An adversary proceeding in bankruptcy is a type of
lawsuit
-
A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil actio ...
in the
American legal system. It is distinguished from other suits by being filed a
United States bankruptcy court in connection with a larger
bankruptcy proceeding
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...
.
Procedure
Adversary proceedings are governed by certain court rules found in Part VII of the
Federal Rules of Bankruptcy Procedure and, in part, by the
Federal Rules of Civil Procedure
The Federal Rules of Civil Procedure (officially abbreviated Fed. R. Civ. P.; colloquially FRCP) govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enabling ...
. A bankruptcy case may contain one or more adversary proceedings or (most commonly) none at all.
Other than their connection to a bankruptcy proceeding, adversary proceedings are largely similar to a standard lawsuit in federal district court. The suit is opened by a
complaint
In legal terminology, a complaint is any formal legal document that sets out the facts and legal reasons (see: cause of action) that the filing party or parties (the plaintiff(s)) believes are sufficient to support a claim against the party ...
filed with the Bankruptcy Court, and proceeds through the same stages of litigation, including
discovery and
trial (including
jury trial in appropriate cases). The adversary proceeding may address claims to do with
federal or
state law State law refers to the law of a federated state, as distinguished from the law of the federation of which it is a part. It is used when the constituent components of a federation are themselves called states. Federations made up of provinces, cant ...
, or in rare cases other law, as well. The only limitation is that the suit must have some bearing on the liabilities or assets of the bankrupt debtor or the debtor's discharge.
Adversary proceedings may be filed by the bankruptcy trustee or by other parties. For example, a creditor may file an adversary proceeding to object to the debtor's
discharge
Discharge may refer to
Expel or let go
* Discharge, the act of firing a gun
* Discharge, or termination of employment, the end of an employee's duration with an employer
* Military discharge, the release of a member of the armed forces from serv ...
. Or, a debtor may commence an adversary proceeding against a creditor as a response to a violation of the
automatic stay. Very commonly, the debtor-in-possession in a
Chapter 11 reorganization of a business debtor will initiate adversary proceedings against a party with whom the debtor had an
executory contract An executory contract is a contract that has not yet been fully performed or fully executed. It is a contract in which both sides still have important performance remaining. However, an obligation to pay money, even if such obligation is material, d ...
, against whom it had a claim in
tort, or to whom it made a
preferential transfer prior to filing for bankruptcy, intending to collect funds to maximize working assets.
An adversary proceeding is more formal than a
contested matter. A contested matter in bankruptcy is governed by Rul
9014of the Federal Rules of Bankruptcy Procedure.
A debtor can attempt to discharge student loans through bankruptcy by use of the adversary proceeding.
["Bankrupt your student loans and other discharge strategies," by Chuck Stewart, Ph.D., . June 2006.]
See also
*
Bankruptcy in the United States
In the United States, bankruptcy is largely governed by federal law, commonly referred to as the "Bankruptcy Code" ("Code"). The United States Constitution (Article 1, Section 8, Clause 4) authorizes Congress to enact "uniform Laws on the sub ...
References
External links
Mobile-friendly edition of the Federal Rules of Bankruptcy Procedure(www.federalrulesofbankruptcyprocedure.org)
{{US-law-stub
United States bankruptcy law
Lawsuits