Any debt that is accrued before a Chapter 13 bankruptcy filing, and is listed on the bankruptcy petition, will be paid as a part of the Chapter 13 bankruptcy plan. On the other hand, most of the debt that is incurred after the debtor has filed for Chapter 13 bankruptcy must be paid outside the plan.
Debts Added to Chapter 13 After the Filing
There are a few types of debts that will be added to the Chapter 13 plan even if they are incurred after the debtor files for bankruptcy. Tax obligations that become payable while the Chapter 13 bankruptcy case is pending will be added to the plan. Similarly, Consumer debts for property or services which are necessary for the debtor and were previously approved by the Chapter 13 trustee, but incurred after the filing, can also be paid under the plan.
Some courts reject new debts incurred after filling for Chapter 13 bankruptcy. Courts concern is that the debtor’s payment obligations will steadily rise which will prevent the debtor from paying off their Chapter 13 plan. The only reason a Chapter 13 bankruptcy is agreed to is because the debtor makes a commitment to repay the debts under a repayment plan that is feasible for both parties. As a result, some courts may issue an order prohibiting the debtor from incurring new debts until the Chapter 13 case is over, unless the Chapter 13 trustee has previously approved the new debts.
However, it is to be expected that you will incur some debt during the Chapter 13 case, which generally lasts around three to five years. Bankruptcy does not mean the debtor must stop living. If you have filed for Chapter 13 bankruptcy and plan on incurring new debt, it is important that you seek the approval of the Chapter 13 trustee before incurring such debt or credit. Certain debt does not have to have the prior approval of the bankruptcy trustee. Debts that are incurred as a result of regular and basic living do not require prior approval.
Debt Gained After Filing Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy case, new debts accrued after the bankruptcy filing cannot be added to a Chapter 7 bankruptcy petition to be discharged. They also cannot be included in an amended petition; the debtor will remain responsible for paying these debts. The debtor has the option to dismiss the bankruptcy petition and re-file the case. However, re-filing a bankruptcy case is a very difficult task and should be avoided. The debtor can also try converting the Chapter 7 case to a Chapter 13 case; however, this conversion may harm the debtor’s personal credit file.
Because bankruptcy laws are complex, those contemplating bankruptcy should seek a bankruptcy attorney who can instruct you on when to seek court approval for newly incurred debts and other relevant issues.