Adversary Proceedings occur in Bankruptcy Court typically when a creditor is suing a debtor to have the Court declare a particular debt non-dischargeable. If the plaintiff in the adversary proceeding were to succeed, the debtor would have to pay back the at-issue debt even after a bankruptcy discharge.

One of the most common grounds for a debt to be declared non-dischargeable is on the basis of fraud. There are other grounds, but fraud is the most common.

There are some major banks suing debtor credit card holders in Chapter 7 bankruptcies for fraud under section 523(a)(2)(a). However, because the Supreme Court has made clear that justifiable reliance by the creditor on representations by the debtor is a prerequisite for a claim of fraud, and because there is no such reliance in a credit card transaction, credit card nondischargeability cases brought on this basis should fail. See Field v. Mans., 516 U.S. 59.

Where a creditor’s request to except a consumer debt from discharge under § 523(a)(2)(A) is denied, the court “shall grant a judgment in favor of the debtor” for costs and attorney fees unless the court finds that the creditor’s position was “substantially justified” or such an award would be ”unjust” under the circumstances. 11 USC § 523(d).

The Pedigo Law Corporation has successfully defended two adversary proceedings for fraud. If you or someone you know need help with a Federal Bankruptcy Court Adversary Proceeding, contact us today.