Chapter 20 Bankruptcy


Chapter 20 Defined:

The filing of a Chapter 7 bankruptcy petition, followed by the often immediate filing of a Chapter 13 bankruptcy petition is known as a Chapter 20 bankruptcy. The benefits of Chapter 20 proceedings have been a boon for many troubled borrowers seeking maximum relief from overwhelming bills through a Discharge under Chapter 7 with a subsequent Chapter 13 repayment for non-dischargeable tax debts.

The discharge, or extinguishment, of numerous types of unsecured general claims of low priority to a burdened debtor under Chapter 7 can clear the way to allow for proper payment of more important priority, secured and non-dischargeable claims – items like recent taxes, mortgage payments and other critical debts, all of which are subject to favorable treatment under Chapter 13.

After eliminating low priority debts and obligations through a Chapter 7 bankruptcy Discharge, those debts not eliminated or discharged can be paid from all remaining income with the importance they truly deserve. These payments can be made under the favorable repayment terms of a subsequent Chapter 13 Plan of Reorganization.

Chapter 13 is in general the most under-utilized chapter of bankruptcy. In fact, very few bankruptcy specialists focus their practice on the somewhat complicated and specialized provision and procedures specific to Chapter 13 of the United States Bankruptcy Code. This void in qualified bankruptcy professionals is unfortunate, since Chapter 13 allows for the greatest debtor protections and options available under any provision of the law.

Chapter 13 allows the borrower:

  1. The full protections and avoidance powers of a debtor-in-possession; i.e. lien avoidance, preferential payment, avoidance and litigation powers;
  2. All the provisions and protections found under Chapter 7;
  3. Full jurisdiction throughout the United States in a swift and favorable forum for the litigation of any and all creditor claims adjudicated “at home” in the debtor’s place of residence;
  4. The ability to alter all forms of obligations, including all types of tax claims, priority claims, secured claims and otherwise non-dischargeable claims;
  5. The ability to obtain court orders on “confirmable” plans with or without the voting rights or consent of creditors as required under Chapter 7 or Chapter 11 proceedings.

Chapter 20 for Tax Elimination and Favorable Repayment

Although few practitioners are experienced or proficient under the provisions of Chapter 13, properly utilized, Chapter 13 or Chapter 20 is the strongest forum available for complete tax elimination or restructuring. In general, older state and federal income taxes can be eliminated and more recent income taxes can be restructured in accordance with affordability and without creditor or tax authority consent.

Although somewhat unknown and rarely discussed, Chapter 20 does, in the hands of experienced counsel, provide the best possible relief available under state or federal law. Its utilization to eliminate dischargeable, low priority obligations through Chapter 7 and the immediately subsequent filing of a Chapter 13 proceeding to eliminate or restructure all forms of state, local and federal taxes makes it a panacea for consumers with overwhelming tax debt.

As one of the leading providers of Chapter 20 relief throughout Connecticut, we are always available to discuss the applicability of the provisions of Chapter 20 to your clients’ specific circumstances. We have routinely encountered and swiftly resolved tax problems in the most complicated and long-term circumstances imaginable.

At the Law Offices of Neil Crane, we have been providing Chapter 7, 11, 13 and 20 tax solutions since 1983.