There are various types of litigation that can arise in a Bankruptcy Court, including motions to vacate the automatic stay, and adversary proceedings such as avoidance actions to set aside fraudulent transfers under Bankruptcy Code Section 548 or under the New York Debtor and Creditor Law Sections 273 et seq., to reverse preferential transfers under Section 547, to object to discharge under Section 727, and to declare a debt to be nondischargeable under Section 523. The avoidance laws and possible defenses are complex.
Nondischargeability litigation typically occurs in Chapter 7 cases. Credit cards are dischargeable and can be wiped out in Chapter 7 or 13 cases. Of course, Chapter 13 involves a repayment plan, but it may not always have to be 100%, so in some Chapter 13 cases a portion of credit cards may be discharged. Credit card companies sometimes fight back and try to prevent discharge in Chapter 7 cases by suing the debtor in an adversary proceeding alleging that their was some kind of fraud. Chapter 13 debtors very rarely face litigation with credit card companies and get 3 to 5 years to repay these debts while protecting all of their assets. Personal and business loans can be discharged or repaid in bankruptcy and are always included in bankruptcy schedules.