If you purchase expensive items prior to filing for bankruptcy, you may not be able to exempt them. In addition, if you buy appliances on credit shortly before filing your case, the creditor may have grounds to have its debt declared nondischargeable. In general, it is not a good idea to make large purchases prior to bankruptcy. But whether buying appliances will affect your case depends on:
If you are filing for Chapter 7 bankruptcy, the bankruptcy trustee has the power to sell your nonexempt assets to pay back your creditors. Most states allow debtors to retain their household goods and appliances as long as they are not exceptionally valuable. If you plan to buy new appliances, make sure that their value doesn’t exceed the amount of your exemption.
Exemption planning refers to the process of rearranging your assets to maximize your bankruptcy exemptions. In general, you can engage in a certain amount of exemption planning prior to filing your case as long as it is reasonable and in good faith. For example, if you have too much cash in your bank account, you can typically spend it on food, rent, gas, car maintenance, or other necessities prior to filing for bankruptcy.
You may also be able to use the money to purchase exempt assets. If your current appliances are old or in need of repair, then you can buy new appliances in good faith and explain your purchases to the trustee if asked. But keep in mind that excessive or systematic conversion of nonexempt assets into exempt ones may be considered bankruptcy fraud.
If you buy household appliances on credit shortly before filing your case, you may not be able to discharge that debt in your bankruptcy. In bankruptcy, if you incur a debt (with the same creditor) that exceeds $675 in aggregate to purchase luxury goods within the 90-day period prior to filing your case, that debt is presumed nondischargeable. (Figure current for three years as of April 2016.)
Luxury goods include items that are not reasonably necessary for your support or maintenance. Whether your purchase will be considered a luxury good depends on the type of appliance you buy and how much it costs. For example, a modest oven you bought to replace a broken one may not be considered a luxury item while an expensive television might.
For more information, see Why a Creditor May File an Objection to Discharge in Bankruptcy.
If you purchase appliances with in-store financing, the store will typically have a lien on the items you buy. This means that if you fail to make your monthly payments, it can repossess the goods. Even if your bankruptcy discharge wipes out your personal liability for the debt, it will not eliminate the lien on the property.
In most cases, the cost of repossessing household goods outweighs the benefit to the creditor. However, if the appliances you purchased were very expensive, the creditor may have more incentive to try to get them back.