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), www.beresfordlaw.com.

BERESFORD BOOTH PLLC has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.

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