It is wholly possible to have a bankruptcy case run from start to finish without the need for an adversary proceeding. While people may feel guilty or even like a criminal in applying for relief, a legal bankruptcy order can be resolved relatively amicably between debtors and creditors.
However, parties do not always play by the rules, so to speak. In this event, an adversary proceeding may be necessary to be brought before the court, and at that, according to a new set of rules: The Federal Rules of Bankruptcy Procedure (FRBP).
Part VII of the FRBP tries to ensure that legal bankruptcy standards are upheld when a more contentious situation develops between debtors and creditors. What does an adversary proceeding entail exactly? The following are general considerations of how adversary proceedings aim to uphold legal bankruptcy procedure:
Though the likelihood of an adversary proceeding in most bankruptcy court cases is unlikely, it does happen. Despite the shift in tone from normal bankruptcy court proceedings, as an adversary proceeding is still almost always heard in a bankruptcy court, structurally it mostly resembles a civil court case. Indeed, there are certain recurring elements between both setups. For one, the familiar plaintiff-defendant binary is carried over to adversary proceedings, and once again, it is likely that the debtor will be the defendant.
Nonetheless, there are circumstances by which the debtor may file a complaint with the clerk of court, a creditor will be summoned to appear before the bankruptcy court, and the creditor must submit a formal answer to the debtor’s allegation(s). Additionally, in some cases a request for a trial by jury may be made with the court, which is permitted in the Federal legal bankruptcy standards.
It should be noted that an adversary proceeding is a different entity than the concept of a “contested matter.” Granted, the two are not radically different from one another. Nonetheless, the latter is significantly more common than the former and involves the filing of a motion (which usually does not come with a fee attached) rather than the submission of a complaint.