Legal Question in Bankruptcy in New Jersey

Re: Store cards

No, the fact that a debtor has debt owed on a store charge card rather than a credit card (such as Visa, MasterCard) etc. in and of itself will not make the debt nondischargeable (i.e., not wiped out in bankruptcy).

However, some store charge cards (such as, for example, Sears) provide that the company keeps a security interest in the items purchased on credit with the store charge card. Other store charge cards (such as, for example, Ikea) do not. If the charge card gives the seller a lien, the lien is not wiped out in bankruptcy. So, for example, if a debtor bought a rider lawnmower from Sears and the debt was not paid off and the debtor filed chapter 7 bankruptcy, the debtor would either have to (1) reaffirm the debt (i.e., agree to continue to make payments), (2) surrender the goods back to Sears (i.e., return the lawnmower), or (3) redeem such property by paying to Sears the current fair market retail value of the lawnmower in view of its age and condition. Under this example if the debtor did not do one of these things Sears would have the right to seek return of the lawn mower.

The foregoing is intended as general information of interest to readers of this site and is not intended as legal advice for your specific situation. Facts and circumstances not disclosed in your brief posting may materially affect your rights. You should consult with an attorney.

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