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What happens at an adversary hearing during bankruptcy?

In bankruptcy, the parties involved can disagree and file complaints

When creditors, bankruptcy trustees or debtors have disputes about the dischargeability of certain debts - or the protection of certain assets - an adversary proceeding may result. Either side can file a complaint against the other in Bankruptcy Court for a variety of reasons:

  • A creditor may argue that a debt owed should not be discharged in bankruptcy due to one of the exceptions such as fraud, willful injury, or that the transaction was conducted in bad faith
  • The bankruptcy trustee may argue that schedules were filed improperly, or they were intentionally filled-out in bad faith. Here, there may be an attempt to recover funds or property
  • A bankruptcy filer may file an adversary proceeding against a creditor to recover damages for an automatic stay violation

When creditors are ordered to stop, they have options

Not only will a creditor file an adversary proceeding to argue a specific debt should not be discharged, but creditors can also request that the bankruptcy judge lifts an automatic stay.

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