What Is a Chapter 20 Bankruptcy?
This is the unofficial name for a Chapter 13 bankruptcy that follows right on the heels of a Chapter 7 bankruptcy. This could mean that right after the Chapter 7 discharge is granted, you may be able to file for the Chapter 13 process. Since your debt was discharged in the first bankruptcy, you would get no additional discharge in the second process. Still, this means that you could combine the debt discharge of Chapter 7 bankruptcy with the home- and car-saving potential of Chapter 13 bankruptcy.
When would someone file for Chapter 20 bankruptcy?
There are many reasons, specific to each case. But oftentimes, if you need the benefits that both Chapter 7 and Chapter 13 bankruptcy provide, you might be best served by filing for them consecutively. For instance, you may need time to catch up on your car loan and mortgage, but you might have too much debt to qualify for Chapter 13.
If you qualify for Chapter 7 bankruptcy, you may be able to discharge your debt, be eligible for Chapter 13, and then through Chapter 13 bankruptcy, you could get three to five years to catch up on your secured loans. This could help you avoid foreclosure and other property loss. Also, with the Chapter 7 debt discharge, your Chapter 13 repayment plan may not take as long, and you could get out of debt faster through the Chapter 20 bankruptcy process.
Stated negatively, if you file for just Chapter 7 bankruptcy:
- You cannot get rid of an unsecured second mortgage
- You might not receive an extension on repaying non-dischargeable debt
- You can't make creditors leave your car loan or mortgage arrears to cure
Chapter 13 bankruptcy can be limited in that:
- It cannot be a fast way to erase (or discharge) debt
- You're stuck with a 3- to 5-year debt repayment plan
- It can be hard to qualify for this process
If you file for Chapter 13 right after your Chapter 7 bankruptcy, you could achieve a full debt-relief solution through a Chapter 20.
When should someone file for just Chapter 7 bankruptcy instead?
If you need to eliminate debt fast, Chapter 7 is the way to go. You also would not be saddled to a repayment plan that controls your entire income for the span of three or five years. Chapter 7 is a swifter, easier-to-qualify-for process. If you do not have much in the way of secured debt (mortgage, car loans), and you instead need to deal with unsecured debt (credit cards, medical bills), then you may only need Chapter 7 bankruptcy relief. And of course, if you do not qualify for Chapter 13, then you have no choice but to stick with Chapter 7.
When should someone file for just Chapter 13 bankruptcy instead?
If secured loans (car payments, the mortgage, etc.) are your main struggle, then Chapter 13 may be all you need to solve your debt problems. This process on its own can be enough to avoid foreclosure and save your other property. With a restructured payment plan, you may be able to pay off most or even all of your secured and unsecured debts. Then the remainder of your debt might get discharged. It may be that Chapter 13 bankruptcy is the only action you need to take. There is also the chance that you won't qualify for Chapter 7.
Of course, none of these decisions are simple. If you are uncertain about whether any bankruptcy at all is the solution for you, or if you need more information about the differences between Chapter 7 and Chapter 13 bankruptcy, don't wait to get in touch with the Law Offices of Marshall D. Schultz.
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