An Adversary Proceeding is essentially a lawsuit within a bankruptcy case. A creditor or a Trustee may file adversary proceedings against a Debtor.
Here, an adversary proceeding begins with the filing of an adversary complaint alleging improper or wrongful conduct by the Debtor or someone connected to the debtor. The adversary complaint begins a separate “sub case” in the main bankruptcy case.
Although there are many types of adversary complaints that may be filed in a bankruptcy case, some of the common ones include:
- Complaint to deny the debtor’s discharge
- Complaint alleging a preference
- A fraudulent transfer of assets
- and/or a complaint alleging a preference payment (an improper payment to a creditor)
Just as in other litigation matters, a Debtor must defend against the adversary complaint filed or a default judgment may be entered to the detriment of the Debtor.