Bankruptcy Litigation

Bankruptcy litigation refers to the legal disputes that arise within or as a result of a bankruptcy proceeding. This includes actions such as objections to discharge, adversary proceedings, fraudulent transfer claims, and preference actions. Unlike the administrative side of bankruptcy, litigation involves contested issues that must be resolved through the court system.

Any party with a legal interest in the bankruptcy case may become involved in litigation. This includes creditors, debtors, trustees, secured lenders, landlords, equity holders, and even third parties accused of receiving preferential or fraudulent transfers.

An adversary proceeding is a separate lawsuit filed within a bankruptcy case. It typically involves disputes over the dischargeability of debts, recovery of assets, lien priorities, or allegations of fraud. These proceedings follow many of the same rules and procedures as civil litigation.

Yes, but certain rules apply. The automatic stay generally prohibits creditors from pursuing lawsuits outside the bankruptcy court. However, within the bankruptcy process, creditors can file adversary proceedings or seek relief from the stay to protect their rights.

Creditors can challenge a discharge by filing a complaint in an adversary proceeding, often based on fraud, misrepresentation, or willful misconduct by the debtor. If successful, the debt in question will not be discharged, and collection efforts may resume after the case concludes.

A preference action is a lawsuit brought by the bankruptcy trustee to recover payments made to a creditor shortly before the bankruptcy filing. Creditors can defend against these actions by proving the payment was made in the ordinary course of business, was contemporaneous with new value, or qualifies for other statutory defenses.

These claims arise when a debtor is alleged to have transferred assets to a third party to hinder or delay creditors prior to filing for bankruptcy. If proven, the court can void the transfer and order the return of the asset or its value to the bankruptcy estate.

The timeline can vary significantly based on the complexity of the issues, the jurisdiction, and the court’s docket. Some matters may resolve within a few months, while others—especially adversary proceedings—can last a year or more.

Creditors should act early, ensure all documentation is accurate, and work with experienced bankruptcy litigation counsel. Filing timely claims, monitoring debtor actions, and challenging improper conduct can improve recovery and protect long-term interests.

Yes. Bankruptcy litigation involves a unique set of procedural rules and legal principles. Working with an attorney who focuses on creditor rights and bankruptcy litigation ensures that your claims are preserved, defenses are properly raised, and your interests are aggressively protected in court.