Ins and Outs of Chapter 20 Bankruptcy

The idea of filing back-to-back bankruptcies seems like it would bury you even deeper in debt. But, it could prove advantageous to your long-term financial health to file Chapter 7 followed by Chapter 13. Adding chapters 7+13 is commonly known as “Chapter 20” and the combination can provide unique debt remedies. This two-step process can be difficult to navigate, and missteps could prove disastrous. That’s why it’s important to work with an experienced bankruptcy law firm the understands the ins and outs of Chapter 20.

What Chapter 7 Can Accomplish

Filing Chapter 7 will be the first step in the process. This filing allows you to eliminate a tremendous amount of the personal debt. Things such as credit cards and monthly bills that have fallen into arrears may be wiped clean. Chapter 7 doesn’t have a dischargeable debt limit. And, you may be able to keep assets such as retirement accounts, automobiles, and personal property among others. The big upside is that the court will not require a repayment plan.

However, there may be assets, such as your home, that you may want to retain despite being behind on payments. Chapter 7 will temporarily stop any foreclosure actions during the litigation. Once final, you will not be able to file another Chapter 7 for eight years. This can pose a problem if you are barely hanging on with things such as mortgage payments. Chapter 13 may be a viable solution if properly managed.

What Chapter 13 Can Accomplish

Although time must pass to make another Chapter 7 filing, Chapter 13 can be utilized immediately. Unlike Chapter 7, debt will not be wiped out. It will simply be reorganized to provide you with adequate time to catch up and meet financial obligations on things such as a home mortgage. In strategic terms, the back-to-back filings allow you to erase the overwhelming debt and refocus your resources.

A repayment plan will be submitted to the court and a trustee will work with you and your attorney to create a reasonable financial plan. The goal will be to keep valued property, having already reduced debt. There are some subtleties to following the Chapter 20 maneuver you should consider.

  • Time Considerations: If you opt for a Chapter 13 bankruptcy within a 4-year time frame of the Chapter 7 filing, you may be prohibited from discharging further debt once the 3- to -5-year Chapter 13 has been completed. Chapter 13 does provide protections against your bank accounts being seized and wages garnished. But you will need to wait the full eight years before filing another Chapter 7. That can put you in an unenviable position if your finances falter during the Chapter 13 repayment period.
  • Discharging Debt: The Chapter 13 plan can leave you with a low and manageable monthly payment plan. The nature of a Chapter 13 bankruptcy plan doesn’t necessarily mean that all of your outstanding debt must be brought current. In fact, you could be paying a seemingly nominal monthly installment toward bills and debt. You also may be able to fully discharge remaining balances once the 3- to 5-year repayment obligations have been met.

One of the keys to filing Chapter 7 and then Chapter 13 is reducing dischargeable debt. While Chapter 7 has no ceiling, Chapter 13 has a strict limit on secured and unsecured debt.

Creditor Objections To Bankruptcy

Needless to say, every creditor’s best interest is paid in full and bankruptcy filings mean they may not see all of the revenue. It’s common for creditors to object and the Chapter 20 process only encourages those claims. Common objections include the following.

  • Providing false or misleading information to the court.
  • Transferring property to a friend or relative.
  • Making false statements to the bankruptcy trustee or judge.
  • Failure to produce documents.
  • Failure to disclose certain assets.
  • Obtaining money with intent to default.
  • Filing false tax returns.
  • Taking cash advances on credit cards.
  • Charging items to credit cards with intent to default.

There may also be a series of procedural objections that claim some or all of your debts are not legally dischargeable. If a creditor is successful in challenging a bankruptcy filing, you could be forced to make payments.

When personal expenses exceed revenue, it can feel like you are sinking in quicksand. The Chapter 20 process may provide a long-term financial solution. Contact an experienced bankruptcy attorney at Yardley Law for a consultation and take a step toward a fresh start.



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