What is a Chapter 20 Bankruptcy?

 Posted on December 13, 2013 in Chapter 7

A Chapter 7 bankruptcy is a common form of bankruptcy because it excuses the filer from all eligible debts.  It is commonly referred to as a liquidation bankruptcy because debts are eliminated by the sale of property and other assets. Creditors are repaid through the proceeds of those transactions.

A Chapter 13 is also called the wage-earner’s bankruptcy.  If someone is earning an income but cannot keep up with past due payments, then a Chapter 13 bankruptcy can give them time to pay those debts. There is a repayment plan that last from three to five years and is based on each person’s income.

Occasionally there are cases when nether Chapter of bankruptcy is appropriate. While a Chapter 20 bankruptcy is not a term found in the bankruptcy code, it is a common strategy to get a fresh start.  It is the process of filing two bankruptcies right after each other to resolve difficult financial situations.  The approach is filing for Chapter 7 protection and then for Chapter 13.

The Chapter 7 bankruptcy lets you eliminate dischargeable debts which does not include child support, taxes, or student loan debts.  If your debts are too high to qualify right away for a Chapter 13 bankruptcy, the Chapter 7 bankruptcy can eliminate enough to become eligible.  That can allow you to focus the majority of your income on debts that cannot be discharged.

The disadvantages of a Chapter 20 filing is you can’t receive a discharge during the Chapter 13 part of the process.  It is also possible that a bankruptcy trustee will object to your Chapter 20 bankruptcy.  They can claim that your Chapter 13 filing is in bad faith.  If that happens, you will be responsible for providing proof that it is necessary given your situation.

If you are concerned about making your monthly credit card payments or losing your family home, then bankruptcy might be an option for you.  Talking to a legal professional can show the benefits of each Chapter based on your situation.  Contact an experienced bankruptcy attorney in San Antonio today.