When you file bankruptcy, what happens to the TV you “rented” from Rent-a-Center depends on how the bankruptcy court views the contract you entered into with Rent-a-Center. The court could view the contract as a “true lease”, which would mean that you would either have to assume or reject the lease. By assuming the lease you would simply continue paying on the lease as if you had never filed for bankruptcy. If you reject the lease, then you will have to return the TV, but you will not be liable for any amounts remaining on the contract.
The court could view the contract as one that merely gives Rent-a-Center a security interest in the television. The court may take this view because Rent-a-Center contracts require monthly payments for a specified period of time and at the end of that time you own the item. If the court takes this view, you can choose to redeem, reaffirm, or surrender the TV in a Chapter 7, or “cram it down” in a Chapter 13.
By redeeming you will simply pay the TV’s value at the time you filed your bankruptcy, and you will own the television outright.
If you reaffirm, you will continue your payments until the contract price has been met.
By surrendering, you simply return the television, and you will not be liable for any balance still owing.
If you file a Chapter 13 and you entered into the contract with Rent-a-Center over one year prior to when you file, you can cram it down, meaning pay the value of the television rather than the balance due on the contract.
Before filing for bankruptcy you should discuss this matter with an experienced and knowledgeable bankruptcy attorney.
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Last modified: January 26, 2010