Understanding Chapter 20 Bankruptcy

Chapter 20 Bankruptcy


What is Chapter 20 Bankruptcy?

The filing of a Chapter 7 bankruptcy petition, followed by the often immediate or later filing of a Chapter 13 bankruptcy petition is known as a Chapter 20 bankruptcy. The benefits of Chapter 20 proceedings have been a godsend 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 and powerful protections of a subsequent Chapter 13 Plan of Reorganization.

Altering New Debt After a Prior Chapter 7:  The Four-Year Rule

Chapter 20 is available even after a prior Chapter 7 Discharge within four years.

A Chapter 7 Discharge prevents a new or subsequent Chapter 7 within 8 years of the prior Chapter 7 filing date.  This is called a Chapter 7 bar, and means that 8 years must pass from a prior Chapter 7 filing to file again under Chapter 7.  Fortunately, there is a limited four-year bar between Chapter 7 and a subsequent Chapter 13 that still allows for the Discharge of new, post-petition debt.  While this is sometimes a unique situation, as successful Chapter 7 clients learn the dangers of new debt, any Connecticut family may be subject to surprise new debt, even with solid, newly-learned good borrowing habits.  This can come in the form of medical bills, job loss or other disasters wherein new debt becomes impossible to pay.

The four-year rule means that new debt after a prior Chapter 7 Discharge can be solved in Chapter 13 four years before the borrower is eligible for a second Chapter 7 filing.  The problems of the Covid-19 pandemic have made this option a savior for many recent successful Chapter 7 clients who now encounter new unforeseen financial problems.


Chapter 13 is the most powerful and 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.   Our office is the largest provider of Chapter 13 and Chapter 20 solutions in Connecticut.

Chapter 13 allows the borrower:

  1. Comprehensive debt relief with a customized repayment plan without any loss of control or loss of assets.
  2. All the provisions and protections found under Chapter 7.
  3. The full protections and avoidance powers of the Bankruptcy Code; i.e. lien avoidance, preferential payment, avoidance and litigation powers.
  4. The ability to alter all forms of obligations, all types of tax claims, priority claims, secured claims, otherwise non-dischargeable claims, student loan debt, and Divorce Decree property settlements.
  5. The ability to obtain court orders on “confirmable” plans with or without the voting rights or consent of creditors as required under Chapter 11 proceedings.
  6. 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.

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 solution for consumers with overwhelming tax debt.

As 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. Call us Today to learn about your options when it comes to bankruptcy and debt relief at 203-230-2233.