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Law Offices of Stephen Orchard Law Offices of Stephen Orchard

What Is A Chapter 20 Bankruptcy? It Could Help You


Is there a secret type of bankruptcy that’s not actually specifically written or allowed for in the bankruptcy code? There is, and although it’s not exactly a secret, it is something that only more experienced bankruptcy attorneys would know about, and could be a big help to you.

What is Chapter 20, and Why Do It?

You may have noticed that the two biggest types of bankruptcy Chapter 7 and Chapter 13, together equal the number 20. That’s because Chapter 20 is the name for the process of filing both Chapter 7 and Chapter 13 bankruptcy, one after the other.

You may be wondering why you would need or want to file for both types of bankruptcy–most people aren’t thrilled about the idea of filing just one. But the purpose of Chapter 20, is to give you advantages of both chapters, that you wouldn’t or couldn’t get filing only one type.

Filing Chapter 7

Let’s imagine you want to file for Chapter 7 bankruptcy, and you qualify for Chapter 7 bankruptcy. Chapter 7 can help you eliminate all of your debts, but it really doesn’t help you with secured debts, like mortgages, or car payments (unless you want to surrender or give up the collateral–that is, you want to walk away from the property or the car).

Benefits of Adding the Chapter 13

But Chapter 13 does allow this to happen. So, when you are done with your Chapter 7, and eliminated or discharged all of your debts, you then transition to filing a Chapter 13. In a Chapter 13 plan, you get to catch up on your secured payments like your mortgage, through the course of a 3 or 5 year plan.

Chapter 20 also works for non-dischargeable debts. WIth non-dischargeable debts, like child support or criminal restitution, when your Chapter 7 is done, you still owe all the money and anybody can still come after you for that money.

But in a Chapter 13, although you still owe the money that can’t legally be discharged, you get to “catch up” to any amounts that you are behind on paying, over the course of 3 or 5 years.

Another benefit to all of this is that you actually have more money to pay for your Chapter 13 plan–that is, to catch up on a mortgage, car loan, or other nondischargeable debt. That’s because you have discharged many other debts in the Chapter 7 that you previously filed.

Chapter 13 may also allow you to lower the amount that you owe on your mortgage or your car loan–although this is very limited, and only allowed in certain situations, you still could qualify for these reductions in the Chapter 13, when you wouldn’t with just the Chapter 7.

Useful – But Not for Everyone

Chapter 20 will not be needed by anybody, and in fact, it may not be doable for everyone. You need to make a small enough income to qualify for Chapter 7 (that is, you must pass the means test) but you must make enough money to qualify for a plan in Chapter 13, which requires that you show the court you make enough money to pay a plan.

What kind of bankruptcy will work for you? Contact the Boca Raton bankruptcy attorneys at the Law Offices of Stephen Orchard at 561-455-7961 today to help.

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