Can You Keep Rent-to-Own Furniture in a Bankruptcy?

People in a tight financial situation often patronize rent-to-own businesses when they need something for their home but cannot afford paying the entire price upfront. Whether someone is looking for furniture, a major appliance or something else, they might be willing to pay high interest rates in order to complete their purchase over an extended amount of time while using the item immediately. Unfortunately, some people who enter into these types of rental agreements are unable to overcome their debt-related challenges and decide that bankruptcy relief is the best option.

If you’re considering filing for Chapter 7 bankruptcy, you might be aware that certain assets are subject to liquidation, but how does that apply to items that you don’t fully own yet? Some rent-to-own contracts are treated as true leases, and other times they are viewed as secured loans. The classification matters because leases and secured debts are handled very differently in bankruptcy. To start, you should speak with a qualified bankruptcy lawyer to review the terms of your particular contract. 

Most rent-to-own contracts are treated as true leases in Georgia. Should this be the case in your matter, the bankruptcy trustee might reject the lease, meaning that you lose possession of the property, but have no further obligations pertaining to the rental agreement. When you file under Chapter 7, you must complete a Statement of Intention declaring if you want to try to keep leased items.

There are some situations where a rent-to-own contract is treated as a secured loan. This means that it has the same status as an auto loan or home mortgage. One option in this scenario is to reaffirm the contract with the lender’s approval, maintaining possession while continuing to make payments. You could also seek redemption, where you pay the rental company the value of the item to purchase it outright. The final option is surrender. You may choose to return the property and discharge any remaining obligation tied to the contract. After speaking with your attorney, you should have a clear understanding of whether keeping the property is possible, as well as other aspects of life after bankruptcy. 

Jeff Field & Associates provides comprehensive counsel to Georgia residents on a full range of bankruptcy issues so that they can secure a prompt, favorable resolution whenever possible. Please call 404-381-1278 or contact us online to schedule a consultation. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Decatur.