What are the downsides of filing for Chapter 13 bankruptcy?

American households are carrying more debt than ever right now. Total household debt climbed to a record of $18.8 trillion in the fourth quarter of 2025, and credit card balances rose by $44 billion and are now sitting at a total of $1.28 trillion. Credit card rates are also sitting near record highs on average, and as a result, millions of borrowers are struggling to keep up with their monthly card payments. That can cause serious financial issues, especially as those balances grow due to compounding interest and other fees. 

In these situations, filing for bankruptcy can start to feel like the only exit. And, while there are a few different types of bankruptcies, Chapter 13 bankruptcy is often seen as the more responsible path. Rather than wiping the slate clean all at once, Chapter 13 lets you restructure what you owe and repay it over time through a court-approved plan. So, it sounds orderly. It sounds manageable. And for some people, it genuinely is.

But Chapter 13 is not always the clean break it's made out to be, and there are some downsides to taking this path. So, before you walk into a bankruptcy attorney's office, it's worth taking a hard look at what this process actually involves — and whether the drawbacks might outweigh the relief it promises.

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What are the downsides of filing for Chapter 13 bankruptcy?

The most immediate and lasting consequence of filing Chapter 13 is the damage it does to your credit. A Chapter 13 bankruptcy stays on your credit report for seven years from the filing date, dragging down your score and signaling risk to future lenders, landlords and even employers. That timeline is less drastic than what comes with Chapter 7, though, which stays on your credit until the 10-year mark. Still, seven years is still a long time to carry that label — and the impact it has on your ability to borrow, rent an apartment or qualify for competitive interest rates can be significant.

Then there's the timeline of the repayment plan itself. Chapter 13 requires you to commit to a three- to five-year repayment schedule under court supervision. That means every major financial decision you make during that window, whether it's taking on new debt, selling property or changing jobs, may require approval from a bankruptcy trustee. Life rarely stays still for that many years, and being locked into a rigid court-ordered plan during that stretch can be difficult.

The cost of filing is also a factor that can surprise people. Between attorney fees, court filing fees and mandatory credit counseling courses, the upfront and ongoing costs of a Chapter 13 case can cost thousands of dollars. Attorney fees alone are often thousands of dollars, though it depends, in large part, on the complexity of your case and where you live — but those extra costs can still be hard to cover when you're already financially underwater.

Perhaps the most sobering downside, though, is that the majority of Chapter 13 cases don't succeed. Research has consistently shown that less than half of all filers complete their repayment plans. When these bankruptcy plans fail — often due to unexpected income changes or new financial emergencies — the bankruptcy case is dismissed, leaving you without the protections you filed for and often in a worse position than before.

Chapter 13 doesn't eliminate all types of debt, either. Student loans, recent tax debt, alimony and child support obligations typically survive bankruptcy intact. If those are the debts driving your financial stress, Chapter 13 may not provide the relief you're hoping for.

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What debt relief options could make sense instead?

Chapter 13 can be the right move in some situations, but it's not the only path out of debt, and for some people, the alternatives are less disruptive. Here's what to consider in place of Chapter 13:

• Creditor hardship programs: Many lenders offer temporary hardship plans that can reduce interest rates, waive fees or offer short-term payment relief. These programs don't erase debt, but they can create breathing room without a court filing on your record.
• Debt management: A credit counseling agency may be able to consolidate certain unsecured debts into one monthly payment with reduced interest rates. You pay your balances in full over time, but often at a lower overall cost and without the public record of bankruptcy.
• Debt settlement: In some cases, it may be possible to negotiate with creditors to pay less than what's owed, especially if you're already behind. This approach has risks — including potential credit damage and tax implications — but for the right borrower, it can shorten the timeline to getting out of debt.
• Targeted consolidation or refinancing: If your credit and income allow, consolidating high-rate balances into a lower-rate loan can simplify payments and reduce total interest. This won't solve deeper budget issues, but it can make the math more manageable.

The bottom line

Chapter 13 bankruptcy can be a legitimate lifeline for people facing serious financial issues that they can't handle on their own, but it's not a decision to make lightly. The credit damage, the years-long repayment commitment, the high failure rate and the cost all deserve serious consideration. If you're considering this route, consulting with both a bankruptcy attorney and a credit counselor or debt relief expert before filing can help you understand whether bankruptcy is truly your best option — or whether another path makes more sense for your situation.