Charging appliances before bankruptcy can backfire if the item exceeds your exemption limit or you charge over $900 in luxury goods within 90 days of filing. Buying one outright could be a problem if you can't protect it with an exemption.
Buying an appliance before you file for bankruptcy is legal, but it can backfire. The exemption you're counting on might not cover the full value, leaving the trustee free to sell it, or a purchase made on credit right before filing can turn into a debt you can't discharge. How much trouble you're in will depend on:
- The value of the appliance you purchased.
- When you purchased it relative to your filing date.
- Whether you paid with cash, a credit card, or in-store financing.
- The bankruptcy exemptions available to you in your state.
Will Your Bankruptcy Exemption Cover the Appliance?
Most state exemptions protect ordinary household appliances, but only up to a set dollar limit. Anything above that limit becomes "nonexempt property" the trustee can reach, so check your state's exemption amount before you buy.
If the appliance isn't fully protected, the bankruptcy chapter you file determines what happens to the nonexempt portion.
- In Chapter 7 bankruptcy, the trustee will sell nonexempt assets and use the proceeds to pay creditors. If an exemption only partially protects your property—say, a $400 exemption for a washing machine worth $1,000—the trustee sells the washer, gives you the $400 exemption amount, and pays creditors with the rest.
- In Chapter 13 bankruptcy, you keep the nonexempt property, but you must pay creditors its value through your Chapter 13 plan, on top of whatever else the plan requires.
Could Buying an Appliance on Credit Make the Debt Nondischargeable?
Yes, because certain transactions are presumed fraudulent, and the presumption can be difficult to overcome. Specifically, if you charge more than $900 in aggregate to a single creditor for luxury goods within 90 days of filing, that debt is presumed nondischargeable. You have the burden to prove that you intended and could pay for the appliance when you purchased it, or that the purchase was reasonable. (11 U.S.C. § 523(a)(2)(C)(i)(I); figures apply to cases filed between April 1, 2025, and March 31, 2028.)
Luxury goods are items not reasonably necessary for your support or maintenance. Whether your purchase counts as a luxury depends on the appliance's type and cost. A bankruptcy court is far less likely to treat a modest store-brand oven bought to replace a broken one as a luxury item than a precision temperature-controlled Wolf range. A high-end touchscreen refrigerator or television can raise the same red flag.
For more on how this plays out in court, see Why a Creditor May File an Objection to Discharge in Bankruptcy.
Is Buying an Appliance With Cash Considered Exemption Planning?
Yes, and it's legal as long as it's reasonable and done in good faith. "Exemption planning" means rearranging your assets before filing to maximize what you can protect.
If you have too much cash sitting in a bank account, you can typically spend it on necessities—food, rent, gas, car maintenance—before filing. You can also use that cash to buy exempt assets. If your current appliances are old or broken, replacing them in good faith is fine. Keep good records of your purchases so you're ready to explain them to the trustee if asked. Excessive or systematic conversion of nonexempt assets into exempt ones, though, can cross the line into bankruptcy fraud. Talk to a knowledgeable bankruptcy lawyer before you engage in any large-scale exemption planning.
What Are the Risks of In-Store Financing?
In-store financing gives the retailer a lien on the appliance, so a bankruptcy discharge won't stop repossession if you fall behind on payments. The store can typically reclaim the goods even after your personal liability for the debt is wiped out, because the discharge eliminates the debt, not the lien.
In most cases, the cost of repossessing household goods outweighs the benefit to the creditor. But if the appliance you bought was expensive, the creditor has more incentive to get it back.
Check Your Exemptions and Timing Before You Buy
Before buying an appliance ahead of a bankruptcy filing, confirm the item's value fits within your state's exemption, avoid running up more than $900 in luxury purchases on a single creditor's credit within 90 days of filing, and think twice about in-store financing that leaves a lien on the goods. When in doubt, talk to a bankruptcy lawyer before you buy, not after.
For related reading, see Bankruptcy Exemptions: Your Property in Bankruptcy and Why a Creditor May File an Objection to Discharge in Bankruptcy.