Can A Creditor Take Back My Italian Leather Couch During Bankruptcy?

October 21st, 2009 by Reed Allmand

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:

1. They can return the items to the creditor during bankruptcy.

1. They can reaffirm the debt and agree to pay off the balance after bankruptcy. The balance is often negotiable.

1. They can payoff the creditor during bankruptcy so that they can keep the item.

1. 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.

About Reed Allmand

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Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."

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