Can You Get a Personal Loan While in Chapter 13 Bankruptcy?
📅 Regularly Updated⏱ 10 min read✅ Expert Reviewed🇺🇸 US Only
Yes — but it requires court approval first. Chapter 13 bankruptcy filers can take on new debt during the repayment plan, but only with permission from the bankruptcy trustee and typically the court. This guide explains the court approval process, which types of loans are typically approved, and how to find lenders willing to work with active Chapter 13 cases.
CB
Charles Bravo
Personal finance expert with 15 years of experience in consumer lending, bad credit loan solutions, and debt management strategies. Specializes in helping underserved borrowers find safe, affordable financing.
Court Approval
Required before taking any new debt during an active Chapter 13 case
3–5 Years
Typical Chapter 13 repayment plan duration — you may need to borrow during this period
Trustee
Your bankruptcy trustee must approve new debt — they evaluate necessity and affordability
Free
Bankruptcy attorneys often answer this question in free consultations — call yours first
⚖️ Chapter 13 Rules for Taking on New Debt
Chapter 13 bankruptcy is a court-supervised repayment plan lasting 3–5 years. During this period, you are generally prohibited from taking on new significant debt without court approval. The rationale: your disposable income is already committed to the repayment plan, and new debt could jeopardize your ability to complete it.
What Counts as "Significant" Debt
Most bankruptcy courts require trustee or court approval for any new credit that would materially affect your plan payments. This typically includes personal loans over $1,000–$5,000 (varies by court), new auto loans, and new mortgages. Small emergency purchases on an existing credit card may not require approval depending on your court's local rules.
⚠️ Do NOT Take New Debt Without Approval
Taking on new debt without trustee permission during Chapter 13 can result in dismissal of your bankruptcy case — meaning you lose your bankruptcy protection and all creditors can resume collection activity immediately. Always contact your bankruptcy attorney before taking any new credit.
📋 The Court Approval Process for New Debt
Step 1 — Contact your bankruptcy attorney — Before anything else. They know your specific court's local rules and will advise whether trustee-only approval or a formal court motion is required.
Step 2 — File a motion to incur debt — Your attorney files a motion explaining why the new debt is necessary, the proposed loan terms, and how you'll afford payments alongside your existing plan obligations.
Step 3 — Trustee review — The trustee reviews the motion and typically approves it if: the debt is for a necessary purpose (car repair, medical emergency), the terms are reasonable, and your budget can support the new payment.
Step 4 — Court approval (if required) — Some courts require a formal hearing; others allow trustee approval to stand without a hearing. Your attorney will manage this process.
Step 5 — Apply for the loan with approval letter — Once approved, you have documentation to show lenders that your bankruptcy court has permitted new debt.
✅ Types of Loans Typically Approved During Chapter 13
Emergency car repair loans — Most commonly approved. If you need your car for work and the Chapter 13 repayment plan depends on your continued employment, a car repair loan is considered necessary.
Vehicle replacement loans — If your car fails and cannot be repaired, a replacement vehicle loan may be approved — though courts want affordable terms.
Medical emergency loans — Emergency medical expenses not covered by insurance are typically considered necessary and are usually approved.
Home repair loans (for homeowners) — Essential repairs (roof, HVAC, plumbing) that maintain the property are typically approved.
What is NOT typically approved — Discretionary purchases, vacation loans, new credit cards, or any debt that increases your financial obligations without a clear necessity.
🏦 Lenders Who Work with Active Chapter 13 Cases
Credit Unions (Best Option)
Some credit unions, particularly community-focused ones, will work with Chapter 13 filers who have court approval documentation. They understand the bankruptcy process and view court-approved debt as a managed obligation.
OneMain Financial
OneMain Financial has experience working with bankruptcy filers and sometimes approves loans for Chapter 13 debtors with court approval and sufficient income. Physical branches allow direct conversation about your situation. APR: 18%–35.99%.
Specialized Bankruptcy Lenders
Some specialty lenders specifically serve bankruptcy filers. Rates are typically higher (30%–50% APR) but they understand the legal context. Search "personal loans active Chapter 13" for current options — this market changes frequently.
📊 Compare Options During Chapter 13
Option
Court Approval Needed
APR Range
Likelihood of Approval
Best For
Credit Union (with approval)
Yes
Up to 28%
⚠ Some CUs only
✓ Best rate option
OneMain Financial
Yes
18%–35.99%
⚠ Case-by-case
⚠ Common approval
Specialty BK Lenders
Yes
30%–50%
✓ Higher approval
⚠ Higher cost
Plan Modification
Yes
N/A
✓ Court-integrated
✓ For large needs
📝 Step-by-Step Application Guide
1
Call Your Bankruptcy Attorney First
Before doing anything else. Your attorney knows your specific court's rules and will tell you exactly what type of approval is needed. Many answer basic questions at no extra charge for existing clients.
2
File a Motion to Incur Debt
Your attorney prepares and files this motion. It explains the need for the loan, proposed terms, and how you'll afford it alongside plan payments. Court filing fees typically $25–$100.
3
Get the Approval Order in Writing
Once approved, obtain a copy of the court order or trustee approval letter. You will need this document when applying to any lender.
4
Apply at Credit Unions First
Contact credit unions with your approval documentation. Explain your Chapter 13 status, show the court approval, and present your income documentation showing you can afford both plan payments and the new loan.
5
Try OneMain Financial if CUs Decline
OneMain Financial has physical branches and staff experienced with bankruptcy situations. Bring your court approval letter, income documentation, and plan payment records.
6
Consider Plan Modification for Large Needs
For larger loan needs, ask your attorney whether modifying your Chapter 13 plan to incorporate the need is more practical than taking separate new debt.
📖 Real-Life Example
Sandra was 18 months into her 5-year Chapter 13 plan when her transmission failed — $3,200 to repair. Without her car, she couldn't work, which would collapse her entire bankruptcy plan. Her attorney filed an emergency motion to incur debt the same day. The trustee approved the motion within 72 hours, recognizing the necessity.
💡 Key Takeaway
With the court approval letter, Sandra applied at OneMain Financial. They approved $3,200 at 28% APR over 36 months — a $122 monthly payment that, combined with her plan payments, her income could support. Her Chapter 13 remained intact. The court approval process that seemed like an obstacle actually gave Sandra more credibility with lenders — a bankruptcy court's blessing that the debt was necessary and affordable.
⚖️ Pros and Cons
✓ Pros
Personal loans are possible during Chapter 13 with court approval — you're not completely without options
Court approval process filters for necessary, affordable loans — protecting your bankruptcy case
Trustee approval demonstrates to lenders that the debt has been reviewed for sustainability
Credit unions and OneMain Financial have experience with Chapter 13 situations
Emergency needs (car repair, medical) are typically approved quickly by trustees
✗ Cons
Court approval process takes time — not appropriate for same-day emergencies
Attorney fees for filing motions add to total borrowing cost
Most mainstream online lenders will not approve loans during active Chapter 13
Higher APRs due to bankruptcy status — 28%–50% typical
Taking unapproved debt can result in case dismissal — the risk of doing it wrong is severe
❓ Frequently Asked Questions
Yes, but you need court or trustee approval first. The approval process involves filing a motion explaining why the debt is necessary, what the terms are, and how you'll afford payments alongside your existing plan obligations. Never take new debt without approval — it can result in case dismissal.
Taking on new debt without trustee or court approval can result in your Chapter 13 case being dismissed. If dismissed, you lose bankruptcy protection and all creditors can immediately resume collection activity, lawsuits, and wage garnishment.
Emergency car repairs, vehicle replacement when necessary for employment, medical emergency expenses, and essential home repairs are most commonly approved. Discretionary purchases, vacations, and new credit cards are typically denied.
Some credit unions, OneMain Financial, and specialty bankruptcy lenders work with active Chapter 13 cases. You must have court or trustee approval documentation before applying. Most online lenders (Upstart, Avant, LendingClub) do not approve loans during active bankruptcy.
Routine approval through the trustee typically takes 2–4 weeks. Emergency motions for urgent situations (car needed for work) can sometimes be approved in 24–72 hours. Your bankruptcy attorney manages this process and knows your specific court's timeline.
See Our Complete Bad Credit Loan Guide
After Chapter 13 completes, our guide covers every loan option available for rebuilding — with step-by-step strategies for improving your credit score fast.
⚠️ Disclaimer: AllFinanceInfoStore provides independent financial education only. We are not a lender, broker, or financial advisor. Bankruptcy rules vary by court district. Always consult your bankruptcy attorney before taking any new debt during a Chapter 13 case. This is general information only, not legal advice. All content is for informational purposes only. See our full Disclaimer and Privacy Policy.