Can You Lose Timeshares in Bankruptcy?
Drastic forms of debt relief -- particularly bankruptcy -- often present hard questions for debtors. Often, debtors worry about what they must give up in return for debt relief. The answer depends on the type of bankruptcy you file. If you file under Chapter 7, your assets are subject to sale and liquidation. In general, your timeshare is at risk during bankruptcy, although the answer depends on your specific circumstances.
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Bankruptcy Assets
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When you file bankruptcy, you must disclose all of your assets. Your assets include anything of value -- cars, real estate, stocks and bonds and bank account balances, for example. If the bankruptcy trustee can sell it, you should probably disclose it. Not every asset will be sold, and you may be able to use exemptions to protect certain assets from sale. In general, a timeshare is an asset, and it can be subject to liquidation, meaning you would lose your interest if it is sold.
Timeshares
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Timeshares often begin as expensive assets. Typically, a debtor pays thousands of dollars for the timeshare, and in return he can use property or vacation house during a specifically allotted time during the year. According to the Jackson White law firm, you usually have two options with regard to your timeshare during a Chapter 7 bankruptcy. You can pay the trustee the value of the interest and keep it, or give it up to the trustee and attempt to have it sold. Selling the asset is not always easy, however.
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Abandonment
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Timeshares can be difficult assets to sell. According to John A. Palumbo, an asset-liquidation specialist, timeshares often sell for pennies on the dollar. Issues such as whether title to the timeshare is free and clear, or under a mortgage, the time of year the debtor can use his timeshare interest and the market for that particular timeshare affect whether the trustee will sell it. The trustee may choose to abandon the timeshare interest, meaning he is choosing not to pursue a sale of it, which would allow you to keep your interest.
Other Issues
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You could also protect a timeshare interest if you do not file a Chapter 7 bankruptcy. Filing under Chapter 13, for example, generally allows debtors to keep possession of their property. They must comply with a repayment plan, however, and meet other eligibility criteria. Because of the legal nature of this article, you should consult with a bankruptcy expert before proceeding to answer specific questions regarding your timeshare.
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