No one wants to file for bankruptcy, let alone more than once. But you may find yourself in a financial situation where you cannot afford to pay all your debts. Assets like your car or home then run the risk of repossession or foreclosure. In these circumstances, filing Chapter 20 bankruptcy may be your best option.
Chapter 20 is not its own form of bankruptcy. Rather, it refers to the subsequent filing of Chapter 7 and Chapter 13 bankruptcies. When you file Chapter 7 bankruptcy, your discharged assets repay the creditors you owe. Chapter 13 bankruptcy requires a repayment plan which allows you to pay off nonexempt debts – like student loans – that you may still owe.
If you’re seeking a fresh financial start after accumulating a mound of debt, keep these benefits of Chapter 20 bankruptcy in mind.
More debt means more time
If your debt is significant, filing Chapter 7 will liquidate your assets and help you reduce the total amount owed. But you may still face nonexempt debts, which may be easier to pay off once your total debt decreases. While filing Chapter 13 after Chapter 7 keeps you on the hook for these debts, it gives you a three to five-year period to repay them.
More time means more security
One reason people opt for Chapter 20 bankruptcy is to have a chance at keeping their car and home. While you won’t automatically lose either with Chapter 7 alone, these are non-exempt assets under its statutes. Filing Chapter 13 can place a stay on your assets (an order which stops creditors from seizing them). If you have second or third mortgages as well, Chapter 13 can strip you of those. Once you protect your home and your car, you can then create a repayment plan that will help you hold on to them and eliminate your other debts.
Many people consider bankruptcy disastrous. But it can also afford you a chance at settings your finances straight. Using the Chapter 20 filing structure can reduce your debts and may help you maintain the ownership of your prized possessions. If you’re curious whether Chapter 20 may be for you, a bankruptcy lawyer can help you determine if it’s appropriate for your circumstances.