San Fernando Valley "Chapter 20" Bankruptcy Attorneys
You’ve heard of Chapter 7, Chapter 11, and Chapter 13 bankruptcy, but what do you know about "Chapter 20 bankruptcy?" In reality, there is no such type of bankruptcy as Chapter 20. When people use the term, Chapter 20 bankruptcy, they’re referring to the practice of filing for Chapter 13 bankruptcy after successfully filing for Chapter 7 Bankruptcy (7 plus 13 = 20, get it?). Is filing Chapter 20 legal? Will it help you with your debts? The answers to these questions will depend on your individual situation. Because of this, it is recommended that you consult an experienced bankruptcy attorney. The legal team at the San Fernando Valley offices of Nader & Berneman has been helping Southern California residents get debt relief for over 20 years. Call them for a free case assessment at (800) 568-0707.
Why File for "Chapter 20" Bankruptcy
Well, let’s look at what Chapter 7 and Chapter 13 accomplish individually. Chapter 7 bankruptcy will relieve you of most of your unsecured debt (medical bills, credit card debt, etc.), but not your secured debt (mortgages, car loans, etc.). Chapter 13 allows you to reorganize your debt, giving you a chance to renegotiate for different payment terms from your creditors while keeping your collateral (house, car, boat, etc.). Chapter 13 also forgives certain types of IRS debt and may allow you to turn second and third mortgages (secured debts) into forgivable unsecured debt. However, there are limits to how much overall debt you can owe to qualify for Chapter 13 bankruptcy, $XXX,XXX in secured debt and $XXX,XXX in unsecured debt. By filing Chapter 7 first and getting rid of most of your unsecured debt, that may put you under the cap for overall debt required to file Chapter 13. In short, if you don’t want to lose your house and car, but you’re carrying too much debt to qualify Chapter 13, "Chapter 20" may be your solution. Also, if you’re just trying to buy some time while you catch up on mortgage or car payments, Chapter 20 can work for you.
Why "Chapter 20" May Not be a Good Deal for You
It’s important to remember that if you don’t wait four years after filing Chapter 7 to file Chapter 13, the debt that would formerly be discharged under Chapter 13, will not be discharged. Also, having just rid yourself of your unsecured debt in filing Chapter 7, you’ll be freeing up more of your income as disposable income - making it harder to renegotiate better terms with your creditors. It’s also important to remember that the courts have a lot of power in bankruptcy cases. Not all judges will allow someone filing Chapter 20 to discharge second and third mortgages (lien stripping). In the end, filing Chapter 20 opens you up to charges of bad faith filing and abuse of the bankruptcy system, which will only complicate your mission to relieve your debt.
Educated and Experienced Advice
If you’re confused, that’s very understandable. Everyone’s situation is different and no single solution fits every problem. The SFV bankruptcy attorneys at the Encino offices of Nader & Berneman will sit down with you and go through all of your options. We’ve guided many Southern California clients through the legal maze of bankruptcy. Call us for a free consultation at (800) 568-0707.
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- Is Bankruptcy a Smart Option?