Adversary Actions In Bankruptcy

Posted: Jan 31, 2019

By: Washington State Business and Bankruptcy Lawyer Jonathan P. McQuade

As a creditor, it can be immensely frustrating when a debtor files for bankruptcy protection.  Even after filing your “proof of claim” evidencing the debt owing to you, in most cases, that debt will be forever discharged – e.g., wiped out – and you’ll receive little to no payment.   From a layman’s perspective, it may feel “fraudulent” that the debtor avoided your debt especially in cases where the debtor promised over and over that he or she would pay you.  Those promises – whether orally or by contract – typically do not warrant additional legal action in bankruptcy.  In certain specific instances, however, there is a legal basis to file an “adversary action” that, if successful, avoids the discharge of your debt, and allows you to pursue your claim against the debtor:

  • The debtor used fraud or false pretenses or made a false statement about his or her financial condition in obtaining the debt.
  • In issuing credit, the creditor relied on a false written statement about the debtor’s financial condition, which was made with the intent to deceive the creditor.
  • The debt involved purchase of luxury goods or services worth more than $675 in aggregate during the 90-day period prior to filing of the bankruptcy.
  • The debt arose from a cash advance or series of cash advances totaling more than $950 and was incurred within the 70-day period prior to the bankruptcy filing.
  • The debt was incurred on account of the debtor engaging in fraud while acting as a fiduciary, embezzlement, or larceny.
  • The debt resulted from the debtor causing willful and malicious injury to another person or another person’s property.

If you are a bankruptcy creditor and would like our experienced bankruptcy attorneys to analyze your claim, and whether an adversary action is a reasonable option, we would be happy to assist.

Beresford Booth PLLC (425.776.4100),

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