Timeshare Foreclosures and How to Avoid Them
A foreclosure takes place when an owner falls behind on timeshare payments. Some owners think that this is the best option when they cannot get out of their contract on their own. They will simply stop paying the fees associated with the ownership and hope it goes away. This is because they feel that a foreclosure involves losing property. Though a timeshare is not a physical property, a foreclosure can still have consequences.
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Negatives of a Foreclosure
A foreclosure can prove harmful for an owner. The timeshare company will take action against people who entered into the contract and then did not hold up their end. Some of the consequences include:
- Harm to Credit
- Potential Lawsuit
- Future Damage
- Tax Problems
Harm to Credit
The first step a timeshare developer will take against someone not paying is to report the missed payments. There are three credit bureaus that process credit reports and scores. Equifax, TransUnion, and Experian are the agencies responsible for consumer reporting. Once payments are missed, a timeshare company will report the fault to the credit agencies. This will lower the owner’s credit score. It may become difficult for the owner to get approved for a loan. A lower score will also cause credit card interest rates to increase.
The timeshare may threaten legal action against the owner. Timeshare contracts are legally binding and companies have a right to collect what they are owed. A lawsuit would be stressful and expensive for the owner. Lawsuits can also take years to resolve. However, this is not a common occurrence. The balance owed would have to be very substantial for this to happen.
A foreclosure will show on the owners credit report for 7 years. During this time, everyone that checks their credit will be able to see the notice of foreclosure. This may impact the ability of the owner to obtain financing for big purchases, such as buying a car or a house. It will also raise interest rates on loans and credit cards. It is not uncommon for potential employers to check credit reports for job candidates. A foreclosure on the credit report may impact the decision of the hiring company.
The timeshare company may not be able to sell the timeshare for what the buyer owed. In this case, the buyer could be held responsible. The timeshare developer may send a 1099-C which forces the buyer to claim the leftover balance as income. If this happens, the buyer will pay taxes on the difference. The amount owed could be in the thousands.
The simplest way to avoid a foreclosure is to remain current on mortgage and maintenance fee payments. Making the timely monthly payments may be difficult for some owners. The timeshare company may have not told you the full cost upfront or they may continue to force upgrading. If staying current is not possible their are still options:
- Ask for payments to be deferred – This means that payments would be put on hold for a few months. These payments are usually added to the end of the loan.
- Flexible payment plan – The timeshare developer may have options for changing due dates.
- Points conversion – Some companies can use points to pay for maintenance fees. The amount of points needed for this usually is not in the owner’s favor.
- Give the timeshare away – This only works if the timeshare is paid off and the buyer does not want to pay the maintenance fees. Many organizations will accept the timeshare and offer a tax write off for the previous owner.
- Request the help of a third-party company, like Linx Legal, to cancel the timeshare.
What if I Still Owe?
If you still owe on the timeshare, it is not possible to give it away. You are under the mortgage contract until it is paid in full. However, you can get out of the timeshare with the right help. Unfortunately, there are “customer advocacy” companies that do not actually help. They simply collect money from a client and the client is no better off. Be careful if someone calls claiming the following:
- They will help you sell or rent the timeshare for an upfront fee. This is usually called the posting fee and often the company will collect and never post the listing. The timeshare owner is out the upfront cost.
- A company will cancel a timeshare for a set price. They usually say this price right away over the phone. This should be a red flag. These companies will encourage you to stop payments and allow foreclosure without offering assistance. The timeshare may be cancelled but the owner’s credit is still ruined. The owner also faces all of the negative consequences listed above.
How to Get Started
If you are concerned about timeshare foreclosure or are thinking timeshare is not right for you, reach out to us today. Visit our website where you will find all of the necessary information. If you have not already, feel free to take a short quiz that will identify if our services are right for you. We can also be reached by completing the following:
- Fill out our full questionnaire for expedited service
- Call us toll free at 1-800-604-3989
Choosing the right company to fight on your behalf is very important. That is why we stand behind our company motto: “Only the Best is Good Enough”.