Updated April 2025
You see the option at checkout, click a button, and spread out payments with no interest (at least at first). But what happens when life hits hard—job loss, medical bills, or inflation—and you can’t keep up with those payments? If you’re considering bankruptcy and wondering what happens to your by now, pay later (BNPL) debt, you’re not alone.
BNPL services like Affirm, Klarna, Afterpay, and PayPal Credit are now embedded into how millions of people shop. But they’re also part of a growing debt crisis, especially for younger consumers.
How Buy Now, Pay Later Debt Works
BNPL services split a purchase into smaller payments over weeks or months. Some charge no interest if you make every payment on time. Others—especially those offering longer repayment plans—charge interest rates similar to credit cards. Miss a payment, and late fees or collection actions kick in fast.
BNPL debt is unsecured. That means there’s no collateral backing it (like your car or house). But don’t assume it’s easy to ignore. Here’s why:
- It shows up on your credit report. While not all BNPL lenders report to credit bureaus, more of them are starting to.
- You can be sued. These lenders may send your debt to collections or file a lawsuit, just like traditional creditors.
- Your total balance can balloon. It’s easy to rack up multiple BNPL purchases at once, especially when each one feels small.
That convenience comes with risk. If you’re juggling BNPL debt along with credit cards, personal loans, and other bills, bankruptcy might seem like your only option.
What Happens to BNPL Debt in Bankruptcy
Buy now, pay later debt might feel different than a credit card bill—but under bankruptcy law, it’s treated the same way. BNPL agreements are unsecured debts. That means there’s no collateral tied to them, and they’re usually eligible for discharge. Still, how this plays out depends on the type of bankruptcy you file, your recent purchase history, and how the court views your financial activity.
Chapter 7 Bankruptcy
Chapter 7 wipes out most unsecured debt, and that includes BNPL balances. So if you qualify for Chapter 7 and complete the process, your obligation to repay these debts likely disappears.
But there are caveats. Timing is one of them.
If you racked up a series of BNPL purchases right before filing for bankruptcy—especially luxury items or non-essential goods—the United States Trustee or creditor may object. The creditor could argue that you never intended to repay the debt and used the BNPL service fraudulently. If the court agrees, that specific debt may not be discharged.
Creditors can file what’s called an adversary proceeding, essentially a lawsuit within your bankruptcy case, to challenge your discharge. You’d have to defend your actions—often by showing you genuinely thought you’d be able to pay at the time of purchase.
BNPL platforms can make this more complicated. Many of them partner with banks or issue credit through third parties. You may think you’re dealing with Afterpay, but legally, the debt is owned by another lender. You’ll need to list each creditor in your bankruptcy filing. Omitting any of them could delay your case or result in debts not being discharged.
Chapter 13 Bankruptcy
If your income is too high for Chapter 7 or you want to protect assets like your home, Chapter 13 gives you another path. You don’t wipe out debt immediately. Instead, you create a repayment plan that lasts three to five years.
In this case, BNPL debt becomes part of your unsecured creditor pool. How much you repay depends on your disposable income, not the total amount you owe. Many people pay only a small percentage of their unsecured debts, and the rest is discharged at the end of the plan.
The upside of Chapter 13? You stop the bleeding. Once you file, an automatic stay kicks in. That puts an immediate stop to collection calls, lawsuits, and wage garnishments. BNPL companies and their collectors have to back off while your repayment plan gets approved.
This type of bankruptcy also buys you time. Let’s say you’re behind on mortgage payments or car loans. You can use Chapter 13 to catch up while folding your BNPL and credit card debts into a manageable plan.
In both types of bankruptcy, full disclosure is essential. Don’t ignore small BNPL balances or assume they’ll fall off on their own. List them with the rest of your unsecured debt. It may seem like a lot of paperwork, but it protects you in the long run
What to Watch Out for Before You File
Bankruptcy can give you a fresh start—but it’s not a decision to rush. Before you file, take a close look at your BNPL activity.
- Recent purchases raise red flags. If you used BNPL to finance a new phone or expensive furniture right before filing, a trustee or creditor might challenge it. These debts could be labeled “non-dischargeable” due to suspected fraud.
- Too many small balances can add up. You’ll need to list each account in your petition. If you used multiple BNPL services or financed purchases through several merchants, tracking it all can get complicated.
- You may be personally liable. Even if you didn’t sign a traditional loan agreement, BNPL platforms often include terms that hold you accountable. That includes defaulting, missing payments, or trying to get out of it without a proper legal process.
Bankruptcy laws are strict about honesty and timing. The more transparent you are about your BNPL debts, the better your chances of receiving a discharge without delays or objections.
Talk to a California Bankruptcy Attorney Who Can Help
If BNPL debt is dragging you down, you’re not alone—and you’re not stuck. At Janus Law, we help Californians take control of their financial future. Whether you’re overwhelmed by credit cards, personal loans, or buy now, pay later balances, we can help you understand your options and make a plan that works.
Call Janus Law right now to schedule your consultation. You don’t have to navigate bankruptcy alone. Let’s figure it out together.
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