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What Is a Chapter 20 Bankruptcy?

Prior to the legislative changes to the bankruptcy code in 2005, commonly referred as “BAPCPA”, a debtor could file a chapter 7 bankruptcy in order to discharge their unsecured debt then subsequently file a chapter 13 to restructure secured debt – often times stripping a second mortgage and home equity lines of credit. Chapter 20 is the colloquial term for when a chapter 7 is followed by a chapter 13.

There was a division amongst the bankruptcy courts within the Eleventh Circuit’s jurisdiction (Alabama, Florida and Georgia) as to whether a chapter 20 is permissible post BAPCPA. Judges Glenn and Williamson of the Middle District of Florida and Judge Mullins of the Northern District of Georgia held that a chapter 20 is permissible post BAPCPA. However, debtors in the Southern District of Florida were not permitted to file successive – an en banc panel of judges (before the entire panel of Judges) in the Miami district and Judge Olson in Fort Lauderdale held that a debtor is not eligible for a discharge in the subsequent chapter 13.

Luckily for debtors residing in the Southern District of Florida, the Eleventh Circuit adopted the Middle District’s holding: allowing the filing of chapter a 20 bankruptcy post BAPCPA. For debtors who may not be eligible to file a chapter 13 due to eligibility requirements or are unable to propose a feasible plan, a chapter 20 may allow them achieve their objective of restructuring their secured debts.