What Is a Chapter 20 Bankruptcy?

 Posted on May 27, 2026 in Bankruptcy

You've probably heard of Chapter 7 and Chapter 13 bankruptcy. But there's a third strategy that combines both, and it goes by an unofficial name: Chapter 20 bankruptcy. It's not a real chapter in the bankruptcy code. But it is a real strategy that Texas residents use to get out from under debt that Chapter 7 and Chapter 13 can’t solve on their own.

If you’re interested in filing for bankruptcy and wondering what the best approach for your case might be, our San Antonio bankruptcy lawyer can help.

What is "Chapter 20" Bankruptcy? 

Chapter 20 bankruptcy isn’t a real legal term. Instead, the name comes from simple math: 7 plus 13 equals 20. Courts and bankruptcy attorneys across Texas recognize it as a possible option, even though you won't find it written in federal law. To understand Chapter 20, you need to understand what Chapter 7 and Chapter 13 do on their own, and why each one sometimes falls short of a real person’s needs.

Chapter 7 is called a "liquidation bankruptcy." It eliminates most unsecured debts, like credit cards and medical bills, relatively quickly, often within three to four months. A trustee reviews your assets, and any non-exempt property can be sold to repay creditors. Most Texas filers don't lose property, though, because Texas has strong exemptions.

Chapter 13 is called a "wage-earner's plan." It lets you keep your property and repay debts over three to five years through a court-approved plan. It's designed for people with regular income who need time to catch up on what they owe.

Why Chapter 7 Alone Sometimes Isn't Enough

Chapter 7 can't eliminate every type of debt. Child support, most tax debts, and student loans survive a Chapter 7 discharge entirely. If those non-dischargeable debts are large, you can still be in serious financial trouble after your Chapter 7 case closes. You might have cleared the credit cards, but you can still be drowning in back taxes or support arrears.

Why Chapter 13 Alone Sometimes Isn't Enough

Chapter 13 has a debt ceiling. Under 11 U.S.C. § 109(e), you can only file Chapter 13 if your total debt falls below a specific limit of just over $2.1 million in secured and unsecured debts combined. If your total debt is too high, you don't qualify, and Chapter 13 isn't an option until you reduce what you owe. That's where the so-called Chapter 20 strategy can help.

How "Chapter 20 Bankruptcy" Works Under Texas and Federal Law

The Chapter 20 approach works in two stages: First, you file Chapter 7 to discharge as much debt as legally possible. Once that case closes, you file Chapter 13 to deal with the remaining debts you couldn't eliminate.

This sequence can make Chapter 13 accessible when it wasn't before. Eliminating unsecured debt through Chapter 7 brings your remaining balances down, potentially below the Chapter 13 eligibility threshold. You can then use Chapter 13 to catch up on mortgage arrears, back taxes, or past-due child support through a structured, court-supervised payment plan.

What Debt the Chapter 20 Strategy Targets

The Chapter 20 approach works best when someone has a mix of dischargeable and non-dischargeable debt. After Chapter 7 clears out the credit cards and medical bills, while Chapter 13 can address the debts that survive. Those typically include debts like mortgage arrears that are threatening foreclosure, priority tax debts owed to the IRS or the state of Texas, and domestic support obligations like child support or alimony.

The Automatic Stay 

When you file Chapter 13 after Chapter 7, the automatic stay under 11 U.S.C. § 362 still applies. That means creditors must stop collection calls, lawsuits, and wage garnishments the moment your Chapter 13 case is filed. That protection gives you breathing room while your repayment plan is reviewed and approved by the court.

If you've had a bankruptcy case dismissed in the past year, the automatic stay may not last as long. In some cases, you'll need a court order to extend it. A bankruptcy lawyer can help you understand how this applies to your specific timeline.

What Are the Risks and Limitations of a Chapter 20 Bankruptcy Filing in Texas?

The Chapter 20 strategy has major benefits, but it also comes with limitations.

You Won't Get a Discharge in the Chapter 13 Case

The biggest limitation is that you won't receive a discharge at the end of your Chapter 13 case. Federal law requires a waiting period between discharges. Because you already received a Chapter 7 discharge, you can't get another discharge in a Chapter 13 filed within four years of that Chapter 7 case.

That doesn't mean Chapter 13 is useless in this context. You can still use it to catch up on secured debts, stop foreclosure, and repay non-dischargeable debts.

The Risk of a Chapter 20 Bad-Faith Objection From the Trustee

A bankruptcy trustee can object to your Chapter 13 filing and argue that it was filed in bad faith. This is one of the more serious risks of the Chapter 20 approach. If that happens, you'll need to show the court that your filing is truly necessary. Your financial situation must make it clear you're not trying to manipulate the system.

Courts look at the full picture of your finances, your income, your debts, and your intentions when evaluating good faith. Having a clear, documented reason for the sequential filing goes a long way.

What You Generally Need to Qualify for Chapter 20 Bankruptcy 

Before pursuing a Chapter 20 strategy, you'll need to meet the requirements for both filings. Here's what that generally involves:

• Passing the Chapter 7 means test based on your Texas household income
• Waiting for your Chapter 7 case to fully close before filing Chapter 13
• Demonstrating that your Chapter 13 plan is proposed in good faith
• Showing regular income that can support a multi-year repayment plan
• Keeping your remaining debt within the Chapter 13 eligibility limits after the Chapter 7 discharge

Not everyone qualifies, and not everyone who qualifies will benefit from this approach. A lawyer can help you run the numbers before you file anything.

Call a Schertz, TX Bankruptcy Attorney Today

If you're buried in debt that a single bankruptcy filing can't fully solve, the Chapter 20 strategy might be worth a serious look. At the Law Offices of Chance M. McGhee, our San Antonio bankruptcy lawyer  offers free consultations so you can get real answers about your options without any pressure or sales pitch.

Call 210-342-3400 today to talk through your situation and find out whether a Chapter 20 approach makes sense for you in 2026.