Sunday, August 30, 2015

Chapter 20 Debtor Can Now Strip a Wholly Unsecured Junior Lien Against A Principal Residence Notwithstanding Debtor’s Lack of Eligibility for a Chapter 13 Discharge

Of course there is no chapter 20 in the Bankruptcy Code.  Chapter 20 is simply a chapter 13 filed in conjunction with and shortly after a chapter 7 case.

One of the most common uses of chapter 20 is to allow a debtor with too much debt to file chapter 13 to strip a wholly unsecured junior lien from his or her primary residence.  A lien strip from a primary residence is not allowed in chapter 7, but a person is not eligible for Chapter 13 if his or her secured debt exceeds $1,149,525, or his or her unsecured debt exceeds $383,175.  Under those circumstances chapter 7 is used to discharge the personal liability of the person with too much debt, and then a second case is filed under chapter 13 for the purposes of stripping the wholly unsecured junior lien(s) from the primary residence.

Until July of 2015 a chapter 20 debtor would have to wait 4 years in between the filing of his or her chapter 7 and the filing of the chapter 13, because a debtor wasn’t entitled to a second discharge until 4 years had passed, and the lien strip had been held to be part of the discharge of debt.  But the Bankruptcy Appellant Panel for the Ninth Circuit recently reexamined this issue and joined a consensus of courts permitting a chapter 20 debtor to immediately file chapter 13 after their chapter 7 for purposes of lien stripping because "nothing in the Bankruptcy Code prevents chapter 20 debtors from stripping such liens off their principal residence,”  The BAP concluded that the completion of the chapter 13 plan payments was the event that finalized the lien strip.

Simply put, the discharge of debt is not longer relevant to the lien strip issue.  A debtor may now immediately file chapter 13 after the conclusion of his or her chapter 7.


  1. Thanks for sharing. Bankruptcy is a provision of federal law that helps to protect an individual from the burden of overwhelming debt. When income is no longer sufficient for a person to make scheduled payments, such as mortgage, medical bills or credit cards, filing bankruptcy may allow you to renegotiate or discharge some of this debt to make it more manageable.Affordable bankruptcy lawyer

  2. Thanks for post. America was based on the drive of people to take after their own way to progress and a superior life. Private companies are a foundation of that custom, and they stay one of the our country's most imperative resources. Tragically, nonetheless, entrepreneurs confront a portion of the best budgetary dangers of anybody. Numerous do not have the monetary methods for bigger entrepreneurs.Boston Bankruptcy Information

  3. Your blog posts are more interesting and informative thanks for sharing.There is an once-over of domains where you can find free and simplicity direct surrender game plans and resources online to help stop dispossession. There are incredible eBooks that have been impacted available to help to and walk contract holders through a couple of procedures that are profitable with a ultimate objective to stop dispossession.Stop Foreclosure service

  4. Wow wonderfull post thanks for sharing.Under Chapter 13, the overall public will have a chance to spare their homes from dispossession. This may empower comprehend to reprobate home credit divides after some time, it enables people to reschedule secured and extend them over the life of the arrangement. Doing this may chop down the parts.Worcester Bankruptcy