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Simple English definitions for legal terms
adversary proceeding
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A quick definition of adversary proceeding:
An adversary proceeding is a type of legal action that happens when someone declares bankruptcy and their creditors want to prevent certain debts from being forgiven. The creditors can start an adversary proceeding to argue that the debts should not be forgiven because of things like fraud or not disclosing important information. There are also certain types of debts that are automatically not forgiven, like debts for luxury items or fines from the government. An adversary proceeding is a way for the court to decide whether or not these debts should be forgiven.
A more thorough explanation:
An adversary proceeding is a legal action in which two opposing parties resolve a dispute through a neutral third party. In bankruptcy court, an adversary proceeding is a specific type of action that creditors may commence to prevent specific debts from being discharged when a party declares bankruptcy.
For example, if a debtor owes a creditor money and declares bankruptcy, the creditor may commence an adversary proceeding to prevent that debt from being discharged. The creditor may argue that the debt is the result of the debtor's fraud or that the debtor failed to properly disclose information.
Adversary proceedings are governed by Federal Rules of Bankruptcy Procedure Rule 3007 and Rules 7001-7087. These rules outline the procedures for conducting an adversary proceeding and the potential exceptions to bankruptcy discharge that may warrant such a proceeding.
Some examples of debts that may be non-dischargeable and warrant an adversary proceeding include:
- Debts incurred due to fines or penalties imposed by the government
- Debts acquired with the intent to cause willful and malicious injury to another or another's property
- Debts greater than $500 incurred from the purchases of luxury items or services
If a court finds that a debt falls under one of these exceptions, it may refuse to discharge the debt, and an adversary proceeding may be necessary to resolve the dispute.