In the first case of its kind in the District of New Jersey, Bankruptcy Judge Michael Kaplan tacitly approved what is known as a Chapter 20 bankruptcy filing. A "Chapter 20" bankruptcy, which is not found in the bankruptcy code, is a term for a debtor filing for a Chapter 13 bankruptcy after filing for a Chapter 7 bankruptcy and receiving a Chapter 7 discharge on unsecured debts.
Note that the debtor cannot receive a Chapter 13 discharge if the debtor received a Chapter 7 discharge in a Chapter 7 case filed within the last 4 years.
A debtor can file a Chapter 13 bankruptcy after receiving a Chapter 7 discharge in order to handle liens that survived the Chapter 7 case. Or the debtor can manage a 3- or 5-year repayment plan of debts that were not discharged in the Chapter 7 bankruptcy. Essentially, the debtor gets additional time to pay off non-dischargeable debts and avoid collection actions by the creditors.
On November 18, 2011, in the matter captioned In re Scotto-DiClemente, 459 B.R. 558, Judge Kaplan held that: (1) the debtor's ability to use Chapter 13 plan to strip off wholly unsecured junior mortgage liens on his principal residence was not contingent upon debtor's receipt of Chapter 13 discharge; and (2) the Chapter 13 case, while filed close on heels of Chapter 7 case in which debtor was granted a dis-charge only six months earlier, was not filed in "bad faith," so as to be subject to dismissal.
