Are there reasons to file bankruptcy if I am not discharge eligible? What is a Chapter 20 bankruptcy?
In some cases, a client in bankruptcy may be allowed to receive a discharge. This is usually because the debtor filed a recent bankruptcy within a certain period of time. Bankruptcies filed too close together may not allow the second bankruptcy to receive a discharge.
There are times, however, when a second bankruptcy, even if there is no discharge allowed, may be in the benefit of the debtor.
For instance, there are what is known as Chapter 20 bankruptcy proceedings. This is a Chapter 13 bankruptcy files immediately following a Chapter 7 bankruptcy. The debtor would receive a discharge in the Chapter 7, but not in the second Chapter 13 filing.
Chapter 20 cases are done to take advantage of the automatic stay and allow the debtor to pay some portion of his or her debts through the Chapter 13 payment plan. This is typically done for tax debts that are owed, outstanding child support or alimony arrearages, to pay mortgage arrears without the threat of foreclosure, and for some other reason. These cases are not common, but they do occur.
In other cases, a debtor may not be eligible to file a Chapter 7 bankruptcy again (as the rule is you must wait 8 years between each Chapter 7 filing to get a discharge) but would be allowed a discharge in a Chapter 13 case. This is a very typical scenario.
In both cases above, the second case, whether discharge eligible or not, allows for the debtor to take advantage of the automatic stay.