You have likely heard the phrase Chapter 7 bankruptcy, and may have heard of Chapter 13 as well. If you are like most people, however, you probably do not know of Chapter 20 bankruptcy Options in Oklahoma.
Chapter 20 bankruptcy is not actually a bankruptcy chapter, like Chapter 7 and 13. Rather, Chapter 20 is a term used to refer to filing for Chapter 7 to discharge your unsecured debts, then filing for Chapter 13 in order to alleviate your secured debts. This is similar to mortgage payments and non-dischargeable priority debts. Chapter 20 bankruptcy comes with considerable benefits, but also several drawbacks.
The following is an overview of Chapter 20 bankruptcy as one of the bankruptcy options in Oklahoma.
Bankruptcy Options in Oklahoma – Benefits of Chapter 20
Chapter 20 bankruptcy offers several benefits, including:
- Chapter 20 can you qualify for a Chapter 13 bankruptcy: To qualify for a Chapter 13 bankruptcy, you cannot exceed certain maximum secured and unsecured debt amounts. These are currently $360,475 for unsecure debt and $1,081,400 for secure debts. If you exceed these limits, you will not be eligible for a Chapter 13 bankruptcy. By filing for Chapter 7 first, you may lower your debt to the limits applicable for a Chapter 13 filing. This will allow you to pursue a Chapter 13 to restructure and eventually discharge your remaining secured or non-discharged debts.
- Chapter 20 can allow you to focus on secured and priority debts: In a Chapter 13 bankruptcy, you will propose a repayment plan to payback all or most of your debts. Completion of this plan will result in discharge of all included debts. Most people file Chapter 13 in order to catch up on missed mortgage payments or to pay off non-dischargeable debts. By filing for Chapter 7, then seeking a Chapter 13, you focus your repayment plan on secured and priority debts. This allows you to reach total freedom from debt.
Drawbacks of Chapter 20 Bankruptcy
Despite its benefits, Chapter 20 bankruptcy also has several drawbacks, including:
- No discharge allowed in Chapter 13: After receiving a Chapter 7 discharge, you cannot receive a discharge under Chapter 13 unless the case it is at least four years later. Although minimal, it could impact those seeking to obtain a lien stripping, as described below.
- Lien stripping may not be allowed: Depending upon your particular court, as each varies on this issue, you may not be able to strip your second mortgage during a Chapter 13 action if you are not eligible for a discharge due to a previous Chapter 7.
- Potential bad faith objection: The court or trustee could raise a bad faith objection if they feel the only reason you file Chapter 7, then Chapter 13, is to avoid paying back creditors. You will have to offer a valid reason for pursing this option if the objection raises.
Contact Us about Bankruptcy in Oklahoma:
Bankruptcy options in Oklahoma can offer a means of escaping from oppressive debt and starting a fresh financial future, but is never something to be undertaken without thorough consultation with an attorney experienced in this area of law. If you file Chapter 7 or Chapter 13 bankruptcy, the Oklahoma Bankruptcy attorneys at Tulsa County Lawyers Group can help. Call today for a free consultation with a bankruptcy lawyer in Tulsa. Call our Today (918) 379-4864.
