The Short Answer
An adversary proceeding is essentially a lawsuit filed inside your bankruptcy case — most often by a creditor who wants the court to rule that a specific debt shouldn't be discharged. After the lawsuit is filed, a federal bankruptcy judge hears arguments from both sides and decides whether the debt survives your bankruptcy. If the judge rules against you, you'll still owe that debt even after your other debts are discharged. Adversary proceedings are rare, but when they happen, the outcome almost always turns on the specific facts of your situation.
You may have heard your bankruptcy attorney mention the threat or possibility of an adversary proceeding. Essentially, an adversary proceeding is a lawsuit usually filed within your bankruptcy while your bankruptcy is active. Sometimes, a bankruptcy case can be reopened after it is closed for the purpose of filing an adversary proceeding. While adversary proceedings are rare, they do occur in some cases.
Creditors who believe that they have a strong basis for an argument that certain debts in your bankruptcy should not be discharged usually file adversary proceedings. In other words, the creditor files a new lawsuit within your bankruptcy, asking for the Judge to determine that certain (or in some cases, all) debts should not be discharged in the bankruptcy.
After the lawsuit is filed, the court holds a hearing for the creditor(s) and the debtor to make arguments as to why the debt(s) should or should not be discharged in the bankruptcy. This hearing is held in a federal courtroom in front of the bankruptcy Judge assigned to your initial bankruptcy case.
The attorney who filed your bankruptcy petition may or may not represent you in the adversary proceeding. You have the choice to hire the attorney who filed your petition or to find a different attorney to represent you in the adversary proceeding. Along the same lines, in most cases your initial bankruptcy attorney has the option to not represent you in the adversary proceeding. The reason for this is that the adversary proceeding is considered to be a new, separate proceeding within your initial bankruptcy case.
If the Judge determines, based on the arguments presented, that the debt(s) at issue should not be discharged in bankruptcy, then you will be responsible for those debts even upon the discharge of your other debts in the bankruptcy.
Your attorney will contact you if an adversary proceeding becomes a possibility in your case. You will need to assist your attorney in preparing for the defense of the adversary proceeding, because you know the facts of your case better than anyone, and the outcome of an adversary proceeding usually depends on the specific facts of the case.
Key Takeaways
- An adversary proceeding is a separate lawsuit filed within your bankruptcy case, typically by a creditor challenging whether a debt can be discharged.
- The hearing takes place in a federal courtroom before the bankruptcy judge assigned to your original case.
- Your original bankruptcy attorney may or may not represent you in the adversary proceeding — it is treated as a new, separate legal matter, and you have the right to choose different counsel.
- If the judge rules that a debt should not be discharged, you remain personally responsible for that debt even after the rest of your bankruptcy is resolved.
- Because the outcome depends heavily on the specific facts of your case, you will need to work closely with your attorney and provide as much detail as possible.
- In some situations, a bankruptcy case can even be reopened after it closes specifically to allow an adversary proceeding to be filed.
Attorney Insight
The mistake I see most often is debtors who are blindsided by an adversary proceeding because they weren't upfront with their attorney about the full history of a debt — things like recent large cash advances, balance transfers right before filing, or a loan from someone they had a personal dispute with. Creditors who file adversary proceedings have usually already done their homework, and they're looking for exactly those kinds of facts. In nearly 30 years of practice, I've found that the cases we successfully defend are almost always the ones where the client told us everything from the start — the uncomfortable details included. If your attorney knows the whole story before the creditor files, we have time to build a real defense; if we find out at the hearing, we're already behind.
