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Could a Chapter 20 bankruptcy be the best option for debt relief?

On Behalf of | Apr 28, 2023 | Bankruptcy Law

According to records maintained by United States Courts, 413,616 people from Pennsylvania and around the country filed bankruptcy in 2021. Bankruptcy is a way for individuals and business entities to petition state courts for relief from debt they are unable to pay. The most common bankruptcy filings are Chapter 7, 11 and 13. However, there is a lesser-known bankruptcy option which includes a combination of filings to address different types of debt.

What is a Chapter 20 bankruptcy?

A Chapter 20 bankruptcy is a term to describe utilizing a combination of Chapter 13 bankruptcy with a Chapter 7. Often, it could be necessary for an individual to file more than one type of bankruptcy if they have both secured and unsecured debt that they are unable to pay. However, established bankruptcy law states you cannot file Chapter 7 and Chapter 13 at the same time. Therefore, it is important to understand which type of filing should be applied for initially.

Chapter 7 first, then Chapter 13

Chapter 7 bankruptcy rules focus on taking care of unsecured debt which is money owed that is not secured by collateral. An example of unsecured debt would be credit card debt or signature loans with no security listed. The greatest advantage of an initial Chapter 7 filing is it eliminates the amount of debt an individual has. This is important because Chapter 13 bankruptcy has limitations on how much debt you can have when you file. Once the initial debt is relieved from Chapter 7, Chapter 13 can be used to eliminate secured debt such as car loans.

If you are considering bankruptcy as a financial option, it will be important to research all available solutions before making a plan to manage your debt. No two situations are the same, and making the right decision will go far in helping to create a bright financial future.



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