A timeshare is a property in which multiple parties hold ownership. Because of its unique nature as an asset, many may wish to know what happens to a timeshare in a bankruptcy case. This article will aim to provide you with that info as well as other important details related to the topic.
Timeshare and Bankruptcy
Despite a separate real estate category, in bankruptcy courts, timeshares will be treated much the same as, say your personal residential property. If you file for bankruptcy after the foreclosure of your timeshare, the outcome is more straightforward and the same in Chapter 7 and Chapter 13, with you getting a discharge for all your timeshare-related debt.
However, if you still own it at the time of filling, what happens to it largely depends on which bankruptcy chapter you filed under.
Timeshare and Chapter 7
Since most timeshares are unlikely to build on any equity, the bankruptcy trustee cannot sell it off to repay your creditors. Thus, provided you can continue making payments on it, you are allowed to keep it. Meanwhile, if the timeshare does hold ay equity, expect its selling to be virtually guaranteed as most state laws don’t provide any exemptions for it. However, if your state allows for a wildcard exemption, you can avail its benefit to protect your timeshare.
You yourself can also choose to surrender your timeshare during bankruptcy. Under chapter 7, if the timeshare holds no equity, in your bankruptcy discharge any remaining debt balance on it and unpaid maintenance fees assessed before the date of your filing also get eliminated.
However, in most states, you will still be required to pay any fees on the timeshare incurred between the period of your filing and its foreclosure. Because of this, sometimes it might more advantageous to file for bankruptcy after foreclosure to avoid paying such fees. However, it is highly recommended to consult a qualified attorney before doing so to avoid any negative tax implications.
In some cases, surrendering your timeshare that holds equity could also be advantageous. If you hold any priority debt such as unpaid income taxes, your bankruptcy trustee must use the proceeds from selling the timeshare to wipe out that debt before clearing any non-priority ones.
Timeshare and Chapter 13
Under Chapter 13, you are allowed to keep ownership of your timeshare provided you can demonstrate to the court that you have enough disposable income to make payments on it. In case the court deems you to be unable, you are required to surrender your timeshare. Do note that the trustee might not sell the timeshare for you. Instead, you will have to make arrangements for it yourself.
If you have any queries or are in need of assistance regarding the bankruptcy process, please don’t hesitate to give us a call or get in touch through our live chat.