There is no Chapter 20 in the United States Bankruptcy Code. But the term is used frequently in bankruptcy courts across the country. A Chapter 20 is a colloquial name for a strategy that combines two separate bankruptcy filings: a Chapter 7 followed by a Chapter 13. The numbers add up to 20 — hence the name.
While the Bankruptcy Code does not officially recognize a Chapter 20, experienced bankruptcy attorneys use this strategy to help clients deal with debts that cannot be wiped out in a single filing.
What Is a Chapter 20?
A Chapter 20 involves two sequential filings:
- Chapter 7 bankruptcy — eliminates most unsecured debts (credit cards, medical bills, personal loans)
- Chapter 13 bankruptcy — creates a repayment plan for debts that survived the Chapter 7 discharge
The goal is to use Chapter 7 to wipe out everything you can, then use Chapter 13 to manage the debts that the law says cannot be discharged.
How Chapter 20 Works
Here is the typical flow:
Phase 1 — Chapter 7:
- You file Chapter 7 and receive a discharge of all dischargeable debts
- This eliminates credit card debt, medical bills, and other unsecured obligations
- Non-dischargeable debts survive (taxes, student loans, domestic support)
Phase 2 — Chapter 13:
- Shortly after the Chapter 7 discharge, you file Chapter 13
- You propose a repayment plan to pay the remaining non-dischargeable debts over 3 to 5 years
- The bankruptcy court monitors the plan
- Once the plan is complete, you have satisfied those obligations
The key insight is that Chapter 13 does not provide a discharge for the debts being paid through the plan. You do not need one — the purpose is to use the court’s protection while you pay off debts that would survive Chapter 7 anyway.
Chapter 20 for IRS and Tax Debt
This is one of the most common Chapter 20 scenarios. Certain IRS debts are non-dischargeable in Chapter 7 under 11 U.S.C. § 523(a)(1), including:
- Income taxes for returns due within the last 3 years
- Taxes where no return was filed
- Taxes where a fraudulent return was filed
- Trust fund taxes (payroll taxes)
Example: A client has $40,000 in credit card debt and $30,000 in recent IRS debt. The IRS debt is non-dischargeable. Without a Chapter 20, the client would emerge from Chapter 7 with $30,000 still owed to the IRS — with penalties and interest continuing to accrue.
With a Chapter 20:
- Chapter 7 eliminates the $40,000 in credit card debt
- Chapter 13 creates a 3- to 5-year plan to pay the $30,000 IRS debt
- The IRS cannot pursue collection actions during the plan
- Once the plan is complete, the IRS debt is satisfied
- No more penalties or interest accruing during the plan period
Chapter 20 for Student Loans
Student loans are generally non-dischargeable in bankruptcy under 11 U.S.C. § 523(a)(8), unless the debtor can prove “undue hardship” — a standard that is extremely difficult to meet.
Example: A person has $150,000 in student loans and $25,000 in credit card debt. Their disposable income is $600 per month. There is no realistic way to pay off $150,000 in student loans at $600 per month outside of bankruptcy.
With a Chapter 20:
- Chapter 7 eliminates the $25,000 in credit card debt
- Chapter 13 creates a plan where the $600 per month goes toward student loans through the court
- The plan provides structure and protection during the repayment period
- The student loans are not discharged, but they are managed systematically
Requirements and Eligibility
To use a Chapter 20 strategy, you must meet the requirements for both chapters:
Chapter 7 eligibility:
- Pass the means test (11 U.S.C. § 707(b))
- No prior Chapter 7 discharge within the last 8 years (§727(a)(8))
- No prior Chapter 13 discharge within the last 6 years (unless plan paid 100% of unsecured claims, or 70% with good faith and best effort) (§727(a)(9))
Chapter 13 eligibility:
- Must be an individual with regular income
- Unsecured debts must be less than $465,275 and secured debts less than $1,395,875 (as of 2024, adjusted periodically)
- No prior Chapter 13 discharge within the last 2 years, or no prior Chapter 7 discharge within the last 4 years
Important timing note: There is no mandatory waiting period between a Chapter 7 discharge and a Chapter 13 filing. However, filing too quickly after Chapter 7 can raise concerns about bad faith. An experienced attorney can advise on the appropriate timing for your situation.
Risks and Considerations
A Chapter 20 is not for everyone. Here are the key considerations:
- Two filing fees — you pay court fees for both Chapter 7 and Chapter 13
- Two sets of attorney fees — both filings require legal representation
- Credit impact — two bankruptcy filings appear on your credit report
- Bad faith concerns — some courts may view a Chapter 20 filing as an abuse of the system if not properly justified
- Chapter 13 commitment — you must complete the 3- to 5-year repayment plan or face dismissal. For a full breakdown, see our guide on Chapter 13 bankruptcy pros and cons
A Chapter 20 makes sense when you have a mix of dischargeable and non-dischargeable debt, and the non-dischargeable portion is significant enough to justify the cost and commitment of two filings.
Talk to a Bankruptcy Attorney
A Chapter 20 is a creative strategy that requires careful planning and experienced legal guidance. The Dellutri Law Group has helped Florida clients use Chapter 20 to address complex debt situations involving tax obligations, student loans, and other non-dischargeable debts. Before filing, make sure you avoid common pre-filing mistakes that could complicate your strategy. Also understand how federal and state exemptions affect what you keep.
Call us at 239-939-0900 or schedule a free consultation to discuss whether a Chapter 20 is right for your situation. We serve clients in Fort Myers, Naples, Port Charlotte, Tampa, and throughout Florida.
Do not let the complexity of two filings stop you from exploring every option. We are here to help you find the best path forward.
