the debtor and any creditor who has a valid reason to object to the discharge of their debt. All parties in an adversary proceeding should be represented by bankruptcy counsel who are skilled and experienced in litigating these cases.
The Law Offices of Michael Jay Berger in Beverly Hills is one of southern California’s most experienced bankruptcy law firms, with a record of success in representing debtors and creditors in adversary proceedings. If you need our help with any bankruptcy matter, contact us online or call 310-271-6223 to schedule a consultation.