Bankruptcy and Your Furniture
When a debtor purchases a product with credit, the creditor has a secured interest in the property. What that means is that anything you buy with credit, including furniture, vehicles, jewelry, electronics, computers, clothes and books can be treated as a secured item during bankruptcy. For example if you purchased a $3,000 laptop using your credit card, the credit card company could technically as for that particular item back, or ask you to reaffirm it in bankruptcy. This basically rarely happens; but it is a risk with certain items such as high-priced electronics, furniture and especially jewelry.
Local merchants are more likely to go after household goods than a large national chain or credit card company. For example, if you purchased a couch at your small local furniture store on credit a year before filing bankruptcy, they might want the couch back or demand that you pay it off especially if it is high-end and has a high resale value. It's not likely to happen; but it is possible.
Here's what a debtor in bankruptcy can do about household goods purchased with credit:
- They can return the items to the creditor during bankruptcy.
- They can reaffirm the debt and agree to pay off the balance after bankruptcy. The balance is often negotiable.
- They can payoff the creditor during bankruptcy so that they can keep the item.
- They can choose to take no action and count on the high probability that the creditor will not attempt to get the property back.
Usually, the creditor (even a small one) will not attempt to get the property back unless it is very valuable and has a high resale value. It's usually safe to take no action; but speak with your bankruptcy attorney first, specially if you have purchased high value items with credit such as computers and jewelry.