Retail credit cards and bankruptcy.

If I purchase a gift for my friend with a retail card like Futureshop card which gives the creditor a security interest in the item can they repossess the gift from my friend if I declare bankruptcy?

This depends on a number the value of the gift and when the purchases were made. Typically purchases on store credit cards don’t provide a security interest on the items purchased, but this doesn’t mean that purchase won’t cause any difficulties. One of two situations may arise.

1. When you file bankruptcy you are required by law to provide details of any gifts of greater than $500.00 in value in the previous 5 years, if these gifts appear to have prejudiced the creditors rights, the Trustee is required to have funds come in to the bankruptcy estate in lieu of these gifts, the premise is then these monies will be distributed to the creditors on an equal basis.

2. Alternatively, in a bankruptcy all creditors automatically file with the trustee a list of all transactions in the previous three months. However, if the creditor believes you have abused the credit cards, they can review transactions for at least a year in the past, and longer if warranted. As a result of this review a creditor may oppose a discharge and the court would then determine if any additional funds were to be paid to the bankruptcy estate in lieu of this abuse.

If you believe this is an issue, you should discuss this with your bankruptcy trustee to fully explore your options.