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Consequences of Timeshare Foreclosure

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consequences of timeshare foreclosure

Millions of Americans own timeshare properties as an alternative to other vacation options. In a timeshare, the owner pays for the use of a vacation property for a certain time period each year, while other owners also own a share of the property and may use it at different allotted times of the year. Timeshare owners may or may not be allowed to trade their designated time for other time periods or for time at other properties within the company. The timeshare also may or may not come with a portion of the deed, and include added expenses like homeowners insurance, property taxes, maintenance fees and more.

Many timeshare properties are financed with a mortgage, meaning the owner will make monthly payments with interest just like with any other mortgage. And if payments are missed, it can result in negative marks on the owner’s credit and ultimately end in a foreclosure. The process of timeshare foreclosure can have many negative effects, so it’s important to understand what’s involved, and how to get out of your timeshare if you find yourself in danger of foreclosure.

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Timeshare Foreclosure Process

timeshare foreclosure process

When an owner misses payments on a financed timeshare property, the property management company can begin the foreclosure process. Most banks do not finance timeshare purchases, so the mortgage will likely be directly with the management company or resort developer. After several missed payments, the company will send out demand notices to attempt to collect their payments. If several of these payment demands have been sent and remain unanswered, the management company can file for foreclosure in the county where the timeshare is located.

Foreclosures can also occur when a timeshare owner fails to pay the maintenance fees or other assessments on the property. There are often monthly or yearly maintenance fees, occasional assessments and other required fees associated with timeshare ownership, and even if the owner is current on their mortgage payments or has paid in full for the timeshare, missing these extra fees can also have serious consequences.

The specific laws for the exact procedure the foreclosure process will follow depends on the state where the property is located, as each state has different laws. The process will also depend on the type of timeshare owned.

Types of Timeshare Properties

If you fall behind on your timeshare payments, the process for what happens next depends on the type of timeshare that you own. The two main types are:

  • Deeded: All timeshare owners in a deeded property own a certain percentage of the property. If you own this type, you’ll have a deed to the property and written rules about its use. For example, you might have the property for two weeks each year.
  • Right-to-Use: In this type of timeshare, you don’t have any ownership in the actual property, but you pay for the right to use the property for a certain amount of time each year, for a specified number of years. You don’t have a deed or own real property in this type of timeshare.

If a timeshare is a right-to-use type of property, and the owner fails to make payments, it wouldn’t go through a foreclosure process, but would instead likely be repossessed. For a foreclosure to occur, the timeshare property would have to be a deeded timeshare. With this type of property, the owner signs a mortgage or deed of trust, which allows the lender to foreclose when payments are missed.

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Avoiding a Foreclosure

avoiding a timeshare foreclosure

If you are facing a possible foreclosure on your timeshare property, there are a few options for avoiding it:

  • Short payoff: This strategy may only work in certain situations, but is basically a bargaining tactic. In a short payoff, the owner offers a lump-sum payment that is less than the remainder of the mortgage owed. The lender may accept a lower amount and forgive the rest of the debt to settle the conflict. However, if the property is already in danger of foreclosure, it may be difficult to come up with a payment large enough to satisfy the lender.
  • Repayment plan: If a lump sum payment is not possible, the lender may agree to a new repayment plan to allow the timeshare owner to catch up on missed payments. For example, perhaps the owner could afford to pay an extra $100 every month for a year, while keeping current with monthly payments, to catch up. This plan may also be difficult for someone who is already struggling to make the regular payments.
  • Deed in lieu of foreclosure: Also called a deedback, a timeshare owner can avoid a foreclosure by giving the lender their deed and interest in the property. The owner loses their timeshare and may also have to pay a lump-sum fee to the lender for them to accept the deal, but the owner avoids having a foreclosure on their record.

All of these options require having some money, which may be difficult for someone already facing foreclosure. If none of these options are possible, the lender will file for a foreclosure.

How a Timeshare Foreclosure Works

The laws regarding timeshare foreclosures vary from state to state. In some states, filing a foreclosure involves filing a lawsuit. This is called a judicial foreclosure. Other states have the option for a nonjudicial foreclosure, or out-of-court process.

Judicial vs non-judicial timeshare foreclosure

In a judicial foreclosure, the lender will go through a formal court proceeding to file the foreclosure and get a judgment that allows the lender to sell the owner’s interest in the timeshare property. The owner loses their property and has a formal foreclosure judgment on their record. This process can take a year or longer to complete.

If a non-judicial procedure is allowed, and the lender chooses this route, they will still need to follow all the requirements of state law, but will not need to go to court. In a non-judicial foreclosure, the process generally involves sending a notice to the owner of the foreclosure and filing the notice in the county or public land records office. The exact process varies depending on the state where the property is located, but it is usually much faster than a judicial process, only taking a few months to complete.

In either case, the timeshare property is eventually auctioned off to the highest bidder at a foreclosure sale. It’s important to note that in either type of foreclosure process, the other timeshare owners of the property are not affected.

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How Timeshare Foreclosures Can Negatively Affect You

how timeshare foreclosures can negatively affect you

The process for timeshare foreclosure is stressful enough on its own. Losing your vacation property and dealing with collections notices and court documents isn’t an experience anyone wants to go through. And unfortunately, the negative consequences of timeshare foreclosure are more far-reaching than that. A foreclosure on your record can have serious consequences for your credit, your taxes and more. It can be just as damaging as defaulting and foreclosing on your home mortgage.

Timeshare Foreclosure Can Lower a Credit Score

The all-important credit score is what potential lenders look for when you apply for a loan or credit card, and this score takes into account your financial history, giving the lender a good idea of how you’ve handled credit in the past. Your current accounts will report any payments that you’ve missed or are late on to the credit reporting agency, negatively affecting your score.

Timeshare companies don’t always report payments to the credit agency, but there’s a risk that they will. However, if you go through the full foreclosure process, it will be public record and will certainly affect your credit report. The most commonly used credit scores are FICO scores, and these range from 300 to 850. On average, a foreclosure can drop this credit score by 100 to 150 points or more, though it can vary with each individual’s credit history and score. If the company does report the missed payments, it can lower the score even farther. If the timeshare owner had a higher credit score before the foreclosure, the drop can be more severe. If the score was already on the low end, the impact may be smaller, but the score will still drop.

Timeshare Foreclosure Limits Future Credit

After a foreclosure is on your record and has lowered your credit score, it can also impede your ability to obtain new credit accounts. Because the negative marks stay on your account for years, it can have lasting effects. In certain cases, it may take up to seven years after the official foreclosure date before you can obtain a new mortgage.

In addition to mortgages, other types of financial accounts could be harder to get. Credit cards and car loans could also be more difficult to obtain after a timeshare foreclosure. Lenders are less likely to grant new accounts with a lower credit score, or if the account is granted, the interest rates might be much higher than for someone with a higher credit score.

Also, some credit card companies where you have existing accounts could close your accounts, reduce your credit line or up your interest rates. Every lender has different rules and standards, but with a foreclosure on your record and a much lower credit score, you are likely looking at higher interest rates, unfavorable lending terms and credit denials for several years after the foreclosure. Sometimes, insurance premiums can also be affected by a change in credit scores and credit history, making insurance more costly as well.

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Timeshare Foreclosure Could Limit Employment and Housing Options

A negative mark on a credit report and a lower credit score also have the potential to affect employment offers and housing choices. Many employers and landlords perform background checks and credit checks on potential employees and tenants, and negative marks and lower scores could lead to a denial of an application for an apartment or job. This can all depend on just how much the credit score is lowered, as well as the details of the situation, but the options may be more limited with a foreclosure on your record. Jobs in banking and finance may be especially difficult to obtain with a disadvantageous credit history.

Timeshare Foreclosure Can Lead to a Deficiency Judgment

If a timeshare owner’s debt is greater than the foreclosure sale price of the timeshare, it can result in a deficiency. As an example, if the foreclosure sale for the timeshare brings in $25,000, but the total debt that the owner owes on the property is $30,000, the result is a $5,000 deficiency. In some states, the bank that’s foreclosing can file for a deficiency judgment against the original timeshare owner for this amount. This all depends on the laws state to state, and whether or not the lender chooses to pursue the deficiency.

Timeshare Foreclosure Can Have Tax Implications

If the lender chooses not to go after the deficiency judgment, or if it is prohibited by state law, they can write off the deficiency. In this case, the timeshare owner will receive a 1099-C form, or cancellation of debt form, and may have to report this amount as taxable income. The timeshare foreclosure tax consequences can be more than you bargained for in this case.

The increase in overall taxable income from the timeshare foreclosure can result in additional taxes owed at filing time. You may be able to exclude this as income on your taxes if your debts exceed your assets. Otherwise, you may be facing additional taxes owed.

Exit Your Timeshare to Avoid Foreclosure


The foreclosure process for timeshares can be incredibly stressful and damaging to your finances, credit, taxes and more. If you are struggling to make your timeshare mortgage payments or additional fees, and fear that foreclosure could happen to you in the near future, seek out help now, before the situation gets worse. The experts at EZ Exit Now have the knowledge and experience to help you get out of your timeshare quickly and easily.

When you work with us, we will meet with you wherever is most convenient for you, and discuss your individual situation. We understand all the reasons people get into timeshares, and the reasons they want to get out too. After reviewing your case, our team will know if we are able to help. We will then decide the best course of action to get you out of your timeshare and file all the necessary paperwork.

To avoid timeshare foreclosure consequences, and get out of your timeshare before it’s too late, contact the experts at EZ Exit Now. We can answer your questions and see if our timeshare cancellation services can help you get out and avoid foreclosure. Get back on track and contact us today.

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