Chapter 20 Bankruptcy: What You Need To Know

In order to understand chapter 20 bankruptcy, you first have to understand both chapter 7 and chapter 13 bankruptcy; this is due to the fact that filing both is the process of filing chapter 20. This can be really confusing, so we are going to break down the understanding of chapter 7 and chapter 13, as well as the pros & cons of filing a chapter 20.

By the end of this article it should be abundantly clear to the reader. Further, information on sites like, can also provide alternatives to bankruptcy. So, at the very least, you will be able to know if filing a chapter 20 bankruptcy is right for you.

Chapter 7 Bankruptcy

This is a 2 part process. The first step is to meet with the creditors. They will decide, essentially whether or not they are going to discharge your debts. They have 60 days in which to decide. If they do decide to discharge your debt, you will probably have to take a class on how to proceed from there – this is the second stage of the process. Now, there is no guarantee that you can get your debts discharged. Not all debts are available to be discharged. If they decide not to discharge your debt, you will get a reason why they cannot be discharged. Keep in mind that even though your debts are cleared, and your assets are likely to be exempt.

Chapter 13 Bankruptcy

There are a lot of cases where you can file chapter 13 bankruptcy immediately after getting chapter 7 done. The way that it differs from chapter 7 is that, while you do not lose your home or car in the process, you don’t get cleared of these debts, either. You will have some of your debts cleared, but (for the most part) you are going to be set up on a repayment plan that will allow you to easily repay your debts without taking a significant loss on your assets.

Now here’s the hard pill to swallow. As part of chapter 13, you have no rights to take on any kind of new debt, without the courts approval, until the old debts are completely paid off. If you happen to receive any unexpected money, it is going to be applied towards your payment plan. So just be ready to live on an extremely tight budget with no wiggle room. Also, can help you manage the effects of a chapter 20 bankruptcy, or provide you with a different way to maintain your credit score (with better debt management).


So here are the real benefits to filing for chapter 20 bankruptcy. According to the chapter 7 bankruptcy you are going to get some of your debts removed. You will have a reasonable amount of financial breathing room to accommodate debts that cannot be removed. You have the ability to refocus and regroup, so that your new plan includes what is really important. Payment plans, according to chapter 13 bankruptcy, usually last about 5 years – which isn’t a terribly long amount of time.

The Downside

Chapter 20 bankruptcy is going to take away all your assets. It is not going to give you much room to grow. You are pretty restricted to what you agree to. You are not going to have any extra money. You will not be able to do any unnecessary improvements to your house. You are not going to do much of anything, without having to file a petition from the courts – the success rate for filing this can be low.

Also, if you miss a single payment, you can lose your whole payment protection plan. If you get a settlement of any kind, you will find that it is redirected to your payment plan – this may not seem fair, but it is money that you owe. With a chapter 20, signing the agreement means you agreed to pay it by any means. The upside of this is that even though you don’t have more wiggle room in your budget, it is going to cut down the amount of time that you are on the payment plan.

It is essential that you get a lawyer to help you to understand any contract that you may have to sign and commit to. If you do not fully understand what is expected of you in a process like this, can help simplify this difficult financial readjustment. This financial commitment is an arduous process. In the long run it could save you from financial ruin, if you follow the rules that are outlined in the paperwork. Chapter 20 bankruptcy is definitely a useful tool to get your life on track. It is meant to help those who need the extra help.