Where Will I Live After the Bankruptcy?
Plenty of my clients are worried about where they will live if they file for personal bankruptcy and hand over their (usually far under water) house. They’ve heard horror stories about people with bankruptcies being incapable of finding a place to rent. But things aren’t as horrible as they fear.
My usual recommendation is to not check out the traditional large apartment complexes. Many will, indeed, decline applicants possessing a recent personal bankruptcy on their credit.
Much more inclined to rent are private landlords. They are usually far more concerned about you, the person, than about your credit. A good job and first and last month’s rent are often sufficient to satisfy these landlords.
Another option is a “Lease with Option to Buy,” or LWOB. A LWOB gives one who has filed for bankruptcy more than a few advantages. First, you are usually able to get a nicer condo, townhouse or single family home than what would ordinarily be available for rent. Second, the owner usually offers the LWOB because he or she can’t sell the property and is actually desperate for cash flow. The owner often cares much less about poor credit and the bankruptcy. Third, you are locking in the possible purchase of the property at today’s lower prices, rather than the price the property might sell for in 2-3 years. And finally, you are developing a considerable down payment if you decide to buy the property later.
“Lease with Option to Buy”, or LWOB, typically involves three provisions in addition to the usual rental clauses:
1. You have the first right to buy the property at some point in the future (usually 2 or 3 years);
2. Some (or all) of the monthly rent payment is credited towards the purchase price if you decide to buy the property.
3. You can set the purchase price at the beginning of the lease.