Commercial Law World - Issue 4, 2017 - 13

Adversary Actions
for the Commercial
Creditor
by Kevin Gowen
Kevin Gowen represents clients in commercial
litigation matters, including collections and
breach of contract claims. He represents
corporate creditors in his practice, including
financial corporations, construction companies,
and health care providers. Kevin handles all
stages of creditor's rights claims, from the
initiation of a lawsuit to post-litigation proceedings
to enforce a final judgment. He also devotes a
portion of his practice to the domestication and
enforcement in Florida of final judgments entered
in other states against Florida debtors.
www.rumberger.com

W

hen a commercial debtor files a bankruptcy
petition, the creditor, more especially those who
hold general unsecured debt such as accounts receivable,
can often do little more than file a proof of claim and
await a pro rata disbursement. However, in the case of
debts incurred by actual fraud, false representations,
or other such intentional acts, the commercial creditor
may be able to have its debt excepted from discharge.
Section 523 of the Bankruptcy Code provides that
certain debts are not dischargeable in bankruptcy. Most
of these exceptions to discharge stem from principal
purpose of the Bankruptcy Code which is to grant a
fresh start to the honest but unfortunate debtor. Grogan
v. Garner, 498 U. S. 279, 286-287 (1991). While Section
523 excepts from discharge a number of debt categories,
such as educational loans and certain taxes, most
commercial creditors will likely bring their Section 523
adversary actions based upon debts incurred by fraud or
false pretenses.
The evaluation of your Section 523 adversary action
begins with receipt of the notice of the bankruptcy's
filing, which will state the deadline for filing a challenge
of whether certain debts are dischargeable. Federal Rule
of Bankruptcy Procedure 4007(c) sets this deadline
as being no later than 60 days after the first Section
341 meeting of creditors, but this may be extended if
an interested party files a motion for cause before the
deadline has expired. The challenge of dischargeability

is filed as a complaint and is a core proceeding pursuant
to 28 U.S.C. ยงย 157(b)(2).
An adversary action seeking to challenge a debt's
dischargeability is essentially a federal lawsuit that is
litigated within the bankruptcy. Service is generally
made by first class mail pursuant to Federal Rule of
Bankruptcy Procedure 7004(b), although service may
also be made pursuant to incorporated provisions of
Federal Rule of Civil Procedure 4. The summons must
be served within 10 days of its issuance. In a departure
from typical federal procedure, the deadline for the
debtor to answer the complaint runs 30 days from the
date of the issuance of the summons rather than from
the date of service. See Fed. R. Bankr. P. 7012(a).
Most adversary actions tend to be settled, but
if yours is not, the Federal Rules of Bankruptcy
Procedure incorporate all of the discovery rules of
the Federal Rules of Civil Procedure, allowing you
to serve interrogatories, requests for production, and
conduct depositions as you would in any federal lawsuit.
Similarly, the Federal Rules of Evidence apply to the
trial. Your debtor may demand a trial by jury, but to
the extent that your adversary action addresses solely
dischargeability of a debt and not the debtor's liability
or the debt's amount, a motion to strike the jury trial
demand is appropriate. This is because the right to trial
by jury is only guaranteed for legal actions, not equitable
actions, and a dischargeability proceeding falls within

CLLA.ORG

13


http://www.rumberger.com http://www.CLLA.ORG

Table of Contents for the Digital Edition of Commercial Law World - Issue 4, 2017

Contents
Commercial Law World - Issue 4, 2017 - Cover1
Commercial Law World - Issue 4, 2017 - Cover2
Commercial Law World - Issue 4, 2017 - Contents
Commercial Law World - Issue 4, 2017 - 2
Commercial Law World - Issue 4, 2017 - 3
Commercial Law World - Issue 4, 2017 - 4
Commercial Law World - Issue 4, 2017 - 5
Commercial Law World - Issue 4, 2017 - 6
Commercial Law World - Issue 4, 2017 - 7
Commercial Law World - Issue 4, 2017 - 8
Commercial Law World - Issue 4, 2017 - 9
Commercial Law World - Issue 4, 2017 - 10
Commercial Law World - Issue 4, 2017 - 11
Commercial Law World - Issue 4, 2017 - 12
Commercial Law World - Issue 4, 2017 - 13
Commercial Law World - Issue 4, 2017 - 14
Commercial Law World - Issue 4, 2017 - 15
Commercial Law World - Issue 4, 2017 - 16
Commercial Law World - Issue 4, 2017 - 17
Commercial Law World - Issue 4, 2017 - 18
Commercial Law World - Issue 4, 2017 - 19
Commercial Law World - Issue 4, 2017 - 20
Commercial Law World - Issue 4, 2017 - 21
Commercial Law World - Issue 4, 2017 - 22
Commercial Law World - Issue 4, 2017 - 23
Commercial Law World - Issue 4, 2017 - 24
Commercial Law World - Issue 4, 2017 - 25
Commercial Law World - Issue 4, 2017 - 26
Commercial Law World - Issue 4, 2017 - 27
Commercial Law World - Issue 4, 2017 - 28
Commercial Law World - Issue 4, 2017 - Cover3
Commercial Law World - Issue 4, 2017 - Cover4
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