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Bankruptcy and Buy Now, Pay Later
What Happens to Klarna, Affirm, and Afterpay Debt?
“Buy Now, Pay Later” (BNPL) services like Klarna, Affirm, and Afterpay have exploded in popularity. They promise instant approvals, interest-free payments,and a quick way to take home what you want without a credit card. But what happens if your financial situation takes a turn and you need to file for bankruptcy? Surprisingly, many consumers don’t realize that BNPL obligations are treated much like traditional unsecured debt—meaning they can potentially be discharged in bankruptcy, just like a credit card or personal loan.
What is Buy Now, Pay Later Debt?
BNPL apps let you split a purchase into smaller installments, usually without interest (as long as you pay on time). But behind the convenience, these transactions create a legal obligation to pay—often structured as a short-term loan. For Example: You buy a $600 laptop through Klarna in four payments of $150. Until those payments are complete, Klarna is your creditor.
Miss a payment? You may face late fees, credit reporting issues, and debt collection—just like with any other loan.
How BNPL Debt is Treated in Bankruptcy
When filing for bankruptcy, all debts must be listed, including Klarna, Affirm, and Afterpay. Here’s how they typically play out:
- Chapter 7 Bankruptcy (Liquidation): BNPL debts are considered unsecured debt (like credit cards). In most cases, they can be discharged, wiping out your obligation to pay.
- Chapter 13 Bankruptcy (Repayment Plan): BNPL debts are lumped in with other unsecured creditors. You may repay only a portion of what’s owed over 3–5 years, with the rest discharged at the end.
Importantly, the treatment doesn’t depend on whether the debt is “small” or “new.” Even if it’s a $100 BNPL purchase, it still must be disclosed.
Hidden Risks: Credit Reporting and Collection
BNPL companies are increasingly reporting to credit bureaus. That means missed payments may show up on your credit report, hurting your score before you even file for bankruptcy. Additionally:
- Some BNPL lenders sell unpaid accounts to debt collectors.
- Aggressive collection attempts may raise FDCPA (Fair Debt Collection Practices Act) issues.
- Incorrect credit reporting could trigger FCRA (Fair Credit Reporting Act) claims.
So, filing bankruptcy may not only wipe out the debt but also stop harassment and correct credit errors tied to BNPL defaults.
Key Takeaway for Consumers
BNPL feels like a convenient alternative to credit cards, but in the eyes of the law, it’s still debt. If you’re considering bankruptcy, Klarna, Affirm, Afterpay, and similar obligations must be disclosed and are usually treated like other unsecured loans.
👉 The bottom line: You don’t lose bankruptcy protection just because your debt came through an app instead of a credit card company.
Yes, You Can Discharge Student Loans in Bankruptcy
Here’s What You Need to Know
07/18/25 - For decades, you may’ve heard that student loans are undischargeable in bankruptcy — wrong. Thanks to updated guidance from the Department of Justice (DOJ) and Education (DOE), discharging federal student loans is not only possible but becoming more attainable for borrowers facing true hardship.