Chapter 20 Bankruptcy Explained (2024)

FAQs

Chapter 20 Bankruptcy Explained? ›

Essentially, a Chapter 20 is nothing more then a Chapter 7 completed bankruptcy (with discharge of debts issued) followed by a second bankruptcy filing – a Chapter 13. The second bankruptcy filing would not discharge debts – as the time limits for getting a second discharge in Chapter 13 is restricted to 4 years.

How a Chapter 20 Bankruptcy Works. Chapter 20 generally refers to a situation where a Chapter 13 is filed right after your Chapter 7 is completed. Some courts even allow the Chapter 13 to be filed after the Chapter 7 discharge is granted but before the case is closed.

Loss of Property

If you include secured debt, such as a mortgage loan or auto loan, in your bankruptcy filing, you could also lose the property or vehicle you used as collateral for the debt.

Cons of Filing For Bankruptcy

It remains part of your credit record for up to 10 years, which is going to make borrowing during that time more difficult and expensive (higher interest rates).

Chapter 7 Bankruptcy. According to the U.S. Courts, the purpose of Chapter 7 bankruptcy is to clear most if not all of your debt in a relatively short time frame. The large majority of people filing Chapter 7 are able to exempt or retain all of their assets.

The law states that credit reporting agencies may not report a bankruptcy case on a person's credit report after ten (10) years from the date the bankruptcy case is filed. Generally, bad credit information is removed after seven (7) years.

Your 401(k) — and most other retirement savings accounts — are protected during bankruptcy. Work with a bankruptcy attorney to determine how to handle your savings. But in general, your retirement should be safe from creditors whether you file Chapter 7 or Chapter 13 bankruptcy.

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy.

How Are Assets Divided in Bankruptcy? Secured Creditors - often a bank, is paid first. Unsecured Creditors - such as banks, suppliers, and bondholders, have the next claim.

You can typically work to improve your credit score over 12-18 months after bankruptcy. Most people will see some improvement after one year if they take the right steps. You can't remove bankruptcy from your credit report unless it is there in error.

Is it better to settle or bankruptcy? ›

Debt relief can help individuals manage their debts and avoid bankruptcy, but it can harm their credit if it involves debt settlement with lenders for less than is owed. Bankruptcy also has negative credit consequences that can last for years.

Generally, Chapter 7 is more appropriate for simple cases while Chapter 13 for more complicated bankruptcies. Or somewhat more accurately, Chapter 13 can give you more power over and flexibility with certain kinds of creditors, and if you have non-exempt assets.

Bankruptcy can often reduce or eliminate your debts, save your home, and keep bill collectors at bay. But it also has serious financial consequences, including long-term damage to your credit score. That, in turn, can affect your ability to borrow in the future.

When an individual files for bankruptcy, they are typically responsible for paying the costs of the bankruptcy process. The cost of filing for bankruptcy can vary depending on several factors, including the type of bankruptcy, the complexity of the case, and the location of the bankruptcy court.

“In my experience, about 15% don't even get approved. From there, they can be dismissed before the process is completed for a lot of reasons.” Why would a Chapter 7 bankruptcy be denied and how can you avoid it? Let's take a look.

Filing for Chapter 7 bankruptcy eliminates credit card debt, medical bills and unsecured loans; however, there are some debts that cannot be discharged. Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, and most unpaid taxes.

A bankruptcy drops off your credit report after 10 years if you file for Chapter 7 bankruptcy, or after seven years if you file Chapter 13 bankruptcy. As long as it stays on your credit reports, a bankruptcy can hurt your credit scores, but its impact on scores lessens over time.

A Chapter 7 bankruptcy may stay on credit reports for up to 10 years from the filing date, while a Chapter 13 bankruptcy generally remains for seven years from the filing date.

In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

They don't get mad when they get your bankruptcy filing and they don't cry when they get your bankruptcy filing. Instead, they process the bankruptcy notice along with the thousands of others they get each year without an ounce of emotion about it.