Some department store credit cards may be secured.  The things you buy with the credit card may be collateral.  The store might tell you that they will repossess what you bought, such as a TV, washer, or sofa, if you do not reaffirm the debt.  Most of the time, stores will not repossess used merchandise.  So, after a bankruptcy, it is much less likely that a department store would repossess “collateral” than a car lender.

However, repossession is possible.  You have to decide how important the item is to you or your family.  If you can replace it cheaply or live without it, then you should not reaffirm.  You can still shop at the store by paying cash, and the store may offer you a new credit card even if you don’t reaffirm. (Just make sure that your old balance is not added into the new account.)

For Example

Some offers to reaffirm may seem attractive at first.  Let’s say a department store lets you keep your credit card if you reaffirm $1000 out of the $2000 you owed before bankruptcy.  They say it will cost you only $25 per month and they will also give you a $500 line of credit for new purchases.  What they might not tell you is that they will give you a new credit card in a few months even if you do not reaffirm.  More importantly, though, you should understand that you are agreeing to repay $1000 plus interest that the law says you can have legally canceled.  That is a big price to pay for $500 in new credit.

Another option for keeping property with a purchase money security interest is redeeming it from the creditor for a lump sum cash payment.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.

It is almost never a good idea to reaffirm a credit card.  Reaffirming means you will pay bills that your bankruptcy would normally wipe out.  That can be a very high price to pay for the convenience of a credit card.  Try paying cash.  Then in a few years, you can probably get a new credit card, that won’t come with a large unpaid balance!

If you do reaffirm, try to get something in return, like a lower balance, no interest on the balance, or a reasonable interest rate on any new credit.  Don’t be stuck paying 18/-/21% or higher!

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA, www.nclc.org.