Time Share?

[dmc-2008]

A friend asked me how time shares are handled in a BK. I dont know. Does anyone here have experience with that? Thank you!

[justbroke]

I have experience. Trustees usually don't like them and want absolutely nothing to do with them. You can keep them, as well as any property, in a Chapter 13, under certain conditions. First, you must perform a "Chapter 7 liquidation test" (also known as the "best interest of creditor's test"). That will determine whether those timeshares, and/or any other property that you are keeping, would have created a distribution in a Chapter 7. At that point you would need to "guarantee" that the unsecured creditors in the Chapter 13 receive as much as they would have under a Chapter 7 liquidation.

It sounds complex, but it's quite easy for an attorney to perform since most of the bankruptcy software that they use, performs this calculation automatically based on the entries (Best Case is one example).

Now, if you did keep the timeshare, the Trustee may balk that it's an unnecessary expense (the maintenance fees) and if you choose to keep them, at least offer something to the unsecured creditors. If you're still paying on a timeshare mortgage, this may also cause the Chapter 13 Trustee some consternation. This is what could make, and actually does make, each Chapter 13 Plan a work of art.

I would say that if you are still paying on a timeshare that has no equity, it may be a good time to shed that debt. If you went directly through the developer, you may be able to do a deed-in-lieu (DIL) to deed it back to the developer and be done. If you obtained a third-party mortgage, that could complicate things as the debt would be forgiven, but you could be on the hook for the maintenance fees until the unit(s) is foreclosed upon.

Having wrote all that, a bankruptcy is the perfect time to rethink that timeshare "investment". The fact is that it is not an investment but something that drains $$$ from you every year in maintenance fees and/or special assessments.

[dmc-2008]

Thank you JB! I think they want to get rid if it. i will pass Along your info!

[justbroke]

For anyone thinking that I am bashing timeshares, please don't take it that way. While I did deed 2 of my contracts back (which had active mortgages), I still hold one of the timeshare contracts (that was paid off).

The maintenance fees are the true killer if you are not using your timeshare unit, or points, to your benefit.