Because they can be better off than many other Americans, debtors in chapter 7 New York bankruptcy sometimes own timeshares. A timeshare is a vacation property with divided ownership or usage rights among multiple parties. The idea is to compromise between the cost of owning real estate in a desirable area and people’s desire to access that property. Because they don’t own the property outright, debtors may not consider timeshares bankruptcy assets, but this would be a mistake: Timeshares are another uncommon and frequently unlisted asset in New York bankruptcy.
So what kind of asset are timeshares? The answer depends on the type of ownership interest debtors have in them. One of the most intuitive types is deeded fractional ownership, which means debtors own the property outright but only for a specific length of time in a year, usually calculated in weeks. Debtors can treat the property however they want during their respective allotted period of ownership, but they can’t limit the rights of other co-owners. Debtors would also be required to pay maintenance and property taxes on the timeshare.
The other common type of timeshare ownership is right-to-use, analogous to a rental situation. Debtors lease timeshares from the owner, typically for a set number of years, and use it accordingly. Debtors in this case would have fewer property rights but also fewer liabilities.
When debtors have an actual property interest in the timeshare, then bankruptcy courts would treat them as normal pieces of real property. Creditors can foreclose on them, and trustees can place them into the bankruptcy estate and then sell them to repay creditors. Unfortunately for debtors, timeshares are not easily protected by exemptions. The homestead exemption will not apply, and there’s a good chance that the state or federal cash exemptions will be insufficient to protect it. Debtors can sign reaffirmation agreements to keep their timeshares, but they will need to continue making payments on them in the future. Debtors may encounter special problems if they take out home-equity loans on their primary residences to pay for their timeshares: Creditors may attempt to foreclose on their homes over the timeshare debt.
Debtors in right-to-use timeshares will find themselves in the same boat as renting debtors do. They can assume the lease or reject it, but if they assume it they must promise to cure all missed payments, which may not be possible. There can be situations in which debtors’ right-to-use timeshare are based on a points system; these are personal property and may be worth nothing to trustees or creditors.
Chapter 7 debtors will also be happy to learn that if they do not reaffirm or assume their timeshares, then any maintenance fees they owe will be unsecured debts that will be discharged.
Timeshares come in many forms and will complicate a bankruptcy. If your financial circumstances are deteriorating and you own a timeshare or another unusual asset, then discussing your case with an experienced New York bankruptcy lawyer will help you assess your options.
For answers to more questions about timeshares in bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/
