In this article, you can discover:
- The common types of adversary cases in bankruptcy proceedings,
- How fraudulent transfer actions and preference actions differ, and
- The importance of treating creditors fairly and equitably in bankruptcy cases.
What Are The Different Types Of Adversary Cases In Bankruptcy?
Adversary cases in bankruptcy typically fall into five common types:
- Dischargeability of Debt: This involves determining if a specific debt should be wiped out by the bankruptcy. For example, if someone spent a lot of money just before filing for bankruptcy, the court may decide that debt should not be discharged.
- Objections to Discharge: In some situations when there is fraud or illegal activity in the bankruptcy case itself, creditors or the trustee can object to discharge of all debts in the case. This type of objection to discharge generally alleges that the debtor hid or wrongfully transferred property or assets prior to filing for bankruptcy.
- Fraudulent Transfer Actions: These actions involve transferring an asset out of your name and into someone else’s, often with the assumption that it was done to hide the asset from the court and creditors. It’s called fraudulent transfer, even if no fraud was intended.
- Preference Actions: Bankruptcy code aims to balance the interests of debtors and creditors. Preference actions address cases where a debtor has favored one creditor over another, violating the principle of equal treatment for creditors.
- Debtor Adversary Proceedings: These cases involve a debtor going after a creditor or party in interest for issues such as violations of the automatic stay or when someone owes the estate money.
How Do Fraudulent Transfer Actions Differ From Preference Actions?
Fraudulent transfer actions involve transferring an asset to someone else, potentially to hide it from creditors, whereas preference actions involve favoring one creditor over another in debt repayment.
Why Is It Important To Treat Creditors Fairly And Equitably In Bankruptcy Cases?
Treating creditors fairly and equitably ensures that the bankruptcy process is balanced and that creditors of a specific type are all treated the same, in accordance with the bankruptcy code.