Adversary proceedings are lawsuits filed during a bankruptcy< case by either the creditor, trustee or debtor. The types of adversary proceedings that can be filed are listed in Rule 7001 of the Federal Rules for Bankruptcy Procedure and include excepting debts from discharge, discharging student loan debts, protecting debtor discharges and recovering fraudulently transferred assets.
When a creditor files an adversary proceeding, it is usually to prevent the debtor from discharging a debt. One of the more common adversary proceedings filed by creditors is requesting to prevent a discharge for borrowed money that the debtor does not intend to repay, such as credit cards maxed out just before filing bankruptcy.
When trustees file adversary proceedings, often the reasoning is fraudulent transfer of assets. If, for example, the debtor were to gift a substantial amount of money to a friend or relative before filing for bankruptcy, the trustee might file an adversary proceeding in order to get that money back.
The debtor can also file adversary proceedings. Usually, this is done to protect bankruptcy discharges or to determine whether a debt can be discharged. Student loans are a common subject of debtor-filed adversary proceedings. These can be difficult to get discharged, but it is not impossible. It may require expert testimony from doctors or psychologists to prove a serious physical or mental health problem that precludes the possibility of student loan repayment.
However, filing an adversary proceeding for student loans gives the debtor leverage to negotiate a potential settlement with the student loan lender. The Sader Law Firm successfully negotiated a student loan debt from $400,000 to $75,000 in this manner, which case was highlighted in Missouri Lawyers Weekly.
The Sader Law Firm – Kansas City Bankruptcy Attorneys