Chapter 20 bankruptcy is not an actual chapter of the U.S. Bankruptcy Code. Instead, it refers to filing Chapter 7 bankruptcy followed by Chapter 13 bankruptcy. This approach can provide relief that neither chapter could accomplish on its own, particularly when unsecured debt, mortgage arrears, or other financial obligations require different solutions.
Most people only need to file one type of bankruptcy. However, when a single filing does not fully address a person's financial circumstances, a Chapter 20 strategy may offer additional options. Whether it makes sense depends on your income, assets, debts, and long-term financial goals.
What Is Chapter 20 Bankruptcy?
The term "Chapter 20" combines Chapters 7 and 13 because debtors file both bankruptcy chapters one after the other.
A Chapter 7 bankruptcy is generally used to eliminate qualifying unsecured debts, such as credit card balances, medical bills, and many personal loans. Once those debts are discharged, some individuals choose to file Chapter 13 to reorganize debts that remain, often through a court-approved repayment plan.
Although the filings occur separately, they can work together to address financial challenges that a single bankruptcy chapter may not resolve.
Why Consider Chapter 20 Bankruptcy?
A Chapter 20 strategy is typically considered when Chapter 7 successfully eliminates unsecured debt but additional financial issues still need to be addressed.
For example, someone may have fallen behind on mortgage payments but wants to keep their home. While Chapter 7 can eliminate qualifying unsecured obligations, it generally does not provide a long-term plan for catching up on missed mortgage payments. A subsequent Chapter 13 filing may allow the homeowner to repay those arrears over time while maintaining regular monthly payments.
Chapter 20 may also be helpful when secured debts remain after a Chapter 7 discharge. Depending on the circumstances, Chapter 13 can provide a structured repayment plan that helps debtors protect important assets while resolving outstanding obligations.
In some situations, Chapter 20 may also create opportunities to address wholly unsecured junior mortgage liens, although eligibility depends on the facts of the case and current bankruptcy law. Because these issues can be legally complex, they should always be evaluated by an experienced bankruptcy attorney.
Can You Receive Another Bankruptcy Discharge?
One of the most common misconceptions is that filing Chapter 13 immediately after Chapter 7 automatically results in a second discharge.
Federal bankruptcy law imposes waiting periods between certain bankruptcy discharges. As a result, many Chapter 20 debtors are not eligible to receive a Chapter 13 discharge immediately after completing a Chapter 7 case.
That does not necessarily mean the strategy lacks value. Even without a second discharge, Chapter 13 may still provide important benefits, such as stopping foreclosure proceedings, allowing time to repay certain debts, or helping preserve valuable property. For many debtors, those protections are the primary reason for pursuing a Chapter 20 strategy.
Is Chapter 20 Bankruptcy Right for You?
Chapter 20 bankruptcy is not appropriate for every financial situation. In many cases, filing either Chapter 7 or Chapter 13 alone provides sufficient relief.
Before recommending a Chapter 20 strategy, an attorney will typically evaluate factors such as:
The types of debts you owe
Whether you own a home or other significant assets
Your current income and ability to make Chapter 13 payments
Whether you are facing foreclosure or repossession
Your long-term financial objectives
Because every bankruptcy case is unique, the best approach depends on how these factors work together rather than any single issue.
Talk to a Monmouth County Bankruptcy Attorney Today
If you are struggling with debt, you do not have to determine the right bankruptcy option on your own. While Chapter 20 bankruptcy can provide meaningful relief in the right circumstances, it requires careful planning and a thorough understanding of federal bankruptcy law.
At The Cassidy Law Firm, LLC, we help individuals and families in Monmouth County and throughout New Jersey evaluate their financial situation and identify the bankruptcy strategy that best supports their goals.
Whether Chapter 7, Chapter 13, or Chapter 20 is appropriate, we can explain your options and help you move toward a stronger financial future. Contact us today for a confidential consultation.