Timeshare Debt Facts
Most of us are familiar with the concept of timeshares — you may have even sat through a timeshare presentation or two while on vacation or while planning to take your next vacation. These presentations, often given by salespeople, make the timeshares sound too good to be true.
Timeshares are billed as an easy way to vacation every year and are made out to be a sound investment too. Millions of Americans get sucked into these sales pitches and end up purchasing timeshare property. In fact, around 7.3 percent of American households own some type of timeshare.
For resorts and developers, timeshare business is booming. The average sale price for a timeshare is more than $20,000 and millions are buying — it’s a 10.2 billion dollar industry, and growing steadily every year. The unfortunate truth about timeshares is that many of them eventually go unused for a variety of reasons, and are very difficult, if not impossible to get out of. Timeshares are a great deal for some, but for many people, they can become a headache and can lead to more problems and deeper debt.
What Is a Timeshare?
Timeshares, also called vacation ownership, involve shared or fractional ownership in a vacation property — allowing the owner to stay on the premises for a certain set amount of time each year. For example, the owner may have one week (1/52nd ownership of the unit), or one month (1/12th ownership), etc. A variety of different plans exist to appease all types of travel plans and schedules, such as biennial plans that allow for stays every other year. To fill in all the remaining time slots, the resort or management company sells other shares of time to other vacationers.
Timeshares are generally categorized as two types:
- Shared deeded: As the name suggests, in this type of timeshare there is owned interest and it comes with a deed — much like other forms of real estate. Although in many ways, it’s not treated as typical real estate. In this arrangement, you generally are tied to a specific week to use your timeshare each year.
- Undeeded or Leased: These timeshares, also called right-to-use, are more like a leasing situation. The owner pays to have use of a vacation property but is not considered an owner of the property itself. Sometimes the timeshare arrangement is for a specific week or month every year, and some are more flexible with available times. Some in this category may even offer various properties and locations as ownership in a “vacation club” where you can use points to reserve various properties or bank your points for later use. Note that there are often extra charges to change dates and locations, and it can be difficult to trade to a more desirable location or time of year.
When you’re on vacation listening to the sales pitch, or attending a pitch as a way to start going on vacation, it can all sound wonderful. Remember that these are professional salespeople. Timeshares are usually not as good of a deal as they sound, and many timeshare owners find themselves frustrated and in debt from the cost of the initial purchase and all the added hidden costs and fees.
How Owning a Timeshare Can Cause Debt
In presentations, salespeople often bill timeshares as “investments,” something you could potentially earn money on, and pass down to the kids. But a true investment should earn you income through interest, appreciation or another method of income generation, and this is not the case with timeshares. The truth is that they often actually depreciate at a rate faster than car ownership. The sales pitch often highlights the ability to trade for another time or location. In reality, it’s often quite difficult to trade, and the trade usually comes with additional fees. The timeshare itself can also come with more added fees — annual fees, maintenance fees and others that can quickly add up.
When a timeshare is purchased, it’s either paid for in cash or a mortgage loan can be used to make payments. The added maintenance and other extra fees apply regardless of how the purchase is financed. The interest rates can be sky-high on these types of mortgages — some as high as 15 percent or more — because they often do not come from banks, but are financed through the timeshare developer instead.
Timeshares are usually purchased with a decades-long agreement, and it’s natural for a family’s situation to change during that time. Whether it’s a change in jobs or finances, the loss of a partner or a decline in health or mobility, the situation may make it difficult to travel. In some cases, you can’t keep up with the mortgage payments and fees of the timeshare.
In these cases, the owner may stop using the timeshare altogether, and struggle to keep making payments on time. Depending on the type of timeshare owned, late payments and non-payments can result in collections notices, levies, judgments or foreclosures. Even if the timeshare was paid for, the annual maintenance fees continue to accrue, and missing these payments can have just as serious consequences as missing a mortgage payment. Once a couple of payments of either type are missed, the debt can quickly get out of control. Once debt begins to accrue, the timeshare agreement can be next to impossible to get out of.
Timeshare Costs and Fees
In addition to the original purchase price and exorbitant interest rates if financed through the timeshare management company, timeshares usually come with lots of additional fees. These fees and extra expenses may not always be clear at the time of purchase.
Additional timeshare fees can include:
- Utilities: Timeshare owners are often surprised to learn that they are also responsible for utility costs during their stay. These costs can quickly get expensive if you’re paying electricity to cool down a tropical condo or heat a cabin at a ski resort.
- Taxes: Depending on the type of timeshare you own, you may be assessed your portion of the property taxes or additional resort taxes for the time you spend at the timeshare.
- Maintenance fees: These fees are similar to any homeowners’ association (HOA) fees and cover things like general repairs to the property, landscaping and lawn care, shared security measures and maintenance of shared amenities like pools or clubhouses. Maintenance fees are assessed even if you do not use the property every year, and usually rise in cost over time.
- Special assessment fees: These fees cover one-time repairs or property improvements such as new roofing, and can occur at any time and in any amount. The fees are levied to your property and you cannot opt-out of them, even if the fee is to pay for something you’ll never use, like a new golf course.
Any of these fees, in addition to regular mortgage payments to a timeshare property, can quickly spin out of control. Costs are often beyond what a timeshare owner planned and budgeted for, and can increase year after year — making it even harder to pay in full.
How Can I Get Out of My Timeshare Debt?
If you are ready to get out of your timeshare agreement, it’s time to face the reality that you will most likely not get all of your money back. Timeshares are not a true “investment” like other forms of real estate.
When you want to exit your timeshare, there are a few options you can try:
- Ask the timeshare company. Some resorts and timeshare developers have programs in place for taking back timeshares. However, it is at their whim which timeshares they choose to take back and they are not required to do so. Many others have no such programs, and you may be out of luck.
- Rent your timeshare. You could get back a little bit of money by renting out your timeshare to others looking for a vacation but you risk not renting it out at all, losing that years usage and you probably won’t completely cover the annual fee.
- File for bankruptcy. If you walk away from your timeshare and stop making payments to the mortgage, you will face foreclosure on the property. Filing for bankruptcy can help you get away from this debt, but your credit score will still take a hit and bankruptcy alone does not get you out of the timeshare.
There is no guarantee the above options will result in successfully ending your timeshare agreement. When none of these options work, it’s time to get help from a timeshare exit company.
Trustworthy organizations like EZ Exit Now can assist many in getting out of their timeshares quickly, ethically and affordably. With help from a reliable timeshare exit company, you can be sure that everything is taken care of for you, from dealing with the timeshare developer to filing all the necessary paperwork.
Can I Be Sued for Not Paying for My Timeshare?
If for any reason you stop making payments on your timeshare property and/or the fees associated with it, certain collections efforts will ensue. The different types of legal actions taken will depend on the type of timeshare that you own, and whether it was financed with a mortgage.
With any late payments, the timeshare company will likely start making phone calls or sending letters demanding payment. The company can also use a third-party collections agency in an attempt to collect the debt, or they can sue for the past-due balance in civil court. In some cases, once a judgment is filed in civil court, the company may then attempt to garnish your wages or issue a levy on your bank account to obtain some of the funds to repay the debt.
If the timeshare is deeded and you stop making payments, the property may go through the foreclosure process. This process may or may not involve a judgment through the courts, but will impact the owner’s credit. Even if the late payments are related to fees instead of the mortgage, a lien can be placed on your timeshare deed, which can also lead to foreclosure.
Note that if your situation has reached the point of collections or judgments, it’s very likely that you will not be able to use the resort, and will not be able to rent out your unit either. You, or any guests, will likely not be able to check-in due to the late payments.
What Happens to Your Timeshare if You Declare Bankruptcy?
If you are considering bankruptcy, you may be wondering how the courts will handle your timeshare. It can be confusing to know what will happen to your timeshare — is it considered an asset? A debt? Both? If you are trying to determine how your timeshare will be handled in bankruptcy proceedings, let EZ Exit Now help walk you through different scenarios and possible outcomes.
Contact EZ Exit Now for Help With Your Timeshare
If you’re going into debt with your timeshare, facing collections notices, judgments or bankruptcy, EZ Exit Now may be able to help you get out of your timeshare. Our caring staff is here for you, helping you along our proven process to get you out of your timeshare fast. We will meet with you one-on-one and discover whether we are able to help you. If we are able to help we will design a course of action, and then we take care of it all. Once you are a client, you can rest assured that we will get you out of your timeshare as quickly as possible. Contact us today to get started with your plan of action.
