Lawsuits invariably result in financial instability for individuals and small business owners alike. Whether brought to enforce your rights under a contract, or against creditors for a recovery of pre-petition transfers, litigation ties up valuable time and resources that small businesses cannot afford. The same is true for an individual defending against claims brought by creditors, a business partner, a landlord, or against contempt proceedings filed by an ex-spouse.

Prevailing in litigation can sometimes make the difference between staying in business or closing the doors in the case of a small business; in the case of an individual, it can mean the ability to earn a livelihood, or to stay current with the day-to-day household expenses. In many cases, the resources that are needed to adequately defend against claims or enforcing your rights are tied up in the litigation, which can go on for years to make its way through the court system.

If achieving a negotiated settlement is possible, doing so is always the better choice. The uncertainty, time, and resources devoted to bankruptcy litigation to the end of a trial can outweigh any benefit of actually prevailing. If, on the other hand, a resolution is impossible, you may have no choice but to aggressively engage in bankruptcy litigation to achieve the results that will keep or make you whole.

Bankruptcy Litigation Attorneys

The bankruptcy litigation attorneys at Dennery Law work closely with their clients to understand their legal position, and to develop realistic goals and achievable objectives before commencing bankruptcy litigation. If the need arises, we can jump in immediately to defend against or file actions to enforce the automatic stay or the discharge injunction. Throughout the representation, you are given the information that you need to control the costs and direction of the litigation. Importantly, you are placed in the position of understanding your chances of success and making an informed decision about accepting or rejecting settlement offers.

Bankruptcy Litigation

Bankruptcy sets out various rules pursuant to which a debtor, a debtor-in-possession, and/or a trustee can seek to enforce their rights under the bankruptcy code, such as the right to recover money or property transferred prepetition, disputing tax assessments, or challenging liens filed against estate property. Bankruptcy also presents an opportunity to resolve prepetition disputes with your creditors or other third parties regarding property of the estate or issues that have contributed to the filing of the bankruptcy case. 

Bankruptcy provides an excellent forum to expeditiously resolve or litigate disputes because discovery is streamlined, the court docket is expedited, and bankruptcy courts specialize in civil matters and are highly competent at analyzing complex bankruptcy, property, and contractual matters. In many cases, disputes about the bankruptcy process, the debtor’s property, and creditor distributions are resolved through contested matters or adversary proceedings that are litigated inside the bankruptcy case.

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What is a Contested Matter?

Parties initiate “contested matters” to resolve issues related to the amounts or the treatment of their claims, or the applicability of bankruptcy law to discrete issues over which the parties have a difference of opinion. Contested matters are typically initiated and resolved through legal briefs filed with the court. Contested matters are sometimes decided through evidentiary hearings where the parties have an opportunity to present evidence and oral arguments in support of their position. 

Creditors often initiate contested matters to obtain relief from the automatic stay, object to how their claims are being treated in a Chapter 11 or 13 plan, or to seek a valuation of collateral securing their claims. Chapter 7 and 13 trustees have a duty to examine creditor claims and Debtor’s petition and schedules and will bring a contested matter to object to creditor claims, or to object to debtor exemptions, or for the dismissal of a case.

What is an Adversary Proceeding?

The bankruptcy code specifically identifies matters that must be contested through “adversary proceedings.” Adversary proceedings are initiated by filing a complaint and summons inside the bankruptcy case – an adversary proceeding is essentially a new case that is filed within the existing bankruptcy case. Adversary proceedings are governed by the federal rules of civil procedures with some bankruptcy specific modifications that allow the case to move at a faster pace. Among other reasons, adversary proceedings are initiated to:

  • Recover money or property for the benefit of the bankruptcy estate.
  • Challenge or establish the priority or extent of a lien.
  • Determine if a debt can be discharged, or for an injunction or other equitable relief.

In addition, litigants in an adversary proceeding can bring both federal and state law claims, so long as they are related to the bankruptcy case and affect the bankruptcy estate. Contracts for the sale of goods or that involve secured lending are governed by the uniform commercial code as adopted by most states. Commercial claims between corporate debtors and creditors can implicate the Uniform Fraudulent Transfer Act (KRS Chapter 378A), receivership proceedings (KRS Chapter 425.600), writs of possessions and other provisional remedies provided for under Kentucky or other state law. Debtors, creditors, trustees, and a chapter 11 debtor in possession can bring adversary cases against parties who are directly or indirectly involved in the case.

Dennery Law helps small business owners obtain relief through the restructuring and reorganization of business-related debt. We are available for telephone consultations at no charge to you. In-person or remote appointments are available on weekdays, evenings, and weekends in Lexington, Louisville, and Northern Kentucky.