Definition

• An adversary proceeding is a lawsuit inside a lawsuit, a motion filed during your bankruptcy proceeding to ask the judge to decide an issue. Most often, a creditor will file an adversary proceeding. Occasionally, your trustee might do it if he feels there is some fundamental flaw in your case. Even the debtor can file an adversary proceeding, usually against a creditor for violating the automatic stay that prevents any action to collect money after the petition is filed. Because federal law governs bankruptcy, any party that files an adversary proceeding must do it in federal court.
  
  

Causes

• Some rules of bankruptcy apply before you even file your petition. For example, you can't show preferential treatment to anyone you owe money to. You can't pay one creditor off, then file for bankruptcy three months later so that particular creditor emerges whole. You can't decide you're going to file for bankruptcy protection in three months, then go on a spending spree with your credit cards, knowing you're not going to pay the debts. If you do anything of this nature, the trustee or one of your creditors will likely file an adversary suit. Certain debts are not dischargeable in the first place, such as alimony or child support. If you list alimony or child support as a debt you want to erase, the trustee, your ex-spouse or your child's other parent will most likely file an adversary proceeding to stop you.
  
  

Procedure

• If someone files an adversary proceeding during your bankruptcy, it initially takes the form of a written complaint. You have the right to answer the complaint in writing. The judge then schedules a court date for everyone to argue their cases in front of him. At the hearing, you or your attorney must prove you didn't do what the trustee or the creditor say you've done. If you filed the proceeding against a creditor, they're attorney will argue that they didn't do what you're accusing them of. Ultimately, it comes down to the opinion of the judge and the strength of the evidence offered.
  
  

Outcome

• An adversary proceeding only ends your bankruptcy proceeding if the trustee or a creditor proves that you did something in bad faith, usually by trying to conceal assets or by committing some other type of fraud. Generally, the issue that prompted the motion is resolved by the judge and your bankruptcy moves forward from there. For example, if you paid a creditor in the months preceding your petition, the judge would most likely order that creditor to give the money back so the trustee can apportion it more fairly among all your creditors. If you ran up bills just before you filed, the judge would probably rule that those debts aren't dischargeable and you'd have to pay them back.