When you’re up to your neck in loans, mortgage payments, and credit card debt, the two main options to restart your financial life are a Chapter 7 or Chapter 13 bankruptcy. While many debtors flirt with this idea, the reality is that it can be a complex legal and financial decision. In fact, it can be so complex that people file for a “Chapter 20” bankruptcy. Filing for a Chapter 7 followed by a Chapter 13 results in a sum of twenty, hence the phrase “Chapter 20.” So why do debtors file for both back to back?
Filing for Chapter 7 and 13 Bankruptcy Basics
While this type of action is rare, more and more debtors are considering for filing for both Chapter 7 and 13 bankruptcies in today’s rough economy. With the help of a Dallas bankruptcy attorney, debtors can successfully eliminate or reorganize their debts instead of partially discharging them. The reason that people pursue the “Chapter 20” bankruptcy by filing for Chapter 13 is to eliminate the debts that weren’t dischargeable through Chapter 7.
Important points to remember about this so-called Chapter 20 bankruptcy include:
- Caution. Filing for a Chapter 13 immediately after a Chapter 7 petition is pretty rare. In most cases, individuals file for Chapter 7 with no intention of filing another bankruptcy – only to fall into debt a few years later and decide to file Chapter 13 with the help of a bankruptcy attorney. In other words, working to file a Chapter 13 immediately after Chapter 7 from the get-go, even with the help of a bankruptcy attorney, could be interpreted as a scam by some judges and creditors. If this is the case, creditors can object to the move and the judge can toss the petition.
- Seek counsel. Working with a bankruptcy attorney can help eliminate this threat. As long as there’s a legitimate reason behind your bankruptcy filing, you shouldn’t have to worry about applying for both options back to back. Remember, the mistakes you’d make on your own would most likely be more costly than hiring an experienced bankruptcy attorney.