You may be surprised to learn that many of the appliances and electronics you buy create secured, as opposed to unsecured debt.

Major retailers like Sears, Best Buy, Rooms to Go and others often offer incentives for you to sign up for a store credit card.  They do this because the fine print language in the store card application contains language that makes every purchase on the store account a secured debt purchase.  The receipt for purchase references the security agreement and, arguably, makes all purchase on a store account secured.

By contrast, if you go into an electronics store and use your MasterCard or Visa to pay for your items, that debt is unsecured.

If you file bankruptcy and choose not to reaffirm these store credit card debts, you will discharge all personal responsibility for the item you purchased but after bankruptcy the store can file a personal property foreclosure to recover the collateral secured by the purchase money security agreement contained in the store credit card agreement.

Thus, if you sell or give away a computer or washing machine that you bought at Best Buy or Sears, it is possible that you have disposed of collateral that is subject to a purchase money lien.  At your 341 hearing a representative from the creditor may appear to ask you if you want to pay for the collateral or surrender it.

While there is always room for negotiation in these matters, the appearance of this type of secured claim can constitute an unpleasant surprise.


Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need bankruptcy protection. Call him at 770-393-4985 for a confidential discussion.

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