Bankruptcy Litigation

Bankruptcy petitions do not often result in contested actions. When they do, you need to work with a bankruptcy litigation attorney who understands both the civil and bankruptcy laws related to the dispute, and can help you protect your interests and exercise your rights. FactorLaw offers debtors, creditors, trustees, and other interested parties high-caliber representation in Chicago-area bankruptcy and federal district courts. We can help you resolve your bankruptcy litigation issues quickly and efficiently, so that you can resolve your debts or get your outstanding balances paid.

Bankruptcy Petitions vs Adversarial Bankruptcy Litigation

Most personal bankruptcy proceedings and even business bankruptcies are resolved without contentious lawsuits. When a pre-bankruptcy dispute spills into the bankruptcy court, or a post-bankruptcy conflict arises, the adversity between the parties may require use of the bankruptcy forum to resolve the dispute, much like a non-bankruptcy tribunal would handle it. In those circumstances, the parties require help from attorneys who understand both bankruptcy and civil litigation processes and procedures. This includes:

• Core Bankruptcy Litigation Matters derived directly from the bankruptcy case and resolved by the bankruptcy court.
• Non-Core Civil Disputes that affect the underlying bankruptcy matter and may be resolved in either civil or bankruptcy courts.

Bankruptcy litigation can arise between debtors, creditors, trustees, and other interested parties. They can be resolved as contested matters within the bankruptcy proceeding itself, or as a separate adversary proceeding. That is why it is important to work with an experienced bankruptcy litigation attorney when contested issues arise.

Common Types of Bankruptcy Litigation

The term “bankruptcy litigation” includes a variety of actions between the various parties to a bankruptcy case:

Automatic Stay Violations

Debtors are entitled to an automatic stay on collections efforts while their bankruptcy petition is pending. When a creditor pursues collections after being notified of a stay, the debtor can sue the creditor for violating the automatic stay or discharge injunction. Similarly, a debtor or creditor can file a contested action seeking to lift the stay under certain circumstances.

Trustees’ Strong-Arm Powers

A bankruptcy trustee has broad authority to take possession and control of a debtor’s assets. They can reclaim preferential payments to creditors, and preserve property fraudulently transferred to third parties to avoid liquidation. This often requires litigation against the debtor or other third parties to reclaim the assets and bring them back into the bankruptcy estate.

Bankruptcy Exemptions Litigation

An individual debtor has the right to retain certain exempt property under federal and state law. The trustee can litigate the debtor’s exemption claims to ensure all available assets are liquidated to satisfy creditors’ rights. On the other hand, a debtor can file a contested action objecting to a trustee’s right to seize the debtor’s exempt property.

Proof of Creditor Claims

Creditors must demonstrate their right to payment before they receive partial satisfaction of their debts from the debtor’s assets. This is done by filing a proof of claim form. Debtors and bankruptcy trustees can challenge a creditor’s right to payment by filing an objection to the allowance of a proof of claim. The proceeding to resolve the amount of the claim gives rise to a contested matter.

Dischargeability of Debts

Not all debts are dischargeable in bankruptcy, some survive and remain payable by debtors and collectible by creditors after the bankruptcy proceeding is complete. If a creditor believes its debt is not dischargeable because, for example, it is based on fraud or willful and malicious injury to property, the creditor can file a separate lawsuit, known as an adversary proceeding, to obtain a determination the debt withstands any bankruptcy discharge.

General Discharge Based on Fraud

A creditor or the bankruptcy trustee has the right to challenge a debtor’s right to a bankruptcy discharge. This action challenges the debtor’s entire discharge rather than a specific debt. Most often, it is based on allegations of bankruptcy fraud against the debtor.

Retain a Chicago Bankruptcy Litigation Attorney for Your Action

FactorLaw provides all parties with a variety of bankruptcy litigation services, including representing debtors, creditors, trustees, and interested parties in dischargeability actions, preference and fraudulent conveyance actions, contested proceedings, and other adversary proceedings. Our rate structure and low overhead often allow us to represent bankruptcy trustees on a contingency-fee basis; we only get paid if our Chicago bankruptcy litigation attorneys succeed in recovering money. Contact us today to discuss how we can help you.