Chapter 7 plus Chapter 13 = “Chapter 20”

When a debtor files a Chapter 7 and a Chapter 13 case, one right after the other, it is commonly referred to as a “Chapter 20.” There is not an actual Chapter 20 of the Bankruptcy Code. So, when does a Chapter 20 occur? In a situation where your financial problems were not wholly resolved in either a Chapter 7 or Chapter 13 filing.

In most cases, a Chapter 20 occurs when the debtor files a Chapter 13 right after concluding a Chapter 7. When you file a Chapter 13 immediately after a Chapter 7, you cannot receive a discharge in Chapter 13.  Additionally, you must wait four years before you will be allowed a discharge in the subsequent Chapter 13 case.

So, how is the Chapter 13 beneficial if you cannot receive a discharge?  If you have too much debt, it provides you additional time. By filing a Chapter 7 first, you can lower your overall debt so you can be below the debt limits for the Chapter 13. Additionally, the extra time gives you time to get caught-up on past due vehicle loans or your mortgage. In fact, the Chapter 13 may provide you the ability to pay debts that were not dischargeable in the Chapter 7 case (such as certain taxes). Finally, you may be able to take advantage of “lien stripping” in your Chapter 13 case.

The “Chapter 20” process requires planning and strategy.  If you are interested in learning more, contact the experienced bankruptcy attorneys at The Koplen Law Firm.