Buy now, pay later services like Klarna, Affirm and Afterpay have changed the way people shop. Instead of paying the full purchase price upfront, you can split purchases into smaller installments that often feel more manageable. Because these are woven into the checkout process and often tied to a credit card, many people don’t think of them as traditional loans.
Bankruptcy attorneys are reporting that these loans are becoming increasingly common, but many clients simply do not realize they need to disclose them (or how to do so) when they file for protection.
Buy now, pay later accounts are still debts
Whether you financed clothing, electronics, furniture or everyday household items, a buy now, pay later obligation is generally treated like any other unsecured debt in bankruptcy. They’re usually dischargeable – but only if they’re listed on the disclosures you file.
Some consumers also lose track of these accounts because they may have several small installment loans with different providers at the same time. Some assume the debt is connected to the retailer rather than the financing company. Others think that listing the credit card tied to a loan is enough. Those misunderstandings can result in an incomplete list of creditors and debt that’s leftover after the bankruptcy is discharged.
Bankruptcy requires complete and accurate financial disclosure. Your petition must identify all of your creditors, even if:
- The remaining balance is small.
- You are current on the payments.
- The loan is interest-free.
- The payments are automatically deducted from your bank account.
- You intend to continue paying the debt after filing.
Incomplete schedules can delay your case, require amendments or raise questions about the accuracy of your filing. Bankruptcy attorneys have become increasingly proactive about identifying buy now, pay later accounts because clients often overlook them. Some now routinely review bank statements specifically to find these transactions before filing.
Before meeting with your bankruptcy attorney, review your recent bank and credit card statements for payments to companies such as Klarna, Affirm, Afterpay, Sezzle or other installment payment providers. Also check your email for purchase confirmations and account statements that may reveal outstanding balances. A thorough review of all debts, including buy now, pay later loans, can help you obtain the full fresh start that bankruptcy is designed to provide.
