Cases can be deceiving and sometimes even what appears to be a straight forward Chapter 7 consumer bankruptcy filing results in what's called an adversarial proceeding. This is just a unique name given to a federal lawsuit filed within a pending bankruptcy proceeding. Bankruptcy Rule 7001 sets forth what is an adversarial proceeding and lays the framework for litigating such matters in the bankruptcy court. Examples of adversary proceedings include objections to discharge; determination of the validity, priority, or extent of a lien or interest in property of the estate; actions to recover property of the estate; and proceedings to sell property in which the debtor is only a part owner.
Section 523 complaint.
Many of times a creditor will file a complaint to contest the dischargeability of its debt by the debtor. This type of adversary proceedings is encountered when the credit card companies, banks and other lenders review the debtors' petitions and credit usage histories and determine that the debtor obtained and or used the debt by way of any fraudulent or improper means. When the creditor files an adversarial proceeding of this type it is commonly referred to as 523 complaint. A 523 complaint is simply legalese for a complaint filed under section 523 of the bankruptcy code. Under section 523 a creditor can contest the dischargeability of a particular debt that was incurred through false pretenses, fraud, use of false financial statements, embezzlement, or larceny. Section 523 adversarial proceedings are easier to settle because they do not require the court's approval of any potential settlements as do in a section 727.
Section 727 complaint.
Sometimes a creditor will file a complaint under section 727, which allows an interested party to contest the entire discharge for intentional concealment, transfer or destruction of property; unjustified failure to keep books and records; dishonesty in connection with the bankruptcy code; or failure to explain loss of assets. If a trustee has reason to believe that a debtor is concealing or hiding assets the trustee will bring an adversary proceeding under this section.
The lawsuit/adversary proceeding is initiated by a creditor or trustee drafting a complaint. That complaint will set forth the facts and allegations which the plaintiff believes are in violation of the bankruptcy code and which entitle the plaintiff to relief against the debtor. Once the court receives the adversary proceeding it will assign the complaint a case number which is different from the underlying bankruptcy case number. The party filing the adversary proceeding it called the plaintiff and the party defending the suit is called a "debtor" or "defendant."
Once your adversarial proceeding has been initiated the Federal Rules of Civil Procedure apply to adversary proceedings. Navigating these rules requires knowledge and experience with bankruptcy proceedings and Federal Bankruptcy Rules 9001 et. Seq
There is a point in your bankruptcy case where you can breathe easy! Creditors have a limited time in which to file objections in your bankruptcy case. This is commonly referred to as the "the bar date" which is 60 days from the date set for the first scheduled meeting of creditors. This is bar date is set out in Bankruptcy Rules 4004 and 4007. It is called the "bar date" because failure by a creditor to timely file a dischargeability adversary proceeding by the bar date will forever bar the creditor from objecting to discharge.
The New Jersey personal bankruptcy attorneys at Riviere Cresci & Singer LLC can answer any questions you may have concerning bankruptcy. If you live in New Jersey, including Toms River, Eatontown, Forked River and Brick Township call us for a free consultation to find out how we can help you.