Filing bankruptcy is never an easy decision, and Chapter 13 has its own unique challenges. While this option can help you keep your home and restructure debt, it also comes with trade-offs that aren’t always clear at the start. Before you commit to a repayment plan that lasts three to five years, you need to understand exactly what you’re signing up for.
At Janus Law, we help Californians weigh their options honestly. Let’s break down the real drawbacks of Chapter 13, so you can move forward with confidence—not confusion.
It’s a Long-Term Commitment With Strict Rules
Chapter 13 bankruptcy isn’t a quick fix. You’ll be tied to a court-supervised repayment plan for three to five years. That means you’re expected to make consistent monthly payments toward your debts over a long stretch of time, all while sticking to a court-approved budget. It’s structured and restrictive by design.
This kind of long-term financial commitment can be tough if your income changes unexpectedly. Maybe you lose your job. Maybe your hours get cut. Even a temporary emergency—like medical expenses or car repairs—can throw your entire plan off track.
Worse yet, if you miss payments under your plan, the court can dismiss your case. That puts you right back where you started, except now you’ve spent time, money, and energy trying to fix things.
Some Debts Don’t Go Away
Chapter 13 can provide a structured way to catch up on overdue debt and keep important assets like your home or car. But it’s important to understand that not all debts are treated equally, and some will stick with you even after your repayment plan ends.
Certain debts are classified as non-dischargeable, meaning they can’t be eliminated through bankruptcy. This includes:
- Student loans: Unless you can prove “undue hardship” in a separate legal proceeding—which is extremely difficult to win—you’ll still owe your student loan debt once your Chapter 13 case is over.
- Recent tax debts: Federal, state, and local taxes from the past few years generally remain due. Chapter 13 can help you create a plan to pay them, but it won’t erase them and new tax debt must be paid in full over the life of the plan.
- Child support and alimony: These are considered domestic support obligations and must be paid in full throughout your plan. Falling behind on them can lead to serious legal consequences—even during bankruptcy.
- Court-ordered fines or restitution: If you owe money due to a criminal conviction, you’ll remain responsible for that amount regardless of your bankruptcy status.
Chapter 13 doesn’t always stop interest from accumulating on certain debts, particularly secured ones like mortgages or car loans. If your repayment plan doesn’t cover that interest, you could exit bankruptcy owing more than when you filed.
Even for dischargeable debts—like credit cards, medical bills, or personal loans—you may end up paying more than you would have under Chapter 7. In Chapter 13, you repay some or all of your unsecured debts based on what the court determines you can afford. That repayment can stretch over five years, and your creditors may receive a higher percentage of what they’re owed than they would under a liquidation.
You’ll also pay administrative fees throughout the process, including:
- Court filing fees, which must be paid upfront or through your plan
- Trustee fees, typically a percentage (up to 10%) of every payment you make
- Attorney fees, which are usually higher in Chapter 13 due to the ongoing nature of the case
Altogether, Chapter 13 may cost more, take longer, and still leave you with lingering debt when it’s over. That’s not to say it doesn’t help, but you need to go into it with a clear picture of what’s resolved and what isn’t.
It Can Tie Up Your Financial Freedom
One of the most overlooked consequences of Chapter 13 is the amount of control you give up over your money, your choices, and even your daily life. The court doesn’t just monitor your debt payments; it gets involved in your entire financial picture.
When you file for Chapter 13, you agree to live on a fixed budget which is reviewed by the court. That budget is based on your income, necessary living expenses, and what the court defines as “disposable income.” Any amount above your basic needs is expected to go toward paying creditors. The plan may work on paper, but in real life, it can feel impossibly tight.
And unlike traditional budgeting, Chapter 13 gives you almost no room to make independent decisions about how you spend or save. For the duration of your plan, you’ll need permission from the bankruptcy judge for anything outside the norm.
You may need court approval for:
- Buying or selling a vehicle
- Taking out new loans or credit cards
- Refinancing your mortgage
- Making large purchases
- Moving out of state
- Starting a side business
This can seriously impact your ability to adapt to changing circumstances or take advantage of new opportunities. Even something positive—like a job offer in another city or the chance to buy a home at a great price—might require a delay or formal petition to the court.
In practical terms, here’s how your life can be restricted during Chapter 13:
- You can’t build savings freely. Any surplus income may be flagged for debt repayment, leaving you vulnerable to emergencies.
- You can’t easily rebuild credit. Credit access is limited, and any attempts to open new accounts must be justified and approved.
- You can’t make long-term financial plans. Major life goals like owning a home, going back to school, or investing in a business often need to be put on hold.
- You can’t control your timeline. Even if your financial situation improves, you’re still bound to the original plan unless the court agrees to modify it.
This level of oversight can feel stifling and it can cause stress beyond the financial. You may feel stuck or judged. If your income increases, the court can even adjust your plan to increase your payments, taking away what might have felt like progress. On the flip side, if you fall behind, your case could be dismissed, wiping out your protections and potentially leaving you worse off than before.
Chapter 13 can help you keep what matters most—but it asks you to give up a lot in return. For some, the trade-off is worth it. For others, it’s a heavy burden that drags on for years.
To Understand All Your Options, Let’s Talk
Chapter 13 might still be the right move, but it’s not your only choice. If you’re struggling with debt in California, the team at Janus Law can walk you through your options and help you decide what’s right for your situation.
Let’s make sure your next move actually brings you closer to financial freedom. Contact Janus Law right now to schedule your consultation.
- What Assets are Exempt from Chapter 7? - June 16, 2025
- What are the Cons of Filing Chapter 13? - June 6, 2025
- Who is Eligible for Chapter 7 Bankruptcy? - May 19, 2025
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