A Chapter 20 filing is nothing more than a Chapter 7 completed bankruptcy (with discharge of debts issued) followed by a second bankruptcy filing - a Chapter The second bankruptcy is utilized for other legitimate bankruptcy options, to either to strip off or cram down subordinate liens or to pay out in full otherwise non-dischargeable debts. What Is "Chapter 20 Bankruptcy?" There are many different kinds of karacto.xyz type of bankruptcy is named after a chapter of the Bankruptcy Code. The main types of bankruptcy are Chapter 7 and Chapter Officially, there is no such thing as a "Chapter 20 bankruptcy" because the Bankruptcy Code only goes up to Chapter Aug 11, · There isn’t a chapter 20 in the Bankruptcy Code. It’s in quotation marks because it’s a chapter 13 bankruptcy filed after a chapter 7; seven plus thirteen equals twenty. A junior mortgage that’s completely underwater can be discharged in chapter 7, but the lien is still in place, meaning debtors must continue paying on the loan or else.
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There are many different kinds of bankruptcy. Each type of bankruptcy is named after a chapter of the Bankruptcy Code. The main types of bankruptcy are Chapter 7 and Chapter Officially, there is no such thing as a "Chapter 20 bankruptcy" because the Bankruptcy Code only goes up to Chapter Instead, "Chapter 20 bankruptcy" refers to debtors who file for Chapter 7 bankruptcy and then file for Chapter 13 bankruptcy after the Chapter 7 bankruptcy ends.
There are two reasons people might want to file a Chapter 13 bankruptcy after a Chapter 7 bankruptcy. First, the advantages of both types of bankruptcies stack together nicely. People typically file for Chapter 7 bankruptcy to discharge their unsecured debts like credit cards. People typically file for Chapter 13 to "lien strip" or reduce the amount of money they owe to secured creditors like car loans.
The two advantages overlap very nicely. People often have both secured and unsecured debt. One goal of Chapter 20 is to discharge unsecured debts in Chapter 7 and then reduce the remaining secured debt in Chapter Chapter 20 allows the debtor to make the most of the bankruptcy system.
The second reason to file for Chapter 20 is to extend the amount of time the debtor needs to repay secured loans. The debtor receives an automatic stay during a bankruptcy, a court order which prohibits creditors from trying to collect on their debt.
In Chapter 7, the stay only lasts a few months because the bankruptcy ends in a few months. In a Chapter 13 though, the stay could last three to five years, depending on the plan. Yes, there is a rule in the Bankruptcy Code regarding multiple bankruptcies. Instead, the rule prohibits discharge of debts in multiple bankruptcies during a four year period.
If the debtor seeks to reduce the amount of debt owed in Chapter 13 instead of discharging debt, there is no disadvantage to filing for Chapter 13 after a Chapter 7.
The second bankruptcy filing would not discharge debts - as the time limits for getting a second discharge in Chapter 13 is restricted to 4 years. However since the debts have already been discharged in Chapter 7, that is not the purpose. The second bankruptcy is utilized for other legitimate bankruptcy options, to either to strip off or cram down subordinate liens or to pay out in full otherwise non-dischargeable debts. The most common example is where an individual qualifies for basic Chapter 7 bankruptcy under the means testing law yet would be required to pay a substantial dividend to their unsecured creditors under a Chapter 13 filing.
By filing the 7 first, the unsecured debt can be eliminated in full and the payments in Chapter 13 to eliminate the second mortgage lien can be greatly reduced - irrespective of available or disposable income. Another example is where the disposable income payments to unsecured debt in an original Chapter 13 filing would be split among all creditors, a Chapter 20 would permit all of the Chapter 13 payments in the 2nd bankruptcy to be directed solely to non-dischargeable debts such as student loans or recent tax obligations.
Some Courts have expressed unhappiness over this practice but the U. Supreme Court as far back as the 's confirmed that the repetitive filing in and of itself is not abusive of the Bankruptcy process Johnson v Home State Bank, U. However, just recently the U. Free v. Malaier, 9th Cir. It takes time. After you have discharged your debts through Chapter 7 bankruptcy, you must wait four years before you can receive a discharge under Chapter Another drawback is that you might need to bend over backwards to prove to the bankruptcy court that you are not trying to act in bad faith, abusing the system.
For this reason, an experienced bankruptcy attorney can be your greatest asset. They know all the ins-and-outs of the law. If you owe back taxes, some may remain despite the bankruptcy process you choose. The same goes for alimony and child support, which you must continue to pay. The time frame for a Chapter 20 strategy to evolve varies. In a best case scenario it will take about three to four months for Chapter 7 bankruptcy, then the Chapter 13 bankruptcy takes three to five years to complete.
If you are still fairly young and made debt mistakes early on, if you are buried under a pile of expensive medical bills, then Chapter 20 can help you start making progress toward a fresh financial future. Consult a bankruptcy attorney to get started as soon as possible. Filing for bankruptcy is not the end.