Chapter 20 Bankruptcies

August 9, 2023

Can your debtor file for Chapter 13 bankruptcy (BK) protection again four years after they got their Chapter 7 BK discharge? The combination of these two bankruptcies is commonly known as a Chapter 20 BK, (add 7 and 13 together, and that is why they call it a Chapter 20 bankruptcy).

One of many judgment-related articles: I am a judgment broker, not a lawyer, and this article is my opinion based on my experience, please consult with a lawyer if you need legal advice.

If your debtor is attempting a Chapter 20 BK tactic, you or your lawyer will need to ask the BK judge if that is allowed. I think if the debtor got a discharge with a Chapter 7 BK; they must wait 4 more years before attempting to file for Chapter 13 bankruptcy protection. If they attempt it before than four years, you/your lawyer may have to point this out to the BK Trustee.

In California, Chapter 20 bankruptcy attempts are often accepted by many BK judges, at least in California’s Central District. Chapter 13 BKs and Chapter 7 BKs, use different chapters of the BK laws; and therefore are usually not mutually exclusive.

Generally, BK laws do not set any minimum times that a debtor must wait before they can file for bankruptcy protection again. However, if the debtor files for bankruptcy too soon after they got a discharge of their debts in a prior BK, they usually cannot receive another debt discharge.

If the debtor is filing under the same bankruptcy chapter; the time frames are different, depending on whether they are filing for a Chapter 7 BK or a Chapter 13 BK.

If the debtor got their Chapter 7 BK debts discharged, they cannot receive a second Chapter 7 BK discharge for another 8 years. If they got a Chapter 13 discharge, they cannot get another Chapter 13 discharge for another 2 years.

This can become complicated if the debtor filed for a second Chapter 13 BK between 2 and 6 years after their first Chapter 13 BK; if the first BK court refused to confirm their second Chapter 13 plan.

Usually, if a BK plan is not confirmed, the debtor may convert their Chapter 13 BK to a Chapter 7 BK. However, in this situation, the rules for receiving a second Chapter 7 discharge after a Chapter 13 discharge would usually kick in, and stop them from getting a successful discharge in their converted case attempt.

If the debtor’s BK filings types were different, then the BK filing time limits change. If the debtor’s first discharge was granted with a Chapter 13 BK, they cannot receive a second discharge under Chapter 7 BK, until 6 years after the date that their Chapter 13 BK was filed. The only exceptions to the 6-year waiting period are:

1) If the debtor repaid all their unsecured creditors fully in their first Chapter 13 BK, or if they repaid at least 70% of the creditor claims in their Chapter 13, and their plan was proposed in good faith, and it was their best effort.

2) If the debtor’s first Chapter 7 BK debt discharge was granted, they cannot receive a second Chapter 13 BK discharge within four years; after the date that their first Chapter 7 BK was filed.

In certain circumstances, the debtor might benefit by filing for Chapter 13 BK immediately after getting their first successful Chapter 7 BK discharge (such as a situation is often called a Chapter 20 bankruptcy). As an example, if the debtor wants for bankruptcy protection again while they are paying some tax debt(s) within their Chapter 13 BK plan.

Whether a debtor can benefit from a Chapter 20 BK attempt, depends on their personal circumstances; and the case laws in their court. A debtor should consult with an experienced bankruptcy lawyer, before attempting a Chapter 20 BK.

If the debtor did not receive a discharge in their first bankruptcy attempt, in most cases; they can file for bankruptcy again without any limits on their second discharge attempt.

However, the debtor may have to wait for 180 days; if their first BK case was dismissed for failure to obey a court order, failed to appear in case, or they voluntarily dismissed their case after some creditor(s) filed a motion for relief from their bankruptcy stay. There might be some additional related rules in certain courts.

If the debtor’s discharge was denied in their first BK attempt, they may be able to file for BK again; however they will probably not be entitled to discharge the debts from the first BK. The debtor should consult with an experienced bankruptcy attorney.

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