Much of the confusion surrounding timeshares stems from a lack of understanding regarding the nature of timeshares. A timeshare is a fractional ownership interest in real estate. Typically, a developer will build or acquire a resort property, and then an owner will sign a contract with the developer to acquire the property. There are two categories of timeshares: deeded and non-deeded, or right-to-use.
Eigentum Timeshare:
A deeded timeshare is created when an individual purchases an ownership interest in a resort property for a specific period of time during the year. After purchasing his ownership right, the individual becomes a timeshare proprietor. The proprietor of a deeded timeshare typically stays in the same location, at the same time, for the same amount of time each year. There are some differences between this form of timeshare and a traditional deeded property such as a home.
Non-Deeded Timeshare or Right-of-Use:
An individual acquires a non-deeded or right-to-use timeshare when they purchase a lease, license, or membership to a resort property for a fixed period of time. After purchasing the lease, license, or membership, the individual becomes a timeshare proprietor. Under this form of timeshare, the owner must contact the developer or resort management in order to make reservations for the exact duration of their stay. The exact duration of a property owner's stay is determined by the extent of their lease, license, or membership. This form of deed is comparable to a residential lease, but there are differences between the two.
What Happens to a Timeshare During a Chapter 7 Filing?
A timeshare is classified as an executory contract during bankruptcy. If the timeshare owner has zero or minimal equity in the timeshare and files for bankruptcy, the owner typically has the option of retaining or relinquishing their interest in an executory contract. When a timeshare proprietor has no or minimal equity, the timeshare is typically not considered an asset and is therefore not sold to pay creditors. If the owner wishes to retain the timeshare, they will continue to make payments; if they wish to surrender the timeshare, they will allow it to enter bankruptcy. If the timeshare has significant equity, it may be sold to pay off creditors during the bankruptcy proceeding.
Chapter 7 Bankruptcy:
When a timeshare owner files for Chapter 7 bankruptcy, a trustee has sixty days to decide whether to assume or reject the timeshare owner's interest. In the majority of instances, a trustee will deny an owner's timeshare interest because it is too burdensome to deal with the timeshare or there is insufficient equity in the timeshare for it to be of value to the bankruptcy. If a trustee rejects a timeshare owner's interest or fails to respond within 60 days, the owner can decide whether to retain the timeshare or allow it to go into bankruptcy. However, if a timeshare has a substantial quantity of equity, it may be subject to Chapter 7 bankruptcy liquidation.
Chapter 13 Bankruptcy:
When a timeshare owner files for Chapter 13 bankruptcy, the trustee has until the confirmation hearing for the repayment plan to decide whether to assume or reject the owner's timeshare interest. Similar to a Chapter 7 bankruptcy, the trustee will typically deny the timeshare interest due to the burden of dealing with the timeshare or the fact that the equity in the timeshare is of little value to the bankruptcy. A timeshare proprietor must include a provision in their Chapter 13 repayment plan indicating whether they intend to keep or sell their timeshare interest. If the trustee declines any interest in the timeshare, the court hearing will confirm the timeshare owner's interest in the timeshare and allow the owner to retain the timeshare. Nonetheless, if the timeshare owner wishes to file for bankruptcy or if the trustee wishes to assume the timeshare, the trustee can sell the timeshare to pay off creditors.
The Conclusion:
Ultimately, a timeshare can be liable to liquidation if the necessary precautions are not taken. Whether you want to retain your timeshare or allow it to go bankrupt, you should consult a qualified attorney.""
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