Posted by Ryan Blay on June 12th, 2012 in Bankruptcy, Chapter 7, Illinois, Life After Bankruptcy, Wisconsin
Best Buy is a fun place to shop. It has lots of gadgets, gifts, and games for men and women, boys and girls. It’s very tempting to overspend or try to finance purchases we can’t afford.
In bankruptcy, the goal is to shed the debt that bothers us. In order to get a fresh start in Chapter 7, that means making tough choices about what debts to hold on to and keep paying. The majority of our clients need a car to get to and from work, working appliances and adequate furniture. The bigger issues come with electronics and gadgets.
Best Buy wants to sell you things. They do a good job of it. One way they do this is by offering financing on their Best Buy cards, typically through HSBC. HSBC is a huge banking company, and Best Buy is the local brand that makes folks happy by selling TVs, iPads, and gaming systems.
Schedules I and J of the bankruptcy petition are the budget for the debtors in bankruptcy. Sometimes, the budget does show a small positive amount every month. Subtracting fixed expenses (food, utilities, rent/mortgage, car payment, insurance, etc.) from net income, we get a final number. If that number is “-$400″, that means that our clients are still running a $400 budget deficit per month – even with their credit cards, medical bills, and unsecured loans excluded. So when our clients then ask if they can keep the 3D TV and Wiis they financed, it comes time for tough decisions.
With secured goods like electronics, we have 3 options to present to our clients: They can surrender the goods and let Best Buy pick them up at their own expense. We can have them offer a lump sum amount in a redemption for the fair value of the item. Or they can reaffirm the debts through long term payments that now survive the bankruptcy.
As an attorney, I am really reluctant to recommend this last option, because typically it means another $2000 or so in debt that remains after bankruptcy. If there is no car payment, mortgage payment, or other long term debt, then maybe it’s workable. But these items are not as essential to living as, say, a car is to get from work to home and pick up the kids.
We’re not here to make these decisions, but it is part of our job to advise our clients as to how to proceed. Like any other debt, we must look at the whole picture and make a choice that won’t put our clients in a bad situation in the future.
If you have an item or two financed on a Best Buy card, and bankruptcy is an option in the near future, call or e-mail us to discuss.