Two kinds of disputes
Bankruptcy litigation usually takes one of two forms. Contested matters are disputes raised by motion, such as objections to a claim, requests to lift the automatic stay, or challenges to a plan. Adversary proceedings are full lawsuits within the bankruptcy case, used for claims such as recovering preferential or fraudulent transfers, determining whether a debt can be discharged, or resolving lien disputes. Each follows its own rules, and adversary proceedings proceed much like federal civil lawsuits. Which form applies affects service, discovery, and timelines.
Deadlines that close quickly
Bankruptcy courts operate on fixed deadlines that can be short. A complaint claiming that a particular debt, such as one arising from fraud, should not be discharged must generally be filed within a set period measured from the first date set for the meeting of creditors, and missing it usually ends the issue. Responses to motions and complaints are also due on a compressed schedule. Keep the court notices you receive, record when you were served, and gather the contracts, payment records, and communications that relate to the dispute. Waiting to see whether a dispute resolves on its own tends to forfeit options.
Assessing your position
We look at what is claimed, which court has authority to decide it, and whether a jury trial right exists. Some disputes must be decided by the bankruptcy judge, while others raise questions about the court's power to enter final judgment. We then estimate the cost of litigation compared with settlement, since many bankruptcy disputes resolve through negotiation. Creditors, debtors, trustees, and buyers of assets all appear in these disputes, and each role carries different leverage. Settlements reached by a trustee or debtor often need court approval before they take effect, which adds a step to any deal. The first discussion focuses on deadlines and the facts that will drive the outcome.
