What potential litigation can a debtor expect in a chapter 11 case?
The trustee, creditors, and interested parties may raise matters in motions and adversary cases to which the debtor will have to respond. If a trustee believes the case was filed in bid faith, he can be expected to file a motion to dismiss or convert the case. Creditors may also file such motions. Adversary proceedings may be initiated by the debtor or creditors. Typical grounds for such adversaries are set forth in Bankruptcy Rule 7001, and include such matters as cases to determine the dischargeability of a debt, or to determine the extent, priority, or validity of a lien. Contested motions may also be brought under Bankruptcy Rule 9014. There are numerous grounds for such motions. Adversaries and contested motions may result in exchanges of discovery and conducting of an evidentiary hearing. Depending on the intensity of the argument and the unwillingness to settle, such matters may be costly and may result in an appeal.
