Timeshares are luxury options for the yearly holiday season. Rather than staying at a hotel, you purchase your own holiday home valid for a specific time frame each year. When you buy a deeded timeshare, you receive property rights into the unit. You pay for homeowners insurance, property taxes and maintenance fees on the property. If you fund the unit, then you pay your mortgage note and interest. Failure to pay your bill results in the timeshare management firm taking back the unit.

Foreclosure Process

After sending numerous payment demands and getting nothing in return, then the management firm of the timeshare can file for foreclosure with the county where the property is situated. In California, the management firm records to get a Notice of Default, which gives you 90 days to cover your past-due bill. Failure to do this leads to a Notice of Sale. You have got three weeks to cover for the balance due on the property prior to the trustee sells the property at auction.

Credit Score

The timeshare foreclosure procedure will have an effect on your credit score. A foreclosure entry appears in your credit report for seven years in the Public Records section. You also might have past-due entries and collection agency entries on your report from past collection efforts. The foreclosure entry alone drops your credit score to 160 points. With a foreclosure on your report, you might find it hard to obtain future credit, including another mortgage loan. You might face increased insurance premiums and a dip in credit lines.

Tax Implications

The IRS demands forgiven debt to be included in your taxable income. The growth in your income amount could result in additional taxes owed when you record. Because it was a secondary property, you do not qualify for the Mortgage Forgiveness Debt Relief Act of 2007, which only applies to main residences. You may be able to exclude the debt that is forgiven if you’re able to prove you are insolvent, which means your debts exceed your assets.

Alternatives

Before going through the foreclosure procedure, talk to the timeshare management business. You may be able to perform a short sale or a deed-in-lieu of foreclosure. Both of these options negatively affect your credit, but the effect is under a foreclosure. The management company may establish a payment program or modify the terms of your contract throughout your fiscal adversity. You also may sell your timeshare by yourself or lease out your week to another person to try to recoup some money.

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