Filing for bankruptcy can be stressful, and this process is even harder when you don’t have the help you need. Navigating the framework surrounding Chapter 20 bankruptcy requires quite a bit of knowledge and expertise, and since filing for this type of bankruptcy can only occur after you’ve already gone through a complicated paperwork process, you’ll need to arrange to receive qualified legal assistance long before you decide to file for Chapter 20. This type of bankruptcy filing might be just the thing to salvage your financial situation, but what exactly is Chapter 20 bankruptcy, and how does it differ from other types of bankruptcy?
What Is Chapter 20 Bankruptcy?
If you go looking for Chapter 20 in the bankruptcy code, you might be searching for a long time. While it’s easy to find codes for Chapter 7, Chapter 11, and Chapter 13 bankruptcy, it might end up proving impossible to find any information in the U.S. Legal Code about Chapter 20 bankruptcy.
There’s a good reason for this lack of information: Technically, there is no such thing as Chapter 20 bankruptcy. On the contrary, this term is a piece of legal slang that is used by lawyers to denote a strategy in which two types of bankruptcy are filed right after each other.
Filing for Chapter 20 bankruptcy involves filing for both Chapter 7 and Chapter 11 bankruptcy at around the same time. The process of filing for Chapter 20 bankruptcy involves all of the steps involved in filing for both of these types of bankruptcy, so if there is some reason that you can’t file for either Chapter 7 or Chapter 11 bankruptcy, you won’t be able to file for Chapter 20 bankruptcy either.
When Should You File for Chapter 20 Bankruptcy?
You might want to file for Chapter 20 bankruptcy in a number of situations in which other types of bankruptcy are insufficient for your needs. For instance, many people choose to file for Chapter 7 bankruptcy since this type of filing is capable of clearing away most of the types of debt that individuals incur. Filing for Chapter 7 bankruptcy is significantly cheaper than other bankruptcy options, and it is the most common type of bankruptcy filing. Chapter 7 bankruptcy is known as “liquidation,” and depending on your financial situation, filing for this type of bankruptcy might leave you debt-free.
However, Chapter 7 bankruptcy may not be enough to solve your financial situation. When you file for Chapter 7 bankruptcy, your bankruptcy trustee sells all of the property that you own that isn’t exempt, and they then use the proceeds from these sales to pay off your creditors. You’ll file for this type of bankruptcy as part of your Chapter 20 filing, so it’s important to keep in mind that most types of property are exempt from this type of sale.
In exchange for this sale of property, your unsecured debts are discharged, which means that you are no longer liable for your debt and that your creditors can’t attempt to collect money from you. This discharge is usually received within three to four months, but Chapter 7 won’t discharge certain types of debt that may be causing trouble in your situation.
For instance, filing for Chapter 7 bankruptcy won’t discharge debt incurred from child support, student loans, or taxes. This type of bankruptcy also won’t free you from your mortgage or car payment loans, and filing for Chapter 7 bankruptcy also can’t force creditors to give you further time to pay debts that aren’t discharged in the filing process.
What About Chapter 13 Bankruptcy?
Many individuals facing financial issues will choose to file for Chapter 13 bankruptcy for temporary relief from types of debt that aren’t resolved by Chapter 7 bankruptcy. This type of bankruptcy will provide you with a revised payment plan for resolving your debt that usually reduces the monthly amount that you’ll have to pay back for a period of 3-5 years. The amount of time that your Chapter 13 bankruptcy repayment plan will last depends on your income; if you make more than the state median income, you’ll be assigned a five-year repayment plan, but if you make less than the state median, you’ll be assigned a three-year plan.
Chapter 13 bankruptcy is also known as reorganization, and rather than eliminating your debt, this type of bankruptcy reorganizes your debt into chunks that are easier to pay. Filing for Chapter 13 bankruptcy is relatively expensive, but it might be the right legal move to make if you’re concerned that you won’t be able to pay back your debt according to your current terms.
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy forces your creditors to allow you to “cure,” or temporarily freeze, mortgages or car loans. This type of bankruptcy can strip unsecured second mortgages, and it forces creditors to give you time to pay debts that can’t be discharged. One of the major detractors of filing for Chapter 13 bankruptcy is that when you file for this type of financial help you don’t receive your discharge as quickly as you do when you file for Chapter 7 bankruptcy.
If you have too much debt, however, you won’t qualify for a Chapter 13 bankruptcy filing. Even if you do qualify for this type of bankruptcy, it can often make your financial situation worse in the long run. Since Chapter 13 bankruptcy reduces the amount you’ll have to pay toward your debt each month, you can end up further behind on your debt and saddled with more interest than you were before you filed for bankruptcy.
What Are the Advantages of Chapter 20 Bankruptcy?
While the concept behind filing for Chapter 20 bankruptcy isn’t complicated, this legal move can detangle your financial situation better than any type of bankruptcy filing if you’re saddled with a significant degree of debt. By combining Chapter 7 bankruptcy with Chapter 13 bankruptcy, you can enjoy the benefits of each type of filing without having to worry about the major detractors that Chapter 7 and Chapter 13 have when filed alone.
For instance, if you’re above the debt threshold for Chapter 13 bankruptcy, you’ll have to pay many kinds of debt whether or not you successfully file for Chapter 7. If you file for Chapter 20 bankruptcy, however, your initial Chapter 7 filing can lower your debt below the Chapter 13 filing limit. By pursuing this course of action, you can enjoy the benefits of both types of bankruptcy. Alone, Chapter 7 and Chapter 13 bankruptcy are limited at best, but Chapter 20 bankruptcy can leave you practically debt-free if you have the right legal help during the filing process.
What Is Chapter 11 Bankruptcy?
As you consider the bankruptcy filing options that are at your disposal, you might recall having heard something about “Chapter 11 bankruptcy” in the news. However, this type of bankruptcy isn’t right for your situation for a number of reasons.
First, Chapter 11 bankruptcy is almost always filed by corporations instead of individuals. Because of the complexity of filing for Chapter 11 bankruptcy, going down this financial reorganization route is lengthy and expensive. Unless you have unsecured debts that are too large to qualify for Chapter 13 bankruptcy or you need to reorganize real estate investments, you’d be better off sticking to Chapter 7, Chapter 13, or Chapter 20 bankruptcy.
What Is the Procedure for Filing for Chapter 20 Bankruptcy?
Before you begin the process of filing for Chapter 20 bankruptcy, you must make sure that you’re eligible for both Chapter 7 and Chapter 13 bankruptcy. Bankruptcy law is clear in forbidding debtors from filing for Chapter 7 bankruptcy if they have already filed for Chapter 7 within the previous eight years, and you also can’t file for Chapter 13 bankruptcy if you’ve filed for this type of bankruptcy within the last six years.
To file for either Chapter 7 or Chapter 13 bankruptcy, you must pass a test ensuring that you have the means to pay back your debt or be deemed not eligible for this means test. You will only be deemed ineligible for the means test if you are under the state median income or the money you owe is primarily composed of non-consumer debt. If you’re filing for Chapter 13 bankruptcy, you must prove that you have an income adequate for keeping up with your payment plan.
The process of filing for Chapter 20 bankruptcy begins with filing for Chapter 7 bankruptcy. To do so, you’ll need to file a petition with the bankruptcy court in the area where you live or do business. In addition to your Chapter 7 bankruptcy petition, you’ll also need to provide the court with a complete accounting of your assets and liabilities, and you’ll need to declare your current income and expenditures.
A statement of financial affairs and a record of your unexpired leases and executory contracts will also be required, and you’ll need to provide your case trustee with a copy of your most recent tax information. If your debt is primarily consumer in nature, it will be necessary to file a certificate proving that you’ve gone through credit counseling and the debt repayment plan that you received as part of the credit counseling process.
Furthermore, you’ll need to provide the bankruptcy court with proof of payment from your employer, a statement declaring your monthly income, and information on your current state or federal student debt. If you have a spouse, the two of you can file for Chapter 7 bankruptcy together or separately.
Lastly, you’ll need to complete the Official Bankruptcy Forms that are provided by the government. This form must include a list of all of your creditors and the nature of the debt you owe them, a comprehensive statement of your income, a list of all of your property, and a detailed list of all of your living expenses. This list of living expenses must include categories for clothing, food, shelter, taxes, transportation, utilities, and medical care.
Once you’ve finished filing for Chapter 7 bankruptcy, you can go ahead and file for Chapter 13 bankruptcy. Since you’ll be filing for Chapter 13 with the same court, it generally won’t be necessary to provide information that you’ve already given to the court with your Chapter 7 filing that would otherwise be necessary when filing your Chapter 13 petition.
Some courts may require information above and beyond what you’ve provided for your Chapter 7 petition, but most of the information required for a Chapter 13 petition is redundant if you’ve already submitted a Chapter 7 filing. Even so, your bankruptcy court may require that you submit a full Chapter 13 filing as part of your Chapter 20 strategy.
Benefits of Chapter 20 Bankruptcy
Filing for Chapter 20 bankruptcy takes the benefits of Chapter 7 and Chapter 13 bankruptcy and rolls them into one comprehensive package. This type of bankruptcy filing can be incredibly helpful when you need extra time to pay back debt but your debt level is higher than the allowed limit for Chapter 13 bankruptcy.
By filing for Chapter 7 bankruptcy first, you can reduce your overall debt to a level that’s within the limits for a Chapter 13 filing. While filing for Chapter 13 bankruptcy usually won’t provide you with any further debt discharge than is offered by Chapter 7 bankruptcy, taking this approach can provide you with the extra time you need to pay back loans that weren’t discharged by your Chapter 7 filing.
In addition, if you file for Chapter 7 bankruptcy before you file for Chapter 13 bankruptcy, you can improve your ability to allocate resources toward debt that you couldn’t discharge with a Chapter 7 alone. Taking this course of action can reduce the length of your Chapter 13 reorganization plan, and it makes it easier to pay back larger portions of your debt during your Chapter 13 plan period, which resolves one of the major detractors of filing for Chapter 13 bankruptcy.
While not all bankruptcy courts are in agreement on this approach, filing for Chapter 7 before you file for Chapter 13 may allow you to strip the entirety of your unsecured second mortgages. To determine whether or not filing for Chapter 20 can help you with this endeavor, you’ll need to speak with a qualified Chapter 20 bankruptcy attorney.
When Is Filing for Chapter 20 the Right Move?
Chapter 20 bankruptcy works in your favor the most when your prospects are on the rise. If you’ve suddenly gained access to greater income or your real estate assets are gaining value, now is the time to file for Chapter 20 bankruptcy to reduce your debt as much as possible.
If it’s expected that your income or net worth will increase dramatically in the near future, the bankruptcy judge who hands down the conditions of your Chapter 13 bankruptcy might threaten to increase your payments after your increased assets are confirmed.
It’s always best to file for any type of bankruptcy when you expect that your ability to pay back your debts will increase in the future, but it only makes sense to go through the process of filing for Chapter 20 if you’re concerned that your increased assets might make your Chapter 13 terms uncomfortably onerous.
Limitations of Chapter 20 Bankruptcy
While filing for Chapter 20 bankruptcy may be the perfect solution to your financial troubles, it’s important to remember that this approach isn’t without its shortcomings. For instance, if you receive a discharge of debt from your Chapter 7 filing, you won’t be able to receive another discharge from your Chapter 13 filing unless your Chapter 7 filing occurred more than four years ago. Therefore, the main purpose of filing for Chapter 13 bankruptcy as part of the Chapter 20 strategy is to give yourself more time to pay back the loans that you couldn’t get rid of with your Chapter 7 filing.
In addition, some courts may not allow lien stripping or cramdown, which are two of the main incentives to try the Chapter 20 approach. Make sure to consult with a qualified attorney before you file for Chapter 7 to ensure that your court allows these maneuvers. Lastly, it’s important to remember that you can’t save your business or keep your properties with Chapter 20 since all of your assets will be given over to a trustee when you file for Chapter 7.
Find a Chapter 20 Bankruptcy Lawyer Near Me
If you’re considering filing for Chapter 20 bankruptcy, you’ll need qualified legal assistance to make sure that you provide all of the necessary paperwork in the proper format. Filing for Chapter 20 bankruptcy is more complicated than filing for either Chapter 7 or Chapter 11 bankruptcy, and if you make a single mistake, your attempts to solve your legal problems will fail. When you need help with Chapter 20 bankruptcy in San Diego, count on the offices of San Diego Bankruptcy Lawyer to have your back. To get started, call 619-488-6168 today!