The Bankruptcy Code and the Federal Rules of Bankruptcy Procedure make strong distinctions between a bankruptcy “case” (a petition for relief filed under a particular chapter of the Bankruptcy Code), and an adversary proceeding arising within a bankruptcy case. The term “adversary proceeding” as used in the Bankruptcy Code and the Bankruptcy Rules is broad and encompasses matters raised by motion, complaint, and otherwise.

Adversary proceedings generally include causes of action that either are created by the Bankruptcy Code or that relate to the administration of a bankruptcy estate.

Examples of adversary proceedings include objections to confirmation of a plan of reorganization, and objections to discharge, or the dischargeability of certain debts (a case typically brought by a creditor). Adversary proceedings also include claims asserted by the bankruptcy estate against third parties, motions seeking to obtain possession of certain property belonging to the estate, and the determination of the extent and validity of liens.

Between debtor and creditors: Disputes attributed to bankruptcy are common. However, the court determines such cases based on the relationship of the matter to the bankruptcy issue. The issues are divided into core issues and non-core matters.

  • Core issues: the bankruptcy case determines the core issues, such as the litigation touching on the debtor’s right to keep the property under dispute, yet it is under bankruptcy exemption. The judge in the bankruptcy case is left to make a ruling.
  • Non-core issues: they are disputes that would have still existed without the involved parties filing a bankruptcy lawsuit. For example, tax litigation. In such cases, the judge is restricted to making recommendations to a Michigan federal district court.

On the other hand, the dispute between the debtor and the creditors can yield various conditions. One of the dominant factors is the dischargeability of debts. Some debts will remain despite the bankruptcy. Thus, it might require either the debtor or the creditor to ask the court to make a ruling on whether the debt will continue to exist despite the bankruptcy lawsuit. If the court issues a discharge, the creditors or the debtors are not obligated to pay the debt

On the contrary, a creditor can file a lawsuit against the debtor if they believe that the debtor has defrauded them or the court. Such disputes are directed at protecting the rule of law, especially when there is evidence that the debtor filed for bankruptcy to escape payment obligations. In another case scenario, the debtor also files a lawsuit demanding the creditor to show proof that they are indeed bankrupt. Proof of claim is a necessity for supporting the prerogative that the creditor cannot make the payment they owe. For example, medical bills, credit card debt or past-due utility bills.

Between the debtor and trustees: The creditor can also file a lawsuit challenging the debtor’s right to be discharged from making payments. Bankruptcy frauds are common when the debtor does not want to make the payments their clients demand. Bankruptcy fraud can be detected when the debtor fails to list a property they own when filing a bankruptcy claim.

Then again, the trustee can take legal direction against a debtor with the right to keep an exempted property. However, the debtor can file for a counter lawsuit to protect the exempted property from being sold to compensate the trustees.

Between trustee, creditors or the interested parties: Some bankruptcy disputes lead to the involved parties exercising their legal powers to protect their investments. For examples, the trustees can resort to using their powers to take the debtors assets — for instance, request for a refund on money sent to the creditor before filing for bankruptcy. The trustee is assured that the money was never spent or it was the creditor’s technique to defraud them.

Our attorney can help you with avoiding committing bankruptcy fraud. It is advisable to be transparent when disclosing any financial details for examples, including all the data on property, creditor, and income sources. You should work closely with an attorney when making a fraud claim. Debtors rarely face fraud accusations because they are alert that a creditor or trustee can raise the applications at any point. Therefore, make use of our skilled attorneys before filing bankruptcy claims.

Issues in Bankruptcy Restructuring & Reorganization

Individuals and institutions require taking action to prevent the need to file for a bankruptcy claim. The involved party restructures its debt levels to avoid overspending or mismanagement of funds and assets. Even though the bankruptcy restructuring is a complex discipline, the services of an experienced attorney can help with developing a suitable plan.

A company can file for a court-supervised restructuring for protection from creditors who would like to retrieve their funds before the process is complete. Most troubled companies will opt for the out-o-court restricting and reorganization where they settle the matter with their creditors. More so, some companies fail in restricting and reorganization strategies because of the competing interests. The debtors are at a high risk because they hold the problems of other involved parties. On the other hand, an attorney who is representing the creditor attempts to recover as much debt as possible.

The services of our attorneys are critical in representing your best interests during bankruptcy restricting and reorganization. Our attorneys will analyze your unique situation to find the root cause that leads to bankruptcy and then conduct a feasibility plan for avoiding it. The red flags are usually present, and they require an experienced person to address them.

Our law firm works with your financial advisor to come up with the best model. The negotiation with the creditors is also critical to make sure that you do not offer a promise that will endanger the recovery of the organization. In case the talks are successful, the attorney will help with structuring a payment plan for each of the individual creditors.

A court-supervised restructuring for debtors will also require the intervention of an attorney. Communication plan is critical in addressing the issue, especially when discussing the employees, shareholders and clients. Besides, the entire process requires documentation as a gesture of respecting the law.

Our law firm is ready to handle all your insurance and bankruptcy-related cases. The attorneys of John R. Foley, P.C. have experience in representing creditors, debtors, third-parties, and trustees in adversary proceedings. Our attorneys have an in depth knowledge of the bankruptcy litigation process, having represented not only debtors, creditors, and third-party defendants, but also having represented Trustees in the administration of estates, and the pursuit of adversary claims on behalf of the Bankruptcy Estate.