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Timeshare Newbie question - (by Theodore F.):

How Is a Timeshare Treated in Bankruptcy?

When you purchase a timeshare, you share ownership of a piece of property with several other people. If you can’t afford to pay the purchase price outright, you can usually obtain a loan from the developer or another lender (a timeshare mortgage). In addition to your timeshare mortgage, you also have to pay monthly or annual maintenance fees to cover the costs of keeping up the property (similar to HOA dues). (Learn more about how timeshares work.)

Bankruptcy law considers a timeshare real estate and treats it in much the same way as your house. For example, if you are still in possession of the timeshare when you file for bankruptcy, you’ll list it with your other property on official bankruptcy form Schedule A/B: Property. Because the lender can foreclose on the timeshare if you default on the loan, the timeshare secures the timeshare mortgage and you’ll list the debt on Schedule D: Creditors Who Hold Claims Secured By Property. However, if the lender already foreclosed on the property, you won’t list it on Schedule A/B and any remaining timeshare-related debt will be listed on official form Schedule E/F: Creditors Who Have Unsecured Claims.

Filing for Bankruptcy After the Foreclosure

If the bank forecloses on your timeshare before you file for bankruptcy, you can discharge (get rid of) all of the remaining timeshare-related debt in either a Chapter 7 or Chapter 13 bankruptcy. The debt you can discharge includes a deficiency balance (the difference between the foreclosure proceeds and the amount you owe) and unpaid maintenance fees.