What Happens If You're Still Living in a Home After a Rent to Own Company Goes Bankrupt or Closes Down?

Many people consider a rent to own arrangement as a way to afford a home. However, it is vital to understand what can happen if the rent to own company goes bankrupt or closes down while you still have a home. This article will provide key information on how this situation is typically handled and the potential outcomes for the homeowner.

Rent to Own Basics

Rent to own is a contract in which a tenant agrees to rent a property from a seller while also making additional payments towards the purchase price of the home. The goal is to eventually purchase the home outright. This arrangement can be beneficial for those who have good rental and credit histories but are struggling to save enough for a down payment or struggling to qualify for a traditional mortgage.

What Are the Consequences?

When a rent to own company goes bankrupt or closes down, several key factors come into play:

Bankruptcy Court Steps

Upon the bankruptcy of a rent to own company, the court will typically take over all of the remaining assets, including any home leases or contracts you may have with the company. Once the financial matters of the bankrupt company are settled, the court may have two options for handling your arrangement:

Complete Payment and Ownership: In some cases, you may be able to continue making payments until the home is yours. This option is particularly likely if the company holds a significant amount of equity in the home, and the court is satisfied that it will be successful for you to complete the purchase and ownership. Take Back the Furniture: If the home does not have enough equity to cover the rent to own contract's total value, the court may decide to terminate the contract and have the landlord, now in a bankruptcy court, take back the furniture that was provided as part of the rent to own deal. In this case, you will need to vacate the property and pay any remaining balance due.

Ensuring Your Protection

It is crucial to understand the potential risks involved in a rent to own contract before agreeing to one. Here are some steps you can take to mitigate the risk of your rent to own company going bankrupt or closing down:

Review the Contract Closely: Make sure you review any contract thoroughly and have it reviewed by a legal professional. Store Received Documents: Keep a copy of all the documents received and a detailed record of all the payments made. Prioritize Regular Communication: Maintain regular communication with your rent to own company. This can help you stay updated on any changes or issues that could impact you.

Alternative Solutions

When a rent to own company goes down, there are several options to explore:

Seek Financial Assistance: Look into programs that provide assistance to tenants, especially those facing foreclosure or bankruptcy. Negotiate Terms: If possible, try negotiating terms with the landlord or court to find a compromise that works for both parties. Consider Public Housing Options: In some cases, public housing or low-income housing options could be a viable alternative.

Conclusion

In the unfortunate event that a rent to own company goes bankrupt or closes down, the first and most important step is to remain informed and take action to protect your interests. Understanding the possible outcomes and being proactive can significantly reduce stress and help you find a suitable solution for your living situation.