How Do Klarna, Afterpay, Affirm, and Other BNPL Apps Work?
Buy now; pay later (also known as BNPL) are payment options that allow customers to stretch out their payments over a short period of time. For example, you can buy a $100 pair of shoes with a BNPL app, but instead of paying $100 at once, a BNPL program may allow you to stretch those payments put over four interest-free installments of $25 each. While $25 sounds like something pretty much anyone can afford, problems occur when people have multiple BNPL loans stacking up. Instead of having $25 payments every week, you may have a $350 payment every week for the next month—which is a lot more than the average person can afford. Additional problems can occur when people are paying their BNPL loans with credit cards. The loans start small, and can increase to large amounts of money very quickly, especially as people are essentially financing things that were never meant to be financed, such as DoorDash or groceries.
How Is Debt Divided in Divorce?
Debt can be divided based on a lot of factors, but, generally speaking, debt is usually split equitably between the each party. “Equitably” may mean 50/50 depending on which state you’re in. Typically, you are responsible for debt acquired during the marriage regardless of whether or not it’s in your name. There may be certain situations where you aren’t responsible for the debt that your partner accrued, but these situations are unusual and the exception. If you and your spouse are getting divorced, you can be responsible (at least partially) for their debt, including their BNPL debt. This is especially likely if they’ve used BNPL debt for household expenses such as clothing for the children, groceries, food for the family, etc. While BNPL debt is typically already resolved before the divorce is finalized, if your spouse pays off the BNPL debt with a credit card, that debt will be treated as regular credit card debt.
When You Didn’t Know
“I didn’t know my spouse was racking up all that debt!” does not typically absolve you of the responsibility of paying that debt—especially if you benefitted from the purchases that caused the debt or the purchased were made for a marital purpose, such as paying utility bills or buying groceries. If you and your spouse are talking about divorce, you both should be transparent about the amount of debt you and your spouse have, especially if your finances aren’t combined. While keeping separate finances has been beneficial for many couples, it does not protect you in the event of a divorce. Even if your finances are completely separate, you could still be partially responsible for your spouse’s credit card debts. It does not necessarily matter that you didn’t know about them. Finding out about the debt can help you plan for the divorce and post-divorce.
What about the Stuff?
BNPL debt is considered to be unsecured debt. Because it’s unsecured, the debt is split equitably and the assets are also split equitably. Unfortunately, this can result in an inequality since you’d likely be responsible for a portion of the debt (maybe even half of the debt), but you may not want the items that the debt purchased. In fact, your spouse may even get those items automatically—after all, are you really going spend time and money to take your ex to court over their Khol’s wardrobe that you can’t even wear? Probably not. If your ex has substantial BNPL loans (or debt that paid off BNPL loans) that disproportionately benefit them, it may be in your best interests to speak with an attorney and see if there’s something that can prevent you from taking on additional debt.
Can The Debt Collectors Come After Me?
A lot of this will depend on how the debt is structured, whose name it’s in, and what happens in your divorce. In the simplest terms: it is possible that debt collectors will attempt to collect from you regarding your ex’s BNPL debt. While BNPL programs don’t typically run hard credit checks to use their most basic features, some platforms have more traditional financing options that do require a credit check, which might enable creditors or debt purchasers to come after you in the event that your ex defaults on a loan. Just because you have debt collectors coming after you doesn’t mean that you have to pay them. You may have debt collectors calling you about debts they believe you owe because your spouse did not refinance the debt in their name only per the court order. If you have debt collectors contacting you regarding debt that you do not think you should have to pay, you may want to review your divorce decree and or contact your attorney for additional clarification.
Protecting Yourself during Divorce
If you’re filing for divorce, having legal representation may be the best way to protect yourself during divorce. When you need an attorney who will advocate for your best interests, CoilLaw is here for you. Contact us today to set you your first consultation.
