By now, you may be regretting the day you ever signed the contract on that troublesome timeshare. If so, you’re not alone. Many before you have discovered once the ink has dried that not only do they rarely use their allotted weeks or months, but the monetary outlay in mortgage payments and maintenance fees is adding up to far more than they’d ever expected.
Now, they want only to be rid of it, and that’s when they discover something else: No one, but no one, is willing to take it off their hands. If that’s the position in which you currently find yourself, you may think there’s one potential solution that just might do the trick. You could try filing for bankruptcy.
Now, if you are gainfully employed and your debts add up to less than $10,000, this is unlikely to work. Here are some things that are looked at for a bankruptcy:
- You are currently out of work, have run through your savings and enjoy no meaningful source of income.
- Your home is in danger of foreclosure.
- You are behind on your taxes.
- A creditor has garnished your wages or sued you for nonpayment.
How Chapter 7 Bankruptcy Works
In filing for Chapter 7 bankruptcy, you are asking the court to wipe out your debts either partially or in full. This will normally entail relinquishing some or all your nonexempt property to a bankruptcy trustee who will then sell it and use the proceeds to satisfy your creditors. In other words, the timeshare’s status as either exempt or nonexempt will determine whether you lose it or keep it. So, there’s no guarantee.
Exempt items usually include such necessary objects as your clothing, your furnishings, your appliances, your pension, your primary motor vehicle and other items deemed to be essential to your welfare. Luxury items, on the other hand, are not exempt from seizure by the bankruptcy court. This raises the question of whether timeshares are or are not thought to be luxury items.
In most cases, they are, and unless you reaffirm this portion of your debt, you will be losing yours. However, whether you get your wish hinges on whether your timeshare involvement consists of a right-to-use, a points-based or a deeded fractional interest. For example:
- In a right-to-use arrangement, what you have is more of a lease than an actual ownership, and the bankruptcy trustee can choose to either terminate the lease or to assume and enforce it. On the rare chance that your lease is not transferrable, you may wind up stuck with your timeshare.
- A points-based arrangement is one in which you have purchased a certain number of points that you trade in every year in return for the use of a vacation unit. This system involves no ownership interest in either the development or the unit. The bankruptcy process tends to treat point-based timeshares as leases, and unless the points are transferrable, your timeshare is exempt from repossession.
- If your interest is of the deeded-fractional variety, you have purchased ownership in the timeshare for a specific number of weeks. This ownership interest is actual, and for the purpose of loss through bankruptcy, that is exactly what you want. The court will treat this as a second home, and second homes are nonexempt. In other words, the bankruptcy trustee can take your ownership leaving you timeshare-free.
Bankruptcy and Maintenance Fees
If your timeshare involvement is on an ownership basis, it might be advantageous to let the timeshare company foreclose on the property before you file for bankruptcy. This could turn the deficiency into an unsecured debt, thereby wiping it out, however, it will destroy your credit score preventing you from qualifying for anything else for a long time.
On the other hand, if you continue to incur those fees after filing for bankruptcy, you may be out of luck. Some courts treat post-petition fees as nondischargeable debts. If yours takes this position, you will still be forced to make those payments even after filing.
There is a Better Option
There is a much better option than filing for bankruptcy just to rid yourself of your timeshare. The attorneys at O’Grady Law may be able to help you get out of your timeshare in a reasonable amount of time and at a reasonable cost. This is all without the additional headache of a bankruptcy filing which will be another burden for years to come. We are well-versed in the intricacies of timeshare contracts, and we will be glad to answer any questions you may have. Please give us a call today.