What The Heck Is A Chapter 20 Bankruptcy?

Law Blog

If you looked in the U.S. bankruptcy code for the term "Chapter 20," you'd discover that it doesn't exist. However, the term is used occasionally by a bankruptcy lawyer to refer to a specific situation. A so-called Chapter 20 filing is one that occurs when someone submits a Chapter 13 application immediately after completing a Chapter 7 case. That may sound a tad crazy, but there's an argument for doing so. Let's look at the typical logic of a Chapter 20 bankruptcy filing and why a bankruptcy attorney might recommend it.

Weaknesses of Just Filing Chapter 7

Pursuing a Chapter 7 bankruptcy means seeking to liquidate assets in exchange for discharging a significant portion of your debts. A major issue, though, is that filing for Chapter 7 doesn't give you any time to get non-dischargeable debts under control. Likewise, it can be challenging to deal with an unsecured mortgage through liquidation. You also can't force creditors to deal with mortgages or car loans.

Weaknesses of Just Filing Chapter 13

It's unlikely that your debts will be discharged quickly under Chapter 13. In fact, you may have to wait between three and five years to complete your repayment plan before any remaining debts will be discharged. That's a long time to have creditors in a position to potentially still come after your debts.

The So-Called Chapter 20 Option

First, it's important to understand one basic fact about this approach. You will not be able to seek an additional discharge of your debts with the Chapter 13 filing. Whatever was discharged under Chapter 7 is done, but you'll have to complete the entire payment plan under Chapter 13. Anything that's left when you're done using this approach still will be owed.

The goal in doing this is to reduce unsecured debts that you owe. Then, you'll take the money that's freed up by settling those debts to service the outstanding debt that can't be discharged. Accomplishing this may require a payment plan, and not all creditors may be amenable to that. Consequently, you may want to petition the court to restructure your remaining debts.

It may also be possible to strip a lien from a second or third mortgage. This is possible because some courts, although not all, are comfortable treating these debts as unsecured. You should have a long conversation with a bankruptcy lawyer, though, before you ask a court to consider this solution.

Bankruptcy can be a very tricky situation. To learn more about different options and solutions, contact a bankruptcy attorney in your area. 


20 March 2020

How to Gain Guardianship Over a Child

The laws governing child custody and guardianship can be confusing. As a family attorney, I have helped many clients gain legal guardianship over a foster child or a relative's child. Getting legal guardianship of a child you are caring for is important because you need to be able to make decisions about that child's education, health care and other matters. This blog will help you navigate the world of legal guardianship and show you how to take steps to get guardianship over a child whether the child's parents are cooperative or not. Legal guardianship does matter even if a child is not going to be adopted. I hope to help people find the way to get this done.