To take on a new loan while you’re in a Chapter 13 bankruptcy, you file a Motion to Incur Debt with the bankruptcy court before you sign anything. The motion tells the judge what you want to borrow, from whom, on what terms, and why your plan can absorb the new payment. The Chapter 13 trustee reviews it, creditors get notice, and if no one objects, the judge signs an order authorizing the specific loan. That signed order is what you bring to the lender.
The rule exists because your confirmed plan is built around the income and expenses you had when the case was confirmed. Every dollar is accounted for over three to five years. New debt reshuffles that math, and the court needs to check that the plan still works.1United States Courts. Chapter 13 – Bankruptcy Basics
When You Actually Need to File
The common triggers are a vehicle replacement when your current car fails, a home purchase or mortgage refinance, emergency home repairs like a roof or furnace, medical financing that insurance won’t fully cover, and student loans for you or a dependent. Student loans carry an extra wrinkle: most student loan debt survives bankruptcy and won’t be discharged when the plan ends.
Many districts recognize a de minimis exception for minor credit. Small purchases below a locally set dollar threshold don’t require a formal motion. Thresholds vary and are typically modest, so check your district’s local rules or ask the trustee before assuming a purchase is too small to worry about. Guessing wrong is expensive, as described below.
What the Court Is Looking For
Judges evaluate a motion on three questions. Is the debt necessary? A reliable car to get to work qualifies; a luxury vehicle does not, and judges have specifically rejected newer model-year cars when unsecured creditors were receiving nothing. Is the debt in good faith? That means reasonable terms and evidence you shopped around. Is the debt feasible? Your updated budget has to show you can handle the new payment without missing plan obligations.2Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan
Courts have denied motions where the interest rate was excessive and the debtor couldn’t show any comparison shopping. Walking into one dealership, accepting a 20% rate, and filing a motion with no evidence of other inquiries is a common way to lose. Judges expect the deal to be the best available given your circumstances, not the first offer you received.
What to Put in the Motion
The motion has to give the court enough information to run the numbers. Vague summaries don’t work.
Loan Details
Identify the lender, the principal, the annual percentage rate, the monthly payment, and the full repayment term. For a car, that might be a 60-month term; for a mortgage, 30 years. Attach the proposed loan agreement or a detailed written quote. Federal bankruptcy procedure requires motions for credit to list all material provisions of the proposed agreement, including the interest rate, default terms, and any liens. A screenshot of a preliminary approval or a verbal quote is not enough.
For a vehicle purchase, expect scrutiny on the price. Trustees and judges apply informal guidelines that vary by district, but the general expectation is reliable, non-luxury transportation. Asking for approval on a BMW while paying unsecured creditors pennies on the dollar will not go well.
Updated Schedules I and J
The core of the filing is a math problem: proving the new payment fits your budget. Update your Schedules I and J to reflect current monthly income and expenses, not the numbers from when you filed the case originally. If your updated budget shows $500 in monthly surplus after plan payments and living expenses, and the new car payment is $400, you’ve shown capacity. If the surplus is $350 and the payment is $400, you have a problem. Some districts require a declaration signed under penalty of perjury confirming the financial information is accurate.
Why You Need It
Add a written explanation of necessity. “My 2009 sedan needs $4,000 in repairs and has 190,000 miles” supports a motion. “I need a new car” does not. If you’ve filed prior motions to incur debt during this case, disclose them, including whether they were approved and whether those loans are current.
The Trustee’s Concurrence
The Chapter 13 trustee collects your plan payments and distributes them to creditors, and their main concern is whether money going to a new lender would otherwise reach existing unsecured creditors.1United States Courts. Chapter 13 – Bankruptcy Basics After reviewing your motion, the trustee issues either a concurrence or a non-concurrence. Concurrence means they agree the debt is necessary and affordable. Non-concurrence means they object, typically with a specific reason: the interest rate, the purchase price, or missed plan payments.
In many districts, if the trustee concurs and no creditor objects, the court can enter an approving order without scheduling a hearing at all. Trustee concurrence is the single biggest factor in a smooth, fast approval. If you’re behind on plan payments when you file, expect resistance; some trustees respond to that situation by filing their own motion to dismiss the case.
Filing, Serving, and the Hearing
Once your motion and supporting documents are ready, file them with the bankruptcy court. Most filings go through Case Management/Electronic Case Files, the federal judiciary’s online platform.3United States Courts. Electronic Filing (CM/ECF) If you’re representing yourself, you may need to file paper copies at the clerk’s window, since CM/ECF access sometimes requires attorney registration.
After filing, serve copies on the Chapter 13 trustee, the United States Trustee, and any creditors directly affected by the new obligation. Federal bankruptcy rules generally require at least 21 days’ notice for most motions. Local rules can adjust that, so confirm the timeline in your district.
If no one objects within the notice period, the court often grants the motion without an appearance. When the trustee or a creditor objects, the court schedules a hearing. Explain the necessity, walk through the budget numbers, and bring documentation of your efforts to find reasonable terms. Judges routinely push back on “I only checked one lender.”
Once the judge is satisfied, they sign an order authorizing the specific debt. That order is what you bring to the lender. No legitimate lender should finalize a loan to a Chapter 13 debtor without seeing the signed order, and a lender willing to skip that step is a warning about the terms you’re being offered.
Emergency and Expedited Requests
Sometimes you can’t wait three weeks. If your only car is totaled and you need transportation to keep your job, most districts allow an emergency or expedited motion asking for shortened notice and a faster hearing. Label it as “Emergency” or “Expedited” and explain in detail why the standard timeline would cause irreparable harm.
Courts grant these for genuine emergencies, not convenience. A car breaking down with no alternative transportation and a job that requires driving qualifies. Locking in a sale price before a promotion expires does not. When expedited consideration is granted, the notice period may shorten to a few days and the hearing can happen within a week or two of filing.
What Happens If You Borrow Without Permission
This is where debtors make their most expensive mistake. Under 11 U.S.C. § 1328(d), any post-petition consumer debt is excluded from your final Chapter 13 discharge if getting the trustee’s approval beforehand was practical and you didn’t do it.4Office of the Law Revision Counsel. 11 USC 1328 – Discharge You complete three to five years of plan payments, receive your discharge, and the unauthorized loan is still there in full.
Unauthorized borrowing can also be treated as a material default under the confirmed plan, giving the trustee or a creditor grounds to seek dismissal or conversion to Chapter 7.5Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal Dismissal wipes out the protections of bankruptcy. Conversion to Chapter 7 could mean liquidation of assets. And a post-petition creditor’s claim can be disallowed entirely under 11 U.S.C. § 1305(c) if the lender knew, or should have known, that getting the trustee’s prior approval was practical and wasn’t done.6Office of the Law Revision Counsel. 11 USC 1305 – Filing and Allowance of Postpetition Claims
After-the-fact authorization is technically possible but hard. You have to show prior approval genuinely wasn’t practical, get the new creditor to file a proof of claim, and convince the court you acted in good faith. Courts view this skeptically. File the motion before signing.
When the New Debt Also Requires a Plan Modification
Some new debt does more than need permission; it changes the structure of the plan itself and requires a formal modification under 11 U.S.C. § 1329.7Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation The most common trigger is refinancing your home to pay off the plan early.
Whether an early payoff via refinance counts as a modification is a contested question. Some courts treat it as always a modification; others say it isn’t if creditors receive at least what they would have gotten under the original plan. A modification must satisfy the same confirmation requirements as the original plan: good faith, best interest of creditors, and feasibility.2Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan If your original plan included special conditions, like contributing a percentage of self-employment income or filing monthly operating reports, a refinance that frees you from those conditions faces an uphill battle. Courts have denied motions to incur debt on that ground. If you’re refinancing to pay off the plan, ask your attorney whether a separate motion to modify needs to accompany the motion to incur debt.