How Are Subscription Services Like Netflix Treated in a Chapter 7 Bankruptcy?

Over the last decade or so, many of us have shifted more of our budget to subscription services, where a fee is automatically deducted from our credit card or bank account, usually on a monthly basis. This trend is probably most associated with home entertainment and music providers, such as Netflix, Hulu Amazon Prime and Spotify. However, meal prep services, including HelloFresh and Blue Apron, also use this type of arrangement. 

When you file for Chapter 7 bankruptcy, you are required to disclose all of your income, expenses, assets and debts. Subscription services are considered part of your monthly expenses and must be listed in your bankruptcy paperwork. As part of the debt relief process, you should closely examine whether you can do without certain services in order to free up funds for true needs. 

In most cases, subscription services are not considered essential expenses, but discretionary spending. Essential expenses typically include housing, utilities, food, transportation and medical costs. That said, having a few low-cost subscriptions is unlikely to raise concerns, especially if your overall budget is reasonable. However, if you have multiple or high-cost subscriptions, the trustee may question whether these expenses should be reduced or eliminated, with the proceeds going to your creditor.

Netflix subscriptions, gym memberships and other type of services are typically considered as executory contracts in bankruptcy cases. These agreements have continuing obligations for both parties. Under the law, customers or bankruptcy trustees can reject these contacts so payments are no longer required. Alternatively, if the trustee approves, a customer can assume the executory contract and will be legally liable for making payments or performing other contractual duties going forward. 

If you’re unsure how to handle subscription services or other expenses during your Chapter 7 bankruptcy, you should speak with a qualified attorney about your options and the legal requirements pertaining to your situation. At Jeff Field & Associates, we represent Georgia residents in Chapter 7 proceedings and other types of bankruptcy matters. For a consultation, please call 404-381-1278 or contact us online. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Scottdale.