Now that consumers are foregoing the brick and mortar store, retailers have found new ways to rope consumers into obtaining credit to make purchases. With the holiday season fast approaching, you are going to see an explosion of online retailers offering you the option to buy something now but pay for it over time in installments with little to no interest. However, do not be fooled. This is just a traditional retail installment agreement going by a slighlt different name. The wolf simply has changed the color of its sheep’s clothing.
These deals can seem too good to be true. However, the damage lies in the fine details of these agreements. If a payment default occurs, interest can kick in and penalties may accrue. You may also be faced with the debt being sold to a much more aggressive debt collector or a negative mark showing up on your credit report.
These kinds of accounts can also have negative impacts if you file bankruptcy soon after making a purchase. Debt incurred for purchases of $750 or more for luxury goods purchased within the 90 days prior to filing for bankruptcy are non-dischargeable. If a creditor felt so compelled, it could bring an adversary proceeding the have the debt deemed non-dischargeable. This is not a common occurrence but could throw a wrench in an otherwise smooth bankruptcy.
If a creditor were to bring an action, you would be left to defend that the item or items purchased were not luxury goods or that at the time of purchase you intended to make the payments. Around the Holidays, it is tempting to purchase a new TV or gaming system as a gift. You want to be able to fulfill a child’s request for that certain present request.
An alternative, is to save the money in installments over 3-4 months. If you can do so, great, go ahead and make the purchase. If you cannot, it is a sign that you would have defaulted on the online retail installment agreement. You are always better off creating your own agreement with yourself because if you default there is no interest, late fees, or other adverse effects.
However, if you find yourself in a financial bind and owe on one of these online retail installment agreements, our bankruptcy team will help you navigate how to handle it in your bankruptcy.
Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you to make that decision is crucial. Instead of worrying what will come next, you should meet with a bankruptcy attorney with a heart to discover your options for dealing with your financial situation.
If you are someone you know is bracing for or already experiencing financial distress, the bankruptcy attorneys at Koenig|Dunne are here to help.