Most consumer websites such as this one focus on Chapter 7 cases and Chapter 13 cases, with the occasional reference to individual Chapter 11 cases.  The types of Bankruptcy are identified by the specific chapter in the U.S. Bankruptcy Code.  What is a Chapter 20 case, since there is no Chapter 20 in the Bankruptcy Code?  Chapter 20 is a term used by Bankruptcy lawyers to describe a Chapter 7 case followed by a Chapter 13 case, usually as part of an overall strategy. Most of the time the strategy is to get a discharge of debts in a Chapter 7 case, and then strip unsecured liens in the Chapter 13 case.  The Chapter 7 case is filed first in order to reduce the overall debt.  Perhaps the client had too much debt to come within the Chapter 13 limits, or needs to reduce the debt in order to make up arrearages for a home loan or pay non-dischargeable debts.  The Chapter 13 is then filed after the Chapter 7 case is closed in order to strip unsecured liens from the home.  The client still has to propose a Chapter 13 Plan, and will not receive a second discharge of debts, but it allows many clients to come out ahead in the long run and keep a house they may not otherwise be able to afford due to multiple liens.

A Chapter 20 Bankruptcy strategy is something that needs to be very carefully considered with an experienced Bankruptcy lawyer.  Not only does the lawyer have to consider the Chapter 7 case as if it were the only case being filed, the lawyer has to consider whether a subsequent Chapter 13 case is feasible if the Chapter 7 case goes well.  The lawyer will also discuss a back-up plan in case a later Chapter 13 filing turns out to be a bad idea based on changed circumstances.  Additionally, some Bankruptcy Courts do not allow lien stripping in the context of a Chapter 20 strategy so it is important to know how local courts will rule.  In June 2014, the Eleventh Circuit, which includes Georgia, Florida and Alabama, has authorized lien stripping in Chapter 20 cases in those states.

Importantly, in Georgia, Florida and Alabama, the courts have authorized the stripping of unsecured liens in Chapter 7 cases.  As of this writing, they are the only states that allow this.  Thus, our clients in these states can often get a discharge and strip the liens without having to file a second Chapter 13 caseUpdate – lien stripping in Chapter 7 cases was disallowed by the U.S. Supreme Court in June 2015.

Scott Riddle is a Bankruptcy and Foreclosure lawyer in Atlanta, Georgia.  The best way to contact us is by phone at 404-815-0164. You can also email, or contact us through the contact page.