Once your Chapter 13 petition is on file, you spend the next three to five years operating under court supervision, and there is a list of things you cannot do after filing Chapter 13 without permission from the trustee or the bankruptcy judge. You cannot borrow money, sell or give away property, skip tax filings, keep windfalls to yourself, pay old creditors outside the plan, or hide changes in your income. Each of these restrictions has teeth: violating them can get your case dismissed, and dismissal wipes out the protection that made filing worthwhile in the first place.
Borrowing Money or Opening New Credit
You cannot borrow money, open credit cards, finance a purchase, or sign a lease without written permission from either the trustee or the bankruptcy judge. Your repayment plan is built on the premise that all of your projected disposable income flows to creditors, so a new monthly payment breaks that math. The restriction reaches car loans, furniture financing, student loans, personal lines of credit, and even a secured credit card opened to rebuild your score.
If you genuinely need to borrow, your attorney submits a request to the trustee explaining the amount, the purpose, the loan terms, and how the new payment fits your budget. If the trustee refuses, your attorney can file a motion asking the judge to approve it. Courts are most receptive when the debt is clearly necessary, such as replacing a car you need for work. Expect several weeks for a decision, so plan ahead of any purchase.
Taking on debt without approval is one of the fastest ways to lose your case. Many lenders will not extend credit to someone in an active Chapter 13, but the ones that do will not check with your trustee. That responsibility is entirely yours.
Selling, Refinancing, or Transferring Property
You cannot sell, refinance, gift, or otherwise transfer property during your case without court approval. This applies to your home, vehicles, jewelry, electronics, and anything else of value, whether you owned it when you filed or acquired it later.
Everything you own at filing, plus everything you acquire during the case, becomes part of the bankruptcy estate. Your post-filing earnings are included. The court and trustee need to confirm that any sale happens at a fair price and that the proceeds go where the plan directs. To sell property, your attorney files a motion describing the proposed 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 seek to undo the transaction, and the court can dismiss your case or convert it to Chapter 7. In serious cases, concealing assets can be treated as bankruptcy fraud, which is a federal crime.
Keeping Windfalls, Raises, or New Assets to Yourself
Because your bankruptcy estate includes property acquired after filing, any significant windfall during your plan must be reported to the trustee. Inheritances, life insurance payouts, lawsuit settlements, and large gifts all qualify.
These windfalls do not simply land in your bank account for personal use. The trustee will typically require you to increase your plan payments or use the money to pay off creditors sooner. Inheritances become part of the estate and unsecured creditors are expected to benefit. Personal injury settlements are generally treated as assets rather than disposable income, so state exemptions may protect a portion of the funds, but the trustee still gets to review the settlement.
The same disclosure rule applies to income. A raise, a switch from salaried work to self-employment, or overtime that substantially increases your take-home pay all need to be reported. If your income rises, the trustee or a creditor can ask the court to raise your payments. Sitting on the information is the worst move. The trustee reviews financial documents periodically, and discovering an undisclosed raise looks a lot like hiding income.
Home equity appreciation is a grayer area. Courts disagree about whether an increase in your home’s value belongs to creditors or to you. Some hold that once the plan is confirmed, property vests in the debtor and any appreciation is yours. Others treat the estate as continuing through the life of the plan. The answer depends on your federal circuit and local bankruptcy court. If you plan to sell your home during Chapter 13, sort out how appreciation will be treated before you list it.
Skipping Tax Returns or Pocketing Refunds
You must file all federal, state, and local tax returns on time for every year your 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 must continue providing copies annually throughout the plan.
Tax refunds are a common friction point. Many Chapter 13 plans require you to turn over part or all of your federal refund to the trustee. Whether your plan includes this requirement depends on how much unsecured creditors are being paid. If unsecured creditors are getting less than the full amount owed, expect the trustee to claim your refunds. The money goes toward increasing the dividend to unsecured creditors, not toward shortening the plan.
If you typically rely on a large refund, adjust your W-4 withholding so less is withheld each pay period. A smaller refund means less turned over to the trustee, and the extra take-home helps with living expenses. Run this by your attorney first, because it affects the disposable income calculation and may prompt a plan modification.
Paying Creditors Outside the Plan or Missing Payments
Plan payments must begin within 30 days of filing, even before the court has officially confirmed your plan. Missing payments is the most common reason Chapter 13 cases fail.
Nearly all plan payments run through the trustee, who distributes the money to creditors according to the plan’s terms. Some plans allow direct payments on specific obligations. Ongoing mortgage payments, for instance, can sometimes go straight to your lender if you were current at filing and your plan or local rules permit it. Whether you pay through the trustee or directly, never pay a pre-bankruptcy creditor outside the plan without authorization. Doing so amounts to preferring one creditor over the others, which cuts against the basic structure of Chapter 13.
Making Voluntary Retirement Contributions
Whether you can keep contributing to a 401(k) or similar retirement account during Chapter 13 depends heavily on your local bankruptcy court. Every dollar you put into retirement is a dollar not going to creditors, and your plan is supposed to commit all projected disposable income to repayment. Many courts treat voluntary retirement contributions as money that should be flowing to the plan instead.
Courts that 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 account loans, are generally treated as necessary expenses and permitted. If a retirement loan is paid off before your plan ends, the freed-up money will likely be redirected into your plan payments.
Skipping the Financial Management Course
Before the court will grant your discharge, you must complete an approved instructional course on personal financial management. This is separate from the credit counseling course you took before filing. The post-filing course covers budgeting, money management, and using credit responsibly, and approved providers are listed through the U.S. Trustee Program. It can usually be done online in about two hours for a modest fee.
Skipping this step blocks your discharge entirely. You can complete every plan payment across 36 to 60 months and still walk away without 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.
What Happens If You Break These Rules
The court can dismiss your case or convert it to Chapter 7 for cause, which includes missing plan payments, taking on unapproved debt, failing to file tax returns, hiding assets, or not reporting income changes. If your case is dismissed, the automatic stay ends immediately. Every creditor regains the right to sue, garnish wages, foreclose, and repossess.
A dismissal can trigger a 180-day bar on refiling if the court finds you willfully failed to follow its orders. That means six months with no bankruptcy protection at all. If the court finds something worse, like concealed assets or fraudulent filings, it can convert the case involuntarily, deny your discharge entirely, or refer the matter for criminal prosecution.
The quieter consequence is losing years of progress. If your case is dismissed after three years of payments, those payments do not come back to you. Creditors resume collection for the full original amounts minus whatever the trustee already distributed. Starting over means a new case, new attorney fees, and a fresh three-to-five-year plan, assuming you qualify to refile at all.
When You Genuinely Cannot Comply
Falling behind is not the only option when circumstances change. You, the trustee, or an unsecured creditor can request a modification at any time after the plan is confirmed but before payments are complete. Common triggers include job loss, a medical emergency, a significant raise, or an unexpected expense like a necessary home repair. Your attorney files a motion with updated income and expense schedules, and the trustee and affected creditors receive at least 28 days’ notice before the hearing. The court will not approve modifications that let you live lavishly while creditors get less, and the total plan length generally cannot exceed five years.
If no modification can make the plan work, you can convert to Chapter 7, which is a liquidation. Conversion is available as long as you have not received a Chapter 7 discharge within the previous eight years, and you must still qualify under Chapter 7’s eligibility rules. In rare cases, the court can grant a hardship discharge without full payment when your failure to finish is due to circumstances beyond your control, unsecured creditors have already received at least what they would have gotten in Chapter 7, and modification is not feasible. A hardship discharge covers fewer debts than a standard Chapter 13 discharge, so it is a last resort for situations like permanent disability or catastrophic illness, not a shortcut.
The point is simple: missed payments without explanation lead to dismissal, but a filed motion shows good faith. If you cannot meet an obligation of your plan, the answer is always to ask the court, not to act on your own.