What Happens If You Incur New Debt During Bankruptcy?

Money problems rarely follow a neat timeline. Bills stack up, cars break down, and families still need food on the table even while a case is open. At Yusufov Law Firm, PLLC, we help individuals and small businesses in Mesa, Phoenix, and Tucson steady the ship and move toward real relief. This article explains what happens if you take on new debt while a bankruptcy case is pending, and what smart steps can keep your case on track.

This is educational material, not legal advice. Every case is different, and a short call can make a big difference. If you have questions about your situation, reach out to Yusufov Law Firm for guidance that fits your goals.

Guidelines for Debt Incurred During Bankruptcy

Bankruptcy offers a fair path forward, yet it also puts guardrails around new borrowing. Those rules protect your ability to finish the case and get a fresh start. New credit can still happen, but the bankruptcy chapter under which you filed controls how it is handled.

Pre-petition debts are those you had before filing; post-petition debts are those created after filing. Pre-petition debts are handled through the bankruptcy process. Post-petition debts are usually your responsibility unless the court or trustee says otherwise.

The rules are not the same for Chapter 7 and Chapter 13. The table below highlights the big differences that most filers care about.

Topic	Chapter 7	Chapter 13
Can post-filing debts be added to the case?	No, you remain responsible.	Usually no, except taxes that come due while the case is open and necessary consumer debts approved in advance.
Is approval needed before borrowing?	Not required by the court, but the new credit will not be discharged.	Yes, court or trustee approval is typically required before taking new credit.
Typical examples of permitted obligations	Ongoing living expenses you pay yourself.	Approved vehicle financing for work needs, essential appliance replacement, or medical costs, if affordable within the plan.
Risk if you borrow without permission	Debt survives the case.	Possible dismissal, loss of items purchased, or limits on future relief.
Plan confirmation reference	Not applicable.	The plan must meet 11 U.S.C. § 1325 standards, including feasibility.

 

With that framework in mind, let’s look more closely at Chapter 13, then Chapter 7.

Incurring New Debt During Chapter 13 Bankruptcy

Life does not stop while a Chapter 13 plan is running. Cars still need repairs, leases end, and kids need care. The rules below help you borrow only when it is truly necessary and affordable.

General Restrictions on New Debt

In Chapter 13, you usually need permission from the court or the Chapter 13 trustee before borrowing or using credit. This applies whether you plan to finance something large or sign as a co-signer on someone else’s loan.

Without prior approval, actions like these are off-limits:

• Leasing a car, appliance, or furniture, or entering a rent-to-own contract.
• Financing or refinancing a home, or pledging property as collateral.
• Taking student loans, payday loans, car loans, or advances on salary.

These limits can extend to family members if you could be held responsible or if your property is used as collateral. Always speak with your lawyer first, especially if a work credit card or vehicle is involved.

Emergencies do happen, and the law gives a narrow path for that.

Exceptions for Emergencies

There is a limited exception for emergencies that protect life, health, or property. Even then, get legal help as quickly as possible, and be ready to show why there was no time to seek prior approval.

If you face an urgent repair, medical cost, or similar issue, tell your attorney and the trustee promptly. Quick communication can reduce fallout.

Why does the court keep such a close watch on new borrowing? The answer lies in the purpose of the plan.

Why Court Approval Is Required

Chapter 13 is designed to eliminate debt or repay pre-petition creditors and finish with a clean slate. New debt can make the plan unworkable, which hurts you and your creditors.

The court must confirm a plan under 11 U.S.C. § 1325, and part of that review is whether the plan remains feasible. If a new loan crowds out plan payments, approval is unlikely.

If borrowing is truly needed, you will need to ask the court the right way.

How to Request Permission to Incur Debt

Your attorney files a motion or request laying out the need for the debt and how it will be paid. The filing should identify the lender, the amount, the interest rate, the payment amount, and the schedule.

The trustee, and sometimes creditors, get a chance to object. A brief hearing might follow, where the judge decides if the request makes sense and fits your budget.

Judges look at need, affordability, and fairness to your existing creditors.

Factors Considered by the Court

The court reviews whether the debt is necessary and whether you can still complete the plan. It also looks at whether funds used for the new debt would otherwise go to unsecured creditors.

You should be current on plan payments before asking for approval. A motion filed while behind on payments can trigger objections or even a request to dismiss the case.

Borrowing without permission can bring real harm to your case.

Consequences of Incurring Debt Without Permission

Taking new credit without approval can cause serious damage. Courts and trustees view unapproved borrowing as a threat to plan success.  Possible consequences are:

• Case dismissal or forced conversion to another chapter.
• Loss of the purchased item and forfeiture of money paid toward it.
• Limits on future bankruptcy relief or tougher plan terms.

There are a few types of post-filing debts that can be folded into the plan when handled correctly.

Debts That Can Be Added to the Chapter 13 Plan

Two categories often come up and can be addressed through the plan when done properly. Always confirm details with your attorney before acting.

• Tax obligations that become payable while the case is active can be added to the plan if the taxing authority requests it.
• Necessary consumer debts for property or services, if approved by the trustee beforehand, and if the creditor files a claim in court, can be paid under the plan.

If your case is a Chapter 7, the picture is different.

General Advice for Incurring Debt During Chapter 13

A short phone call now can prevent months of trouble later. Before taking any new credit, get advice from a bankruptcy attorney who knows local rules and the trustee’s practices.

• Keep clear records of income, expenses, and any proposed loan terms. Organized paperwork helps your request move faster.
• Stay in steady contact with the trustee and your lawyer if an urgent need pops up. Silence creates risk that is easily avoided.
• Build a small emergency cushion in your budget if possible. Even a modest buffer helps avoid unapproved borrowing.

Good communication keeps your plan on track and protects the relief you worked hard to secure.

Incurring New Debt During Chapter 7 Bankruptcy

Chapter 7 focuses on liquidating non-exempt assets, then a quick discharge of eligible pre-petition debts. New debts created after filing do not get added to the case and are still yours to pay.

If new borrowing becomes a problem, the best option may be to dismiss and refile at a later date, though repeat filings come with timing limits and other hurdles.

Before changing course, talk with counsel about timing, eligibility, and the ripple effects on protected assets.

How Incurring Debts Shortly Before Filing Bankruptcy is a Bad Idea

Loading up on credit cards or loans right before filing often backfires. Courts and creditors look closely at borrowing in the 90 days leading up to a case.

• Presumption of Fraud: Large recent charges within 90 days can be presumed fraudulent, which can lead to nondischargeable debt.
• Impact on Chapter 7 Eligibility: Recent borrowing can trigger questions about intent and can affect your ability to qualify for straight liquidation relief.
• Complications in Chapter 13 Bankruptcy: New debts just before filing can distort disposable income calculations and trigger trustee or creditor objections.
• Damage to Creditor Relationships: Lenders can view last-minute borrowing as bad faith, which invites closer scrutiny.
• Increased Legal Challenges: Creditors are more likely to file adversary cases asking the court to exclude those new debts from discharge.

If you are on the edge of filing, pause new credit use and talk with a lawyer first. A small change in timing or approach can save you from bigger fights later.

Considering Bankruptcy? Contact Yusufov Law Firm Today

At Yusufov Law Firm, we help people in Mesa, Phoenix, and Tucson stop collector pressure, protect homes and cars, and rebuild their financial lives. If you are weighing your options or worried about new debt in a case, we welcome your questions and can walk you through smart next steps. Call us at 520-745-4429 for our Tucson office or 480-788-0098 for our Mesa/Phoenix office, or reach us through our website to set up a consultation. A focused plan can bring steady progress and real peace of mind.