Chapter 20 Bankruptcy

If you want to lienstrip to make your 2nd mortgage disappear, one big hassle is that you can only do this in Chapter 13. The Chapter 13 is debt settlement program supervised by a Bankruptcy Trustee. Chapter 13 can be very rigorous and demanding. The Chapter 13 Trustee has the power to determine how much "you can afford to pay" and it can be impossible to persuade the Trustee that all the expenses you wish to claim, whether for your cigarettes, your children’s karate lessons, gifts for your grandchildren, or the annual family vacation, are really necessary. As a result, in Chapter 13, your payments can be so high that you could feel that you are in a form of "debtor’s prison."

Strangely, nowhere in the bankruptcy law is there anything actually called a Chapter 20. But don’t conclude that a Chapter 20 is a sham or is something that doesn’t exist. Chapter 20 is a real thing, but in bankruptcy jargon, it simply means a Chapter 7 Bankruptcy followed by a Chapter 13 Bankruptcy. Because 7 + 13 equals 20, bankruptcy lawyers refer to these two bankruptcy cases, one followed by another, as Chapter 20.

Although most debts can be eliminated by filing a Chapter 7 Bankruptcy, some debts won’t go away through Bankruptcy. Examples include certain tax debts, student loans, alimony and child support, as well as debts related to restitution for crimes. Other debts that can be eliminated in a Chapter 7 Bankruptcy, could result in the loss of property unless they are paid. For example, if someone doesn’t pay a mortgage, the creditor can foreclose. If someone doesn’t pay their vehicle loan, the creditor can repossess.

So here is the advantage of lienstripping through a Chapter 20, instead of a straight Chapter 13. Since you go into a Chapter 13 only owing any debt on your 1st mortgage, the only payments you have to make in your subsequent Chapter 13 are the balance of your legal fees, any mortgage arrearages, and a 10% commission to the Bankruptcy Trustee.

Unlike a Chapter 13 alone, with a Chapter 20, there is no minimum period of time that you must make payments. Once you pay off what you owe, you are done and can exit out of Bankruptcy Court. It is possible to complete the Chapter 13 portion of the Bankruptcy in as little as 6 months. In addition, since you have very little actual debt to repay, since the debts for your credit cards, collection accounts, medical bills, and your 2nd mortgage were discharge in your Chapter 7, the Bankruptcy Trustee cannot insist on you making higher payments because you are paying 100% of all your remaining debts.

Yes, you will pay more in legal fees to your greedy attorney with a Chapter 20! But you will pay your credit cards, debt collectors and others who forced you into bankruptcy absolutely nothing. Isn't paying the lawyer that formulates this strategy for you and gives you your life bank a worthwhile investment in your future?


Home Page

A Fresh Start Law Office
2037 Franklin Ave • Las Vegas, NV 89104