Adversary Proceeding

During an Arizona bankruptcy case, there are some circumstances that might lead to an adversary proceeding, a trial that is held before the bankruptcy judge to determine matters that affect your bankruptcy case. For example, determining whether an undue hardship exists in the case of student loans, or determining if fraud has been committed in credit card use or other debt discharges. Though not common, an adversary proceeding can be a necessary step in the bankruptcy process.

The bankruptcy court will consider the adversary proceeding separately but along with the bankruptcy filing. While the bankruptcy court might ultimately rule to enter a discharge in the bankruptcy, the issues dealt with in adversary proceedings are not included unless the court also rules on the adversary proceeding.

In the case of bankruptcy that includes student loan debt, recent changes to the law mean that no student loan debt is discharged without proving special circumstances. That means proving that an undue hardship exists so that the debtor cannot now or ever repay the loan. Proving undue hardship goes beyond the standard bankruptcy process. An adversary proceeding must be included to specifically receive a ruling that will discharge the student loan debt.

In the case of credit card charges or other questionable debt, the credit card issuer can contest specific charges or all of the credit card balance. To do that, the card issuer will file an adversary proceeding. If successful, the results of that hearing would exclude the questionable charges from the bankruptcy discharge and the debtor would still be obligated to pay them.

If your bankruptcy case includes an adversary proceeding, it is important to have an experienced bankruptcy lawyer represent you. But even more important, BEFORE filing for bankruptcy you should consult with reputable bankruptcy law firm to help you understand the options available to you in these scenarios before you file for bankruptcy.