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Contested Matters And Adversary Proceedings — How Are Bankruptcy Disputes Resolved?
Dolores Rice
Many bankruptcy cases proceed through the court system without extra complications. However, some include issues that need to be settled by a bankruptcy court judge. What kinds of issues might need to be resolved? And can they be resolved through a contested matter hearing or an adversary proceeding?
Here's what you need to know to defend your bankruptcy case.
When Is a Hearing Necessary?
The federal bankruptcy rules and state regulations seek to provide enough detail to ensure a fair and smooth bankruptcy case. But no law can cover absolutely every situation. This is where an additional hearing may be necessary so a judge can interpret the law and give direction to all parties.
The most common hearings are challenges to the dischargeability of a particular debt, often through accusations of fraud or the type of debt involved. The trustee may also seek the reversal of an improper pre-bankruptcy payment or transfer of assets. The debtor might even ask for a hearing to dismiss a lien, change their bankruptcy terms, or force a creditor to stop violating the automatic stay.
What is a Contested Matter?
These legal contests come in two main varieties. Relatively simple matters may be resolved through a contested matter hearing. This usually involves little additional evidence and may include time for the two parties to come to an agreement on their own.
Contested matters include things like getting an exemption from the automatic stay, modifying a payment plan, objecting to a creditor's claim, or converting a case to a different chapter.
What Is an Adversary Proceeding?
More complex issues call for an adversary proceeding. This proceeds much like a standard civil trial, including multiple stages and the process of discovery.
What might generate an adversary proceeding? Some of the most common issues are determining the dischargeability of an unusual debt, clawing back assets after transfer, prioritizing certain debts, revoking discharge or confirmation of debt, and clarifying property rights.
Because it's basically a form of civil lawsuit, an adversary proceeding is also used to settle what would normally be settled in a state court — if not for the related bankruptcy. For instance, if a potential creditor needs to sue the debtor about payment, this may be heard in bankruptcy court rather than another venue.
Where Can You Learn More?
These additional court hearings and suits complicate any bankruptcy. Sometimes, they may be avoided. But they may also be a necessary part of your case. Contact a local bankruptcy lawyer to learn more.
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