Adversary Proceedings in Bankruptcy

 Posted on May 05, 2025 in Bankruptcy Procedure

Sometimes issues or disputes arise in bankruptcy that cannot be resolved through the bankruptcy process itself. These disputes, which require a judge's input, may be resolved through an adversary proceeding. This separate lawsuit within the bankruptcy case is a way for interested parties in the bankruptcy to challenge certain actions with which they disagree. For example, a debtor can file an adversary proceeding to object to a creditor’s violations of the automatic stay halting debt collection efforts. A trustee can bring claims against a debtor objecting to fraudulent transfers of assets, or the trustee may object to the dischargeability of a debt. Creditors can also file an adversary proceeding to object to the discharge of a debt, and for other reasons, as we will discuss below. An experienced Kerrville, TX bankruptcy attorney can represent you in an adversary proceeding in bankruptcy. 

What Is an Adversary Proceeding?

Simply put, an adversary proceeding is a lawsuit that is part of a bankruptcy case. Like it sounds, it is a way for adversaries to fight it out in bankruptcy court.

The main bankruptcy case involves a debtor and the creditors of that debtor. The bankruptcy court clerk assigns each case a case number. In an adversary proceeding, as in most lawsuits, a plaintiff files a complaint against a defendant. The debtor in the bankruptcy case can be either a plaintiff or a defendant in the adversary proceeding. The debtor is usually one or the other, but not necessarily, as disputes can arise in a bankruptcy case that do not directly involve the debtor as a party.

An adversary proceeding gets its own case number that is distinct from the bankruptcy case number.

Most consumer bankruptcy cases do not involve an adversary proceeding. That is usually good because most people want a straightforward, uncontentious case. However, adversary proceedings are still quite common and can arise in just about any case. Sometimes an adversary proceeding is the only way for debtors to get what they want. In other cases, these proceedings might be necessary to prevent something that the debtor does not want to happen.

Who Can File an Adversary Proceeding?

There are three categories of people who can file an adversary proceeding:

• Your creditors

• The trustee (the Chapter 7 or 13 Trustee, or U.S. Trustee)

• You, the debtor

There is a technical list of ten different types of adversary proceedings in the Federal Rules of Bankruptcy Procedure Rule (FRBR) 7001. However, it is more practical to look at what particular kind of relief each of the parties listed above would be seeking in an adversary proceeding.

Today, we will begin with discussing possible adversary proceedings brought by creditors against you.

What Is the Adversary Proceeding Procedure?

The adversary proceeding process works similarly to that of other types of civil lawsuits. A creditor will begin an adversary proceeding by drafting and filing a complaint with the court. The complaint will contain all the allegations against the debtor and request that the court grant legally available relief. The creditor will "serve" the complaint or give it to the debtor. The debtor (through his attorney) will then file a response with the court objecting to the complaint. Both parties will then provide evidence to each other. The parties will then either negotiate a settlement or go to trial before the bankruptcy judge. The losing party has a right to appeal. 

What Happens When a Creditor Challenges the Discharge of a Debt?

When a creditor files an adversary proceeding, it is usually about whether its debt should be discharged—legally written off.

Most debts can be discharged in bankruptcy, but there are exceptions. The exceptions include debts created through a debtor’s fraud or misrepresentation, or through "willful and malicious injury" to a person or property.

Even in these types of cases, bankruptcy still discharges the debt unless the creditor files an adversary proceeding. So if the creditor does nothing, the debt is discharged, along with the rest of the dischargeable debts. 

Most consumer bankruptcy cases do NOT have any adversary proceedings. In particular, most do not include any creditor challenges to the discharge of a debt.

What Is the Creditor’s Deadline?

The creditor has a strict deadline to challenge the discharge of certain debts. The creditor must file the adversary proceeding "no later than 60 days after the first date set for the meeting of creditors.  The meeting of creditors is usually about a month after you file your bankruptcy case. So creditors must challenge the discharge of a debt within about three months after the case filing.

This deadline is very strict. If a creditor gets notice of a bankruptcy case but does not object within the allotted timeline, they cannot prevent the debt from being discharged. That is the case even if the debt was actually incurred through misrepresentation or "willful and malicious injury."

Can a Creditor’s Deadline Be Extended?

One exception is if the creditor files a motion asking for an extension of this 60-day deadline. But it has to do so "before the time has expired."

Why would a creditor file such an extension motion? Typically, this happens if they believe there are sufficient grounds to challenge the discharge of the debt but they need more time to prove this. They want to avoid paying the filing fee and attorney fees of litigating an adversary proceeding until they have confirmed that there are reasonable grounds. It can get expensive for a creditor to go through an adversary proceeding. If they cannot convince the bankruptcy court that the debt should not be discharged, the creditor will have wasted all of these additional costs.

What Happens With Attorney Fees If the Challenged Debt is Still Discharged?

There is another reason a consumer creditor may hesitate to challenge the discharge of their debt. If they lose for failing to show valid grounds for denying the debt discharge, they may also have to pay your bankruptcy lawyer’s fees that were charged for defending the adversary proceeding. This may happen if the bankruptcy judge determines that the creditor’s position was not substantially justified.

Do Any Debts NOT Require Adversary Proceedings?

Everything stated above only applies to certain kinds of debts. There are other kinds of debts that do not require the creditor to file an adversary proceeding to avoid discharging the debt. Criminal fines and restitution, taxes that fit certain criteria, and child and spousal support are examples of debts that survive bankruptcy without any action by the creditor.

Can a Creditor Challenge a Fraudulent Transfer?

Another type of adversary proceeding that a creditor may file is an objection to a fraudulent transfer. A fraudulent transfer occurs when a debtor transfers assets (like property, money, or most other assets that could become a part of the bankruptcy case) to someone else within a certain period of time just before the bankruptcy case. The idea is that the debtor is not really giving away that property but temporarily hiding it with someone else to keep it out of the reach of the bankruptcy courts. This fraudulent transfer is unlawful, and a creditor can file an adversary proceeding if it suspects that the debtor made a fraudulent transfer in order to recover those assets. A creditor can also object to the discharge of the debtor’s debts in bankruptcy on the grounds that there was a fraudulent transfer.

Call a Kerrville, TX Bankruptcy Attorney

If you are concerned about whether any of your debts will continue after bankruptcy, discuss it with your lawyer. They can advise you whether a creditor or trustee is likely to bring an adversary proceeding objecting to the discharge of your debt, and represent you in that proceeding or any other before the bankruptcy courts of Texas. At Law Offices of Chance M. McGhee, the experienced Schertz, TX bankruptcy attorney is here to answer any questions you may have. Call our office at 210-342-3400 for a free consultation.