What Chapter 7 Filers Should Know About Adversarial Matters

Posted on: 23 January 2023

Adversarial actions can occur in some chapter 7 bankruptcy cases. While it may not happen to everyone, it's important to understand why they happen and how to prevent them. To find out how such an action could affect your bankruptcy, read on.

The Notification of an Adversarial Action

Once your bankruptcy paperwork is filed by your lawyer, you may receive a letter from your trustee. The bankruptcy trustee presides over your case and keeps you informed of all important actions. If an adversarial action is filed against you, the letter may arrive a few weeks after you have filed. The trustee needs time to review your case and verify your financial statements once you file. It's important not to be upset when such a letter arrives. While an adversarial action is a sign of a problem with your case, many such actions are of a minor nature. Contact a chapter 7 bankruptcy lawyer right away to discuss things with them. 

Reasons for Adversarial Actions

Some common reasons filers get involved in adversarial actions are listed here:

  • The filer failed to list financial transactions. You must inform the bankruptcy court about the sale or transfer of high-value personal property prior to the filing. For example, some filers fear the loss of property and so they "give" the property to a friend or relative before they file. The property, if discovered, can be returned to the filer and can be subject to seizure. 
  • The filer failed to provide sufficient proof of their income. This issue can prevent filers from attaining bankruptcy relief if they earn too much money given their state's median income level.
  • The filer was not truthful when they obtained a credit card. It's rare for a creditor to bother with such issues. However, lying on a credit application could cause that debt to be excluded from the discharge.
  • The filers used their credit cards to obtain luxury goods or services prior to the bankruptcy filing. You cannot use your card to buy frivolous items knowing that you are about to file for chapter 7. You also cannot take more than a certain amount of cash from a credit card for any reason. Expect to be able to prove that your expenditures were not for luxury goods. 
  • The filer substantially undervalued an item of property. This can happen with real estate and vehicles. Be sure to use accurate numbers when valuing your property because your information will be verified by the trustee.

Speak with your bankruptcy attorney to find out more.