KNOXVILLE, Tenn. (AP) _ After months of maintaining his innocence, Jake Butcher has opted for a plea bargain that could put him behind bars for up to 20 years but will spare him a series of costly and lengthy trials on bank fraud charges, sources said.

Butcher associates said Friday that the embattled financier decided that he no longer had the resources to fight charges that he siphoned $20.6 million from his own banks before they became part of the third largest bank failure since the Great Depression.

''He'd have been better off in jail than to go through what he's been through,'' said a source close to Butcher who spoke only on condition of anonymity.

''He could have won three trials and lost the fourth and still ended up in jail. What's the point?'' the source said.

Details of the plea bargain were provided by sources close to Butcher who spoke only on the conditon they not be named. Other elements were confirmed by an attorney close to the case.

Jury selection was scheduled to begin Monday in U.S. District Court for the first of four bank fraud trials facing Butcher and his financial adviser, Jesse A. Barr.

Late Friday afternoon, the court clerk announced that jury selection had been postponed a week and that U.S. District Judge William K. Thomas had set a hearing for 2 p.m. Monday.

Also on trial is Jack H. Patrick, a former United American Bank vice president who is accused of helping Butcher and Barr divert $7 million in bank funds to a company secretly owned by Butcher.

U.S. Attorney John Gill declined to discuss the purpose of the hearing but noted that he would work on the case throughout the weekend.

James F. Neal, the former Watergate prosecutor who is defending Butcher, also declined to comment.

A plea bargain, if formally requested by Butcher and accepted by the court, could cancel similar indictments facing the bankrupt financier in Memphis and London, Ky.

Butcher and Barr face a maximum of 472 years in prison if convicted on all 92 counts of bank fraud, conspiracy, making false bank entries, mail fraud and other bank crimes

Monday's trial involved 32 counts of bank fraud, conspiracy and making false bank entries and carried possible sentences of 160 years each for Butcher, Barr and Patrick.

On the day after the close of the 1982 Knoxville world's fair, which Butcher headed, examiners from the Federal Deposit Insurance Corp. descended upon Butcher-controlled banks for a simultaneous audit.

Less than four months later, Butcher's United American Bank-Knoxville was closed.

The FDIC has since reported that it will have to absorb $395 million in worthless loans held by Butcher's flagship bank.

A two-year federal probe of Tennessee bank failures had produced ''evidence of the biggest insider bank fraud'' in U.S. history, said Peter Barrish, staff director of a U.S. House subcommittee which last year investigated the bank failure.

A total of 11 Tennessee banks owned by Butcher or his brother, C.H. Butcher Jr., who has not been indicted, failed during 1983 and 1984.