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Timeshares and Bankruptcy- What Happens to the Maintenance Fees?

Many families who are going through a difficult financial situation from credit cards and medical bills, may also be struggling with paying timeshare maintenance fees.What happens if you decide that you want to surrender this timeshare in bankruptcy? Are you still liable for the maintenance fees on the timeshare.

Many people who file for Chapter 7 bankruptcy no longer want to keep their timeshares and want to eliminate the monthly maintenance fees for the timeshare. If you do not wish to keep your timeshare then you need to list the timeshare as an asset you wish to surrender as part of your bankruptcy case. Surrendering your timeshare will allow you to eliminate your contract obligation for the timeshare and any maintenance fees that were due prior to filing your bankruptcy case. In a perfect world the timeshare company would take back the timeshare or foreclose on the timeshare once it has been surrendered as part of your bankruptcy case. The reality is that many timeshare companies do not want to take back the timeshare and never bother transferring over the interest in the timeshare.

Are you responsible for the maintenance fees on the timeshare after bankruptcy

if they refuse to take back the timeshare? The issue really appears to turn on how the time-share ownership is structured. There is an argument that Section 523(a)(16) of the Bankruptcy Code can apply to certain timeshares that deed you an interest in land or condo, or in which you purchased a share interest in a timeshare cooperative. You could potentially remain liable for post-petition maintenance fees for certain types of timeshare ownerships . Section 523(a)(16) treats as non-dischargeable: "a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership , in a share of a cooperative corporation, or a lot in a homeowners association". The problem appears to arise as a result of some timeshares being structured as cooperative time-share interest in which you purchase a share interest in the cooperative. There may be an argument that where you have purchases a share interest in a timeshare cooperative, then the post -petition maintenance fees would be treated as a fee that is not dischargeable.

There is also a possible argument that any timeshare that deeds you an interest in land or condo, could potentially result in the post-petition maintenance fees being treated as a fee that is not dischargeable. Timeshares ownership are structured differently, with some only conveying a personal property interest and others a real property interest. It is unclear how the courts will treat these real property timeshare interest, given that some states almost treat them identical to real property ownership. The law remains unsettled in this area and therefore it is important to remain cautious. If you still remain the owner of a timeshare after your bankruptcy case then consider donating it or giving it away, to avoid any potential issues in the future. Consult with an experienced bankruptcy lawyer if you own a timeshare you wish to surrender in bankruptcy.

Comments

If the company filed for bankruptcy protection you should have received possibly some information on what would happen as a result of the bankruptcy filing. If you did not then you should contact the company to clarify your standing with the company and the status of your timeshare.
My timeshare Monarch Grand Vacations has filed bankruptcy and we have continued to make our quarterly maintenance fees and monthly charges we have financed to pay it off. I am getting phone calls from companies offering to buy us out and the figures they offer are really high. Is this a scam? They also tell me to stop making my maintenance payments as they are not going towards the related costs to continue maintaining the properties. Very confused. Are we throwing our money away?
The policy of Section 523(a)(16) is to force the debtor to give up their interest or hold on to it and make payments due on assessments. There is no reason why the same policy should not apply to timeshares. Therefore, I believe that the law will shape itself so that Section 523(a)(16) will ultimately apply to timeshares. When that may happen is anybody's guess, since the amount involved in such cases is usually to little to justify anybody taking the matter up on appeal and creating case law. Bankruptcy Lawyer Mark Aalam, Bankruptcy Legal Center

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