“Chapter 20” Bankruptcy

You won’t find Chapter 20 described in the law books. However, it is a sometimes used strategy to assist people who face difficult financial challenges.

A Chapter 20 is called such because it is essentially a Chapter 7 followed by a Chapter 13 (7 + 13 = 20).

A “Chapter 20” bankruptcy might be proposed by a competent bankruptcy attorney in the following situation. A married couple unfortunately is burdened by massive debt – perhaps over $100,000.00, in credit cards, medical bills, etc. This couple maybe has four children, one with special needs. They are six months behind on their house payment and foreclosure is threatened. It is imperative that debtors keep their home in order to provide for their children.

In spite of this couple’s past difficulties they are now on a stable path financially with recently obtained employment.

Under this scenario, it might be recommended that this couple file a Chapter 7 bankruptcy first. This would have the effect not only of eliminating the $100,000.00 worth of medical debts/credit cards, etc., but would also forestall the threatened foreclosure as against Debtors’ home.

After the Chapter 7 is completed (perhaps four months after filing), the couple could then file a Chapter 13 Bankruptcy, which would allow debtors to “catch up” the payments on their home over a period of three to five years.

If you or someone you know has a situation somewhat similar to that as described above, make sure that a competent bankruptcy attorney is retained, as “Chapter 20’s” are complicated and many technical rules must be followed.

This article is for information purposes only and is not to be considered or substituted as legal advice. The information in this article is based on North Carolina state laws in effect at the time of posting.

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