bankruptcy terms
What Can’t You Do While in Chapter 13
Chapter 13 Basics Explained: What Can’t You Do While in Chapter 13 When you file Chapter 13 bankruptcy, you enter
January 15, 2026
What Can’t You Do While in Chapter 13
Chapter 13 Basics Explained: What Can’t You Do While in Chapter 13
When you file Chapter 13 bankruptcy, you enter a structured repayment plan that reorganizes your debts rather than liquidating assets. Unlike Chapter 7, which discharges most unsecured debts within months, Chapter 13 allows you to keep your property while making monthly payments to a bankruptcy trustee. According to the U.S. Courts, these plans typically last three to five years, depending on your income level.
Understanding what you can’t do while in Chapter 13 is crucial for successfully completing your repayment plan. The bankruptcy court exercises significant control over your financial decisions during this period. You’ll face restrictions on incurring new debt, selling assets, making large purchases, and managing your finances independently. These limitations are intended to regulate financial activity during the repayment period and ensure compliance with bankruptcy requirements.
Financial Restrictions: What Can’t You Do While in Chapter 13
You Cannot Borrow Money Without Permission
The most significant restriction involves new credit. You generally may not incur new debt without prior approval from the trustee or court, depending on the type and amount of the obligation. This includes credit cards, personal loans, auto financing, and even some medical payment plans. The Department of Justice U.S. Trustee Program monitors these restrictions closely.
Requests for new debt may be evaluated based on necessity and impact on the repayment plan, subject to trustee or court review. Violations of plan requirements may result in court action, including potential dismissal.
You Cannot Sell or Transfer Major Assets
What can’t you do while in Chapter 13 regarding property? You cannot sell real estate, vehicles, or other significant assets without trustee approval. Your Chapter 13 plan calculates payments based on your asset values at filing. Selling property without required approval may violate bankruptcy rules and affect the case.
If you need to sell your home during Chapter 13, you must petition the court, demonstrate legitimate reasons, and ensure that the sale proceeds benefit creditors appropriately. The trustee examines whether the sale serves your repayment plan’s best interests or simply attempts to circumvent bankruptcy protections.
You Cannot Miss or Modify Plan Payments
Once confirmed, your Chapter 13 payment schedule becomes legally binding. You cannot skip payments, pay less than the required amounts, or change payment timing without court modification. According to Federal Trade Commission consumer protection guidelines, consistent payment compliance is required under the confirmed plan.
If financial circumstances change—job loss, medical emergency, income reduction—you must immediately file a motion to modify your plan rather than simply stopping payments. Missed payments can trigger case dismissal, allowing creditors to resume collection activities, including foreclosure and repossession.
Lifestyle and Financial Management Limits
You Cannot Hide Income or Assets
Complete financial transparency is mandatory throughout Chapter 13. You cannot conceal income sources, underreport earnings, or fail to disclose asset acquisitions. Your trustee reviews bank statements, tax returns, and pay stubs regularly. Failure to disclose required information may result in court action or other legal consequences.
If you receive windfalls like inheritances, lottery winnings, insurance settlements, or significant bonuses during your plan, you must report them immediately. The trustee reviews such changes and may request plan adjustments consistent with bankruptcy rules.
You Cannot Make Major Financial Decisions Independently
What can’t you do while in Chapter 13 regarding everyday finances? You cannot change jobs, significantly affecting income, relocate to different states, or make substantial lifestyle changes without notifying your trustee. While you maintain employment freedom, dramatic income increases may require plan payment adjustments.
You also cannot pay creditors directly outside your plan, even if you want to prioritize certain debts. All payments funnel through your trustee, who distributes funds according to your court-approved plan. Attempting to favor specific creditors violates bankruptcy law and can jeopardize your entire case.
Your Path Forward: What Can’t You Do While in Chapter 13 Successfully Managed
Understanding what you can’t do while in Chapter 13 helps you navigate these restrictions successfully and complete the plan in compliance with court requirements. Outcomes vary depending on eligibility and plan completion.
Take Control Today: What Can’t You Do While in Chapter 13 Questions Answered
Navigating Chapter 13 restrictions requires experienced legal guidance to protect your rights while ensuring plan compliance. Understanding what you can’t do while in Chapter 13 bankruptcy prevents costly mistakes that could derail your debt relief journey. Individuals with questions about Chapter 13 requirements may wish to speak with a licensed bankruptcy attorney to discuss how these rules apply to their situation.
Frequently Asked Questions
1. Can I keep my credit cards during Chapter 13 bankruptcy?
No, Credit card use is generally restricted during Chapter 13, and existing accounts are typically addressed through the repayment plan.
2. What happens if I get a raise while in Chapter 13?
You must report income increases to your trustee, who may request plan modifications to increase creditor payments based on your improved financial capacity.
3. Can I refinance my mortgage during Chapter 13 bankruptcy?
Mortgage refinancing requires court approval and must demonstrate clear benefits like lower interest rates without extending your overall debt repayment timeline significantly.
4. Am I allowed to start a business while in Chapter 13?
Starting a business requires trustee approval since it affects your income and may involve debt obligations, potentially complicating your existing repayment plan structure.
5. What can't I buy during Chapter 13 without permission?
Purchases involving significant expense generally require trustee or court approval.
Key Takeaways
- Chapter 13 places restrictions on incurring new debt, selling assets, and managing finances during the repayment period.
- You cannot sell major assets like real estate or vehicles without obtaining bankruptcy trustee permission first.
- Missing plan payments or hiding income can result in case dismissal and renewed creditor collection actions.
- All financial decisions require trustee notification, including job changes, relocations, or windfalls received during bankruptcy.
- Plan completion may result in discharge of certain eligible debts, subject to court approval and compliance.
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