Discharging Fintech and BNPL Loans

“Buy Now, Pay Later” (BNPL) services like Affirm, Klarna, and Afterpay, and fintech loans from apps like Upstart or SoFi, are everywhere. When you file for bankruptcy, how are they treated?

They Are Unsecured Debt

Generally, BNPL and fintech loans are unsecured non-priority debts, just like credit cards and medical bills. They are typically 100% dischargeable in Chapter 7 and treated the same as other unsecured creditors in Chapter 13.

The “Secured” Exception

Some BNPL terms claim they retain a “security interest” in the item you bought (e.g., the Peloton bike). In practice, they rarely enforce this (they don’t want your used bike). However, legally, they might be a secured creditor. We analyze the contracts to determine the true status.

The Fraud Risk

Fintechs use sophisticated data. If you took out a $20,000 loan from an app two weeks before filing for bankruptcy, they will likely flag it for fraud. They may file an Adversary Proceeding to object to the discharge of that specific debt.

Strategic Filing

Timing is everything. We advise clients on when to file to minimize the risk of fraud objections from aggressive fintech lenders.