Timeshares can be an enjoyable investment for you and your family. But they can be a significant financial burden as well. If you’ve landed in a fiscal jam, you may wonder if you can file bankruptcy on a timeshare. Declaring bankruptcy will discharge most of your debt, including your timeshare ownership Here is all the info you need on timeshare bankruptcies.
What Is a Timeshare?
When you buy into a timeshare, you purchase a shared piece of vacation real estate, usually in one resort or a family of resorts. You pay cash or finance your portion with a mortgage and then pay monthly or annual maintenance fees. You and your family can then stay at that property for about one week a year.
Timeshares are a lifetime commitment, but many owners eventually want to sell because they get tired of paying the fees associated with the property when they only stay there about one week a year. Unfortunately, timeshares usually lose value and are difficult to sell due to simple supply and demand. Many more people are trying to sell timeshares than there are people who want to buy them.
Always do extensive research before purchasing a timeshare property. The Office of the Indiana Attorney General also advises you to:
- Resist high-pressure sales. A gift from a developer – including a reduced-price vacation or any “prize” in exchange for a sales presentation – does not obligate you to buy a timeshare.
- Carefully read all contracts and literature that the developer provides.
Should You Give Up Your Timeshare?
If you can no longer afford the monthly payments, you can surrender your timeshare when you declare bankruptcy. In this case, the property will go back to the lender. However, you may still have to pay the monthly or annual fees until the bank forecloses and transfers the title from your name.
Chapter 7 Timeshare Bankruptcies
If you file for Chapter 7 bankruptcy, you might be able to keep your timeshare. That depends on whether you have equity in the timeshare and what other assets you possess. Timeshares usually don’t have equity and won’t be sold by the trustee in a Chapter 7 bankruptcy.
If you want to get rid of your timeshare, you can do it before it has been foreclosed on or after. It is usually best to wait for foreclosure because you won’t have to pay any fees once you’ve filed for bankruptcy.
If the lender hasn’t foreclosed on the timeshare property or the foreclosure is still in progress, you will list the debt to the lender as part of your bankruptcy. The lender will then ask the court for permission to foreclose on it. The court will distribute equity to your creditors. If you owe more on your timeshare than it’s worth, your bankruptcy discharge will wipe out your obligation to pay.
Bankruptcy on a Timeshare in Chapter 13
Declaring Chapter 13 bankruptcy allows you to keep all of your assets. The court works with you to develop a plan to repay your debt over three to five years. The repayment plan can include your timeshare’s monthly mortgage payment and maintenance fees. You’ll have to stay current on those payments.
If you don’t have enough income to cover the timeshare (or prefer to let it go), you can surrender it as part of a Chapter 13 bankruptcy or reject a payment plan and discharge the debt and all associated payments.
Sawin & Shea –Indiana Bankruptcy Attorneys
The attorneys at Sawin & Shea have experience in all areas of bankruptcy, including timeshare bankruptcies. With our guidance, you can get out from under an untenable financial situation and make a fresh start. Contact us at 317-759-1483 or send us an email for a free consultation today!