Chapter 20

First of all, there is no  Chapter 20 in the Bankruptcy Code. The term “Chapter 20” is a shorthand  term where the individual or married couple has filed a Chapter 7 and  shortly thereafter filed a Chapter 13.

When the homeowner is faced  with a foreclosure and has no present ability to file a Chapter 13 to  save the property a Chapter 7 may be appropriate. In addition to  mortgage defaults, there is likely a good deal of other debts. The  discharge in a Chapter 7 relieves the person from his/her/their debt  obligations.

But circumstances change. For instance, a married  couple may have separated and both incomes were required to successfully  file a Chapter 13. Being separated a Chapter 7 was the logical avenue  so they could get a “fresh start.”

After the Chapter 7 discharge,  the couple reconciles and now has sufficient income to pay the current  mortgage; make payments to the Chapter 13 trustee, and have a sufficient  amount for their everyday living expenses.

Courts, trustees, and  mortgagee may look at such a “Chapter 20” with suspicion. But if  circumstances have changed for the good the Chapter 13 should be  confirmed and the debtor will be given a chance to save the home.

There  are, of course, other changes in circumstances following a Chapter 7  discharge. An unemployed or underemployed Chapter 7 debtor may get a  good-paying job. The list of positive changes of circumstances following  a Chapter 7 could on and on.

Good things sometimes happen to good people.

The  point is that something good happened after the Chapter 7 discharge.  And the subsequent Chapter 13 case is being filed in “good faith.”

General Information:

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