20 June

Filing Multiple Bankruptcy Actions

Many people believe that taking the step to file for bankruptcy is a bad thing based on the misinformation that is widely disseminated by lenders and creditors who ultimately want individuals and businesses to exhaust all possible means to remain current on their bills and obligations, regardless of the long-term harm that these measures will have. However, bankruptcy was created in order to offer necessary relief to those who need the help. Depending on the debtor’s circumstances, there are different bankruptcy options, including commencing a Chapter 7 or a Chapter 13. However, there are times when more than one bankruptcy action is necessary in order to get the debtor in the right financial position to get a fresh start. Often, this is referred to as filing a “Chapter 20,” which refers to the use of both 7 and 13 bankruptcy actions to achieve the desired results.

A bankruptcy action filing is a big step. Making the decision to undertake a second case requires careful review of the debtor’s circumstances in order to decide whether this is a logical way to proceed. Before starting this course, there are a number of considerations, including:

By filing an initial Chapter 7 action, the debtor can discharge enough debt that he can manage the remaining payments on non-dischargeable debts. Therefore, it creates a situation that supports greater financial stability and a foundation where the debtor to meet his obligations moving forward.
The debtor needs to know that the timing between these two actions is important – if he files a Chapter 7 action (presuming all income requirements are satisfied) and then files a Chapter 13 case within four years, then the debtor is not eligible for a discharge of debt in the 13 case. However, the subsequent filing of a Chapter 13 will provide an opportunity to catch up on overdue home loans, car payments, and unpaid tax debt, which are not subject to discharge under a Chapter 7, thereby avoiding repossessions and foreclosures.
A debtor who owns a home subject to more than one mortgage loan can utilize the Chapter 13 action in order to strip a junior lien off of the home. The stripping of a loan involves removing an unsecured loan from the property. In order to determine if a loan is unsecured, it is necessary to evaluate the first mortgage on the property. If the amount of the loan is greater than the fair market value of the home, then there is no security remaining for subsequent loans. This would result in no payment for a secondary lienholder in a foreclosure action, leaving them unsecured. This result only is possible if the debtor waits more than four years between the filing for a Chapter 7 and Chapter 13 action.

Although there are many benefits to a Chapter 20 for specific debtors, it is something to be contemplated carefully before embarking on this path. Many bankruptcy judges do not believe that the two filings are fair to certain creditors. This is particularly true if a junior lienholder is going to be left with nothing after the second bankruptcy filing. However, the major benefit of providing additional time for the debtor to create a sustainable financial framework through which to move forward may justify the filing of these two actions in planned succession.

The Law Offices of Georgette Miller & Associates, P.C. was founded in order to help individuals and businesses to take advantage of the bankruptcy laws in order to achieve financial stability after hardship has resulted in an inability to pay bills and expenses. Our attorneys are experienced in reviewing the unique circumstances of each individual to develop the strategy that works best for him. We provide dedicated and knowledgeable support throughout the entire process, no matter how long it lasts. To schedule a time to discuss the situation in which you find yourself, call us at 1-866-964-6529 ((866) 964-6529).