Can You Discharge Klarna, Afterpay, and PayPal in Bankruptcy?
In today’s world of online shopping and “buy now, pay later” services, it’s not uncommon to run into financial trouble with platforms like Klarna, Afterpay, and PayPal Credit. Many people ask:
👉 Can these debts be discharged in bankruptcy?
The short answer is yes, these debts are generally dischargeable in bankruptcy. But let’s break down why that is, what these companies are considered in bankruptcy, and how they might impact your financial future.
What Are Klarna, Afterpay, and PayPal?
Klarna, Afterpay, and PayPal (including PayPal Credit) are often called payment gateways. A payment gateway is a platform that allows you to make purchases without paying upfront, either by extending short-term installment plans or offering revolving credit lines.
These services can feel like “free money” because they spread payments out over weeks or months. But the truth is, they are loans in disguise. Like credit cards, these debts add up quickly—and because they make you feel like you have more disposable income than you really do, many consumers end up overextended.
How Are Payment Gateways Treated in Bankruptcy?
In bankruptcy, Klarna, Afterpay, PayPal Credit, and similar services are typically classified as unsecured debts. This means:
They are not tied to collateral (like a house or a car).
They fall into the same category as credit cards, medical bills, and personal loans.
In most Chapter 7 bankruptcies, unsecured debts are dischargeable.
Unless the purchase created a secured debt (for example, if a creditor kept an ownership interest in a big-ticket item you financed) or a nonpriority unsecured debt (like certain student loans or court fines), Klarna, Afterpay, and PayPal balances can usually be wiped out.
When Would These Debts Not Be Dischargeable?
While most buy-now-pay-later balances are dischargeable, there are some situations where exceptions might apply:
Luxury purchases right before filing – If you made large or “luxury” purchases on credit within 90 days before filing, the trustee may challenge those charges.
Fraudulent use – If you knowingly ran up charges with no intent to pay, creditors can object to discharge.
Secured purchases – If the item itself was pledged as collateral, you may have to return the item or pay to keep it.
Because the types of purchases people make are endless, it’s always smart to consult a bankruptcy attorney about your specific situation.
Why Payment Gateways Can Hurt Your Financial Health
Even people with high incomes fall into trouble with Klarna, Afterpay, and PayPal Credit because these services artificially inflate your spending power. They make it feel easy to qualify for purchases—but behind the scenes, they can hurt your:
Debt-to-income ratio
Credit score
Ability to qualify for a mortgage (already difficult in today’s lending environment)
Over time, these small installment plans pile up, leaving you financially trapped.
What Other Debts Can Bankruptcy Wipe Out?
If you’re considering bankruptcy, know that it’s not just Klarna, Afterpay, or PayPal that can be discharged. Bankruptcy often eliminates:
Credit card balances
Medical bills
Personal loans
Old tax debts (in some cases)
Car repossession deficiencies
Unpaid apartment balances
Some state toll debts
Filing bankruptcy may provide the fresh financial start you need if these debts have become overwhelming.
Should You File Bankruptcy for Klarna, Afterpay, or PayPal Debt?
Ultimately, whether bankruptcy is the right move depends on your entire financial picture. These debts can usually be discharged, but you’ll want to look at all your obligations, income, and future goals before deciding.
The best next step? Talk to a bankruptcy attorney who understands your local laws and court system. They can review your purchases, your debt, and your eligibility for Chapter 7 or Chapter 13.
Speak With a Bankruptcy Attorney Today
If Klarna, Afterpay, PayPal, or other debts are holding you back, don’t wait until it’s too late. Our law firm, Bankruptcy Near Me, helps individuals and families across California and Maryland find debt relief through Chapter 7 and Chapter 13 bankruptcy.
📍 Santa Ana, CA Office – 714-798-2544
📍 Kensington, MD Office – 301-550-5408
📧 Contact us online
Your debt is not forever. Bankruptcy may give you the financial reset you deserve.