Turning to bankruptcy to resolve financial problems is often a difficult decision to make; however, it is frequently the best decision for a debtor who is struggling with no apparent end in sight. If you have made the decision to file for bankruptcy protection the next decision you need to make is which chapter is best for you and your situation. Typically, an individual debtor files either a chapter 13 or a chapter 7 bankruptcy. In some cases though, a debtor actually files both back to back. When this is done the debtor is said to have filed a “chapter 20”.
The U.S. Bankruptcy Code is divided into chapters with many of the chapters devoted to the rules and procedures for a certain type of bankruptcy. It is for this reason that we refer to specific types of bankruptcies by chapters. There is no “chapter 20” in the Bankruptcy Code; however, when a debtor files a chapter 7 and then a chapter 13 it is often referred to as a chapter 20. Why would a debtor want to file both a chapter 7 and a chapter 13? The simple answer is that the debtor’s financial problems cannot be resolved entirely by just filing one of the chapters.
One common reason why people choose to take the chapter 20 route is that their debts exceed the chapter 13 limit, currently set at $360,475 of unsecured or $1,081,400 of secured debt. If you qualify to file a chapter 7 first you can reduce a significant portion of debt by discharging unsecured debts in the chapter 7 bankruptcy which may then make you eligible to file the chapter 13 bankruptcy. Chapter 7 alone though may not provide you with the time you need to pay back secured debts that are secured by important assets such as your home. Therefore, simply filing the chapter 7 bankruptcy isn’t sufficient.
Although you cannot get a discharge from the chapter 13 bankruptcy unless at least four years has passed since your discharge in the chapter 7 bankruptcy, you may still find following the chapter 7 with a chapter 13 to be advantageous. Along with providing you with additional time to repay priority and secured debts, you may be able to strip a second mortgage lien, though courts are divided as to whether or not lien stripping is available in a chapter 20.
Clearly, choosing to proceed with a chapter 20 bankruptcy in Monmouth County is a complex approach to bankruptcy that requires the assistance of an experienced Monmouth County bankruptcy attorney.