How Timeshares Are Handled in Bankruptcy

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How Timeshares Are Handled in Bankruptcy

21 July 2016
 Categories: , Blog

If you have a timeshare (joint investment in a property) and you need to file bankruptcy, you may wonder what will happen to it. Owners of timeshares usually file bankruptcy when they can no longer pay the mortgage. You have the option of keeping the timeshare or surrendering the timeshare. Here is some more information on timeshares and bankruptcy.

How Bankruptcy Treats Timeshares

Bankruptcy treats timeshares as luxury items or as leases depending on the type of timeshare and the type of bankruptcy you file. For example, a points-based timeshare allows you to buy points to trade for use of the vacation unit. In most cases, this will get treated as a lease with no transferable value, so you will be able to keep it.

If you file Chapter 7 bankruptcy, you list all of your non-exempt property and debts you owe on a bankruptcy petition you file with the local court. A trustee sells non-exempt items to pay off debt. If you still owe on a timeshare, the trustee may pay off the debt using the proceeds from the sell.

Keeping the Timeshare

If you decide to keep the timeshare, reaffirm the debt. Reaffirming a debt holds you liable for the debt following the discharge, but you don't have to give up the property. A new agreement is made between you and the creditor, and this agreement must be approved by the court.

Filing Chapter 13 bankruptcy is another way to keep the timeshare. Chapter 13 bankruptcy allows you to keep assets. However, you still must make payments and prove you have enough income to make the payments.

Surrendering the Timeshare

If you tell the trustee you don't want the timeshare, the court may cancel the debt under Chapter 7 or Chapter 13. You still may have to pay maintenance fees until the timeshare sells, since you are still regarded as the legal owner.

If the timeshare is in foreclosure, wait until after foreclosure to file bankruptcy to avoid ongoing fees. You won't have to pay the remainder of the timeshare balance or fees you owed before you filed.

If the timeshare has equity, it will be sold as usual under Chapter 7. However, if you have priority debts to pay such as child support, these have to be paid first, which means surrendering won't cause damage. Under Chapter 13 bankruptcy, you are allowed to sell the timeshare yourself.

Bankruptcy is a way to legally erase timeshare debt or keep the timeshare. Bankruptcy laws are complex, so it is advised that you see a bankruptcy lawyer before you file. You can also visit sites such as to look at various law firms.