Lance Jones

Publication Date


Document Type



In Johnson v. Home State Bank (In re Johnson), the United States Supreme Court approved -the property-saving strategy of filing under Chapter 72 of the Bankruptcy Code, immediately followed by a filing under Chapter 13, the so-called "Chapter 20." The Court held that a mortgage lien that survived the discharge of the debtor's personal obligations in Chapter 7 is a "claim" for purposes of 11 U.S.C. § 101(5), and thus may be included by the debtor in a subsequent Chapter 13 plan.

Chapter 20 procedures typically follow a similar pattern. A debtor defaults on loan payments, including a home mortgage. The debtor does not possess sufficient income to pay his total debt owing under a Chapter 13 restructuring and cannot eliminate the home mortgage and prevent foreclosure under Chapter 7.

By first filing under Chapter 7, the debtor eliminates all personal liabilities, including personal liability on the home mortgage. With a decreased total debt burden, the debtor files under Chapter 13; forcing the bank to de-accelerate the loan, thereby allowing the debtor to cure any arrearages and keep the house.