The Rewards and Risks of Buy Now, Pay Later

Buy now, pay later debt traps can have an outsized impact on your financial life. At our firm, we’ve learned time and again how short-term solutions can lead to long-term financial problems.

But these Buy Now, Pay Later (BNPL) services like Klarna, Affirm, Afterpay, and Zip have still exploded in popularity over the last few years. They let you split purchases into smaller, interest-free payments. From new shoes to takeout to concert tickets, you can “just pay later” with a couple of clicks.

But what happens when “later” comes… and you can’t afford it?

What Is Buy Now, Pay Later (BNPL)?

Buy Now, Pay Later (BNPL) is a type of short-term financing. It lets you split a purchase into several smaller payments (usually four or more)  – often with no interest if paid on time.

Services like Klarna, Affirm, Afterpay, and Zip will partner with online and in-store retailers to offer these options at checkout. You might have seen something like: “Pay $25 today and 3 more payments of $25 every two weeks.” That’s BNPL in action.

BNPL is marketed as a flexible, budget-friendly alternative to credit cards. You don’t need perfect credit to qualify, and the approval process takes seconds.

In fact, many people use apps without fully realizing they’re taking on debt.

Why BNPL Can Lead to Debt Trouble

BNPL services feel easy and harmless. You can take on this debt with just a click. But when you use these platforms multiple times across different retailers and services, you’re essentially borrowing over and over again.

And so the debt can get out of hand quickly. Remember, BNPL creates separate installment plans for each individual purchase. That means you could be juggling five or ten different payment schedules at once.

Here’s how the trouble begins:

  • You make several small purchases on different BNPL apps.
  • Each one has its own payment schedule.
  • You miss one or more payments and start racking up late fees.
  • The provider can report your debt to the credit bureaus, so missed payments hurt your credit.
  • From there, collections agencies can get involved.

The structure of BNPL makes it easy to lose track of how much you owe. And unlike credit cards, there’s no minimum monthly payment that gives you flexibility – BNPL payments are fixed, so you’re stuck with the debt at its full cost.

Warning Signs You’re Caught in a Buy Now, Pay Later Debt Trap

BNPL debt can sneak up on you. Here are a few red flags that your use of BNPL may be unmanageable:

  • You’re using BNPL without it being worked into your budget in advance.
  • You have more than one or two BNPL purchases at once.
  • You’re using one BNPL app to pay off another.
  • You’re missing payment reminders or getting hit with late fees.
  • You’re using BNPL for essentials like groceries or gas.
  • You’re ignoring other bills to cover BNPL payments.
  • You’ve started getting collection calls or negative credit reports.

If any of this sounds familiar, it’s time to step back and take a look at your overall financial health.

Can Bankruptcy Help with BNPL Debt?

Yes, bankruptcy can help with this kind of debt.

BNPL debt is usually considered unsecured debt, similar to credit cards or personal loans. This means it can be discharged in both Chapter 7 and Chapter 13 bankruptcy.

  • Chapter 7 bankruptcy wipes out your qualifying unsecured debts quickly, giving you a fresh start.
  • Chapter 13 bankruptcy sets up a manageable repayment plan over 3-5 years and also helps protect your assets.

If you’re drowning in BNPL payments and other types of debt, bankruptcy might be your chance to get back on your feet.

A Few Additional Concerns About BNPL

Courts look closely at new debt taken on within 60-90 days of filing. If you recently made a lot of BNPL purchases – especially for luxury items – that may come up early during the bankruptcy process.

That doesn’t mean you’ll be denied, but it’s something you’ll want to consider with your timing. So make sure to discuss this with your attorney – we offer a free consultation where we always look at recent purchases and debts like this.

Also, be aware that BNPL debt from some platforms might not show up on your credit report yet, but that doesn’t mean it won’t be collected, sold to third parties, or end up in court. It’s a real and serious debt just like any other.

Take Control Over Your Buy Now, Pay Later Debt

If you’re stuck in a cycle of Buy Now, Pay Later debt payments, you’re not alone. Many people in Memphis and across the country are quietly struggling with this new form of debt.

The good news? There’s a way out.

For decades, our Memphis bankruptcy lawyers have helped people get out of debt and get a fresh start. And we can help you, too.

Call 901-327-2100 today to schedule your free consultation or reach out to us online. We’ll look at your full financial picture and help you decide if bankruptcy is the right move.