Those Troublesome Timeshares

A vacation timeshare can become like a stone around your neck.  I would say if you are thinking of getting one, don’t.

Vacation Timeshares can be like a stone around your neck.
A vacation timeshare can be like a stone around your neck.

A while back I heard from some people  I had done a Chapter 7 bankruptcy for in 2006.  After hearing nothing for years, out of the blue they were being sued for dues and maintenance fees by a timeshare company. The vacation  timeshare was owned at the time of filing the bankruptcy.  My clients were asking me the obvious questions:  Wasn’t that taken care of when we filed the bankruptcy?  How can they be suing us now?

Timeshares are unusual animals and a bankruptcy discharge might not apply to the maintenance fees and ownership association dues which accumulate AFTER the filing of the bankruptcy.  Any fees owing from before the filing of the bankruptcy would, however, ordinarily be discharged.

When it comes to fees which accumulate after the filing, the reason they might not be dischargeable is a provision among those that Congress added to the bankruptcy code in 2005, Section 523 (a) (16).  If you go here you can see it, just scroll down to (16).  This was written mostly to apply to condo and homeowner association fees, but it also says “in a share of a cooperative corporation … for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation or such lot …”

Some timeshares involve real estate ownership and are a version of a condominium or townhouse setup.  Others are cooperatives that own the property and the customer gets a membership in the coop.  If you have either of these, you are probably liable for the fees which are accumulated AFTER the bankruptcy filing and continue to accumulate until you are no longer an owner.  This is or can be a terrible spot to be in, because many of these places have quit trying to take back the units when they are not being paid for.  Most of them are worth little or nothing and can’t be sold.  A timeshare owner might be stuck with it indefinitely.

However, if you merely have a contract that gives you a license to use the facilities during a certain time, without any sort of ownership of the property, then liability for the fess would probably not continue after the bankruptcy filing.  The bankruptcy should kill it for good.  So exactly how the timeshare is set up makes a big difference.   I have looked over many stacks of timeshare documents, some of them even in foreign countries.  Those papers tend to be very hard to wade through, very hard to figure out.  I can read and write, and I even went to law school, but sometimes it can be hard to figure which category a certain timeshare setup belongs in.

If you have a timeshare of any kind and are considering bankruptcy, be sure to tell your lawyer all about it. If you can sell it before filing the case, you probably should.  Make your best effort to figure out whether it has a market value and what that is.  Provide your lawyer with all the paperwork you may have about it.  Make sure it is properly listed and properly described in your bankruptcy petition, and make sure that whoever is running the organization gets notice of your bankruptcy filing.

Then cross your fingers, hold your breath, or better yet –  pray a lot.  Hope the darn thing goes away.

As with any other financial matter, if you are considering a bankruptcy, don’t make any serious moves without consulting your attorney first.

This post is for general information purposes only and is not legal advice.  It does not create an attorney-client relationship.  If you need legal advice, please consult the attorney of your choice. 

Should I File for Bankruptcy?

Should I file for Bankruptcy?

Should I file for Bankruptcy?This is a difficult question. As you can imagine, I get asked this a lot. Usually “Should I File For Bankruptcy?” is asked as one of the first questions when a new prospective client calls or emails me. Most of the time, the question is too complicated for dealing with by email, so early on in the exchange of emails I am very likely to suggest that the person just call me on the phone.

I usually break the conversation down into two issues: First, can these people file for bankruptcy – are they eligible; and second, we answer the question “should I file for bankruptcy”.

For details of the technicalities of eligibility, you should look at my pages devoted specially to Chapter 13 and Chapter 7. Almost everyone qualifies for one or the other, although I do run into a few who don’t qualify for either.

Assuming that a person qualifies, the question of should I file for bankruptcy is probably harder to figure out. In my opinion nobody should file any kind of a bankruptcy if they have any other options available to them. How does one know if there are any other options? After all there are adds on the TV and the radio for debt management programs and debt consolidation programs.

In my opinion you are out of other choices if your dischargeable unsecured debt – the debt that usually can be gotten rid of in a bankruptcy – equals or exceeds one half of your annual gross income.

So first I will try to figure out how much your annual income is right now, and then I will want to start adding up the debts. When I add up the unsecured debt, I do not include the student loans, because they will still be there after the bankruptcy is finished. I also would not include child support arrearages and most taxes for the same reason. As a practical matter, however, lots of student loan debt or other nondischargeable debt may lower ratio of how much other debt as compared to annual gross income would justify filing in my opinion. The higher the student loan debt, the lower the dischargeable unsecured debt to income ratio I would want to see before taking the case.

What Does The Law Say about Filing for Bankruptcy?

The law doesn’t help answer the question of Should I File for Bankruptcy. It provides for no minimum amount of debt which is required to be there before one can file a bankruptcy.

Every case is different, and there has never been a foolproof mathematical formula that has seemed to work for me. But here’s what I am really trying to figure out:  as a practical matter can these people live long enough and work hard enough to pay off this debt by some time within their reasonable life expectancy?

If the answer is no, then I recommend that either a Chapter 7 or Chapter 13 be filed. What I find is that most of the people who call me have passed the point of no return some time ago.

If you need to talk to a professional about whether or not you should file for bankruptcy, give me a call today at: 952-544-6356

Or Fill Out Our Contact Form Here

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