After filing Chapter 13, you cannot borrow money, sell or give away property, skip tax filings, quietly keep windfalls, pay pre-bankruptcy creditors outside the plan, or ignore your reporting duties to the trustee — not without written permission from the trustee or the bankruptcy judge. Your finances are under court supervision for the three to five years the plan runs, and the restrictions below are the ones that trip people up.
Take On New Debt Without Approval
You cannot borrow money, open a credit card, finance a purchase, or sign a lease without written permission from the trustee or the bankruptcy judge. Your repayment plan is built on the assumption that all of your projected disposable income goes to creditors, and a new monthly payment throws off that math. The rule covers car loans, furniture financing, personal lines of credit, student loans, and even a secured credit card opened to rebuild your score.
When you genuinely need credit, your attorney submits a request to the trustee describing the loan, the terms, and how the payment fits your budget. If the trustee says no, your attorney can file a motion asking the judge. Courts tend to approve debt that is clearly necessary, like replacing a car you need for work. The process takes several weeks, so plan ahead of any purchase.
Borrowing without approval is one of the fastest routes to dismissal. Many lenders will not extend credit to someone with an active case anyway, but the ones that will do not check whether your trustee approved it. That is on you.
Sell, Refinance, or Transfer Property
You cannot sell, refinance, gift, or otherwise transfer any property during the case without court approval. That covers your home, vehicles, jewelry, electronics, and anything else of value, whether you owned it at filing or picked it up later.
Everything you own when you file, plus everything you acquire during the case, becomes part of the bankruptcy estate. Post-filing earnings are included. The court and trustee need to confirm that any sale happens at a fair price and that the money goes where the plan directs. To sell, your attorney files a motion describing the transaction, and creditors and the trustee get at least 21 days’ notice to object before the court rules.
Failing to disclose a sale or transfer is treated as bad faith. The trustee can move to undo the transaction, the court can dismiss your case or convert it to Chapter 7, and in serious cases concealing assets can be treated as bankruptcy fraud.
Keep Windfalls to Yourself
Because your estate includes property acquired after filing, any significant financial windfall during the plan must be reported to the trustee. Inheritances, life insurance payouts, lawsuit settlements, and large gifts all count.
These funds do not just quietly land in your account. The trustee will typically require you to increase plan payments or use the money to pay off creditors early. An inheritance becomes estate property, and the trustee will expect unsecured creditors to benefit from it. Personal injury settlements follow similar logic, though courts have generally treated settlement proceeds as assets rather than disposable income, which means state exemptions may protect a portion.
Home equity appreciation is a grayer area. Some courts hold that once the plan is confirmed, property vests in the debtor and the appreciation is yours. Others treat the estate as continuing through the life of the plan. The answer depends on your federal circuit and how the local bankruptcy court reads the statutes. If you plan to sell your home during Chapter 13, get clarity on how appreciation will be treated before listing.
Miss Plan Payments or Hide Income Changes
Plan payments must begin within 30 days of filing, even before the court has confirmed the plan. Missing payments is the most common reason Chapter 13 cases fail. The trustee takes a percentage fee on payments, capped by federal law at 10 percent for non-family-farmer debtors, which is already built into the plan amount.
You also cannot sit on a change in your income or employment. A job loss, a raise, a switch to self-employment, or overtime that meaningfully increases your take-home pay all have to be reported. If income goes up, the trustee or a creditor can ask the court to raise your payments. If it drops, you can request a plan modification to lower them. The worst option is silence: the trustee reviews financial documents periodically, and an undisclosed raise looks like hidden income.
If you are struggling because of a genuine hardship, filing a motion to modify the plan is far better than falling behind quietly. Missed payments without explanation lead to dismissal; a filed motion shows good faith.
Skip Tax Returns or Pocket Refunds You Owe the Trustee
You must file all federal, state, and local tax returns on time for every year the case is active. Falling behind on tax filings is grounds for dismissal. Within the first year you must give the trustee a copy of your most recently filed federal return, and you continue providing copies annually throughout the plan.
Refunds are a common sticking point. Many Chapter 13 plans require you to turn over part or all of your federal refund to the trustee. Whether yours does depends on how much your unsecured creditors are being paid. If they are getting less than the full amount owed, expect the trustee to claim your refunds, and expect that money to go toward increasing the unsecured dividend rather than shortening your plan.
If you normally count on a large refund, talk to your attorney about adjusting your W-4 withholding. A smaller refund means less turned over to the trustee, and the extra take-home pay helps cover living expenses. It can affect disposable income calculations, though, so it is a conversation worth having.
Pay Pre-Filing Creditors Outside the Plan
Nearly all plan payments run through the trustee, who distributes the money to creditors according to the plan’s terms. Some plans allow you to pay certain obligations directly — ongoing mortgage payments, for instance, if you were current at filing and the plan or local rules permit it. Whether you pay through the trustee or directly, you cannot pay a pre-bankruptcy creditor outside the plan without authorization. Doing so prefers one creditor over the others, and preferring creditors violates the basic structure of Chapter 13.
Contribute Freely to Retirement
Whether you can keep making voluntary 401(k) or similar contributions during Chapter 13 depends heavily on your local bankruptcy court. Every dollar going into retirement is a dollar not going to creditors, and since your plan must commit all projected disposable income to repayment, many courts treat voluntary contributions as money that belongs in the plan.
Courts that do allow contributions tend to look at the debtor’s age, the size of the contributions, and whether the overall lifestyle is modest. A 58-year-old making small contributions with reasonable expenses is more likely to get approval than a 35-year-old maxing out a 401(k). Mandatory contributions required as a condition of employment, and repayments on existing retirement loans, are generally treated as necessary expenses. If a retirement loan is paid off during the plan, the freed-up money will likely be redirected into your plan payments.
Skip the Financial Management Course
Before the court will grant your discharge, you have to complete an approved instructional course on personal financial management. This is a different course from the credit counseling required before filing. The post-filing course covers budgeting, money management, and using credit responsibly. Approved providers are listed through the U.S. Trustee Program, and the course usually takes about two hours online for a modest fee.
Skipping it blocks your discharge entirely. You can complete 36 to 60 months of payments and still not receive a discharge if you never took the course. File the completion certificate with the court as soon as you finish, well before your final payment if possible.
What Happens If You Break the Rules
The court can dismiss your case or convert it to Chapter 7 for cause, and cause includes missing plan payments, taking on unapproved debt, failing to file tax returns, hiding assets, and not reporting income changes. When a case is dismissed, the automatic stay ends immediately, and every creditor regains the right to pursue collection through lawsuits, wage garnishment, and foreclosure.
A dismissal can also trigger a 180-day bar on refiling if the court finds you willfully disobeyed its orders. That is six months with no bankruptcy protection at all. If the conduct is worse, such as concealing assets or filing fraudulent documents, the court can convert the case to Chapter 7 involuntarily, deny your discharge entirely, or refer the matter for criminal prosecution. Bankruptcy fraud is a federal crime.
The quieter consequence is losing years of progress. If your case is dismissed three years in, those payments do not come back to you. Creditors can resume collection for the original amounts minus whatever the trustee already distributed. Starting over means a new filing, new attorney fees, and a fresh three-to-five-year plan, assuming you are still eligible to refile.