“Buy Now, Pay Later” Services and Chapter 7 Bankruptcy

Financial distress makes it difficult for millions of Americans to pay full price up front for the items they need, so it is no surprise that Buy Now, Pay Later (BNPL) services are growing in popularity. BNPL companies such as Klarna, Afterpay and Affirm allow consumers to obtain goods or services upfront and pay for them over time in installments. If you’re considering filing for Chapter 7 debt discharge, you might already be familiar with one or more of these BNPL providers, but you should also understand how their services can complicate your bankruptcy proceeding. 

When filing for Chapter 7 bankruptcy, you must disclose all debts, including those incurred through BNPL services. This includes listing the creditor, the amount owed and the dates of the transactions. Omitting this information can result in delays or even dismissal of your case.

If you used BNPL services to make large purchases shortly before filing for bankruptcy, the transactions could be scrutinized for potential fraud. Courts might question whether you intended to repay the debt or used the service knowing you would declare bankruptcy. Generally, luxury purchases over $725 made within 90 days of filing are particularly vulnerable to being challenged.

Most BNPL debt is unsecured, meaning the lender cannot repossess the purchased items if you default. However, some BNPL agreements might include provisions that treat the debt as secured until it is fully paid. It’s essential to review your contracts to understand how your obligations are classified. 

You should avoid using BNPL services if you are contemplating bankruptcy. Any new debt can complicate your filing. If you’re in a situation where you have to use Klarna, Afterpay or Affirm, focus on covering necessary expenses rather than non-essential purchases. A bankruptcy attorney can guide you on how to address BNPL debts and other financial obligations in your Chapter 7 filing.

Chapter 7 bankruptcy offers a chance to eliminate unsecured debt, including BNPL obligations. By understanding the role of BNPL in your debt profile and seeking professional guidance, you can start the process of rebuilding your credit. 

Jeff Field & Associates prepares Chapter 7 filings for Georgia residents and advises on a full range of debt relief matters. Please call 617-232-5950 or contact us online to schedule a consultation in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta or Scottdale.