If you have an unwanted timeshare, then you might have stopped paying your loan. But if you stop paying your loans, then you will likely face timeshare foreclosure. Before you start worrying about your credit score or paying multiple fees, let us help you understand the process of timeshare foreclosure and what you can do to avoid it.
How A Timeshare Foreclosure Works
When you fail to make prompt timeshare payments over a specified length of time or have stopped paying altogether, your timeshare may be foreclosed on. A foreclosure will bring you to court for breach of contract. Depending on which state you’re in, the legal process will be judicial or nonjudicial as state law governs timeshare foreclosures.
Judicial foreclosures require the lender to file a lawsuit while nonjudicial foreclosures just involve a notice of default and subsequent negotiating. Regardless, you will receive a lien on your timeshare if you should default in your timeshare payments.
The Consequences of Timeshare Foreclosure
Similar to residential foreclosure, timeshare foreclosure can lead to significant financial side effects. If you’re approaching foreclosure on your timeshare, here are some of the potential consequences you may encounter:
Lower Credit Score
Timeshare foreclosure will negatively impact your credit score. In some cases, individuals have experienced a loss of 100 points or more! In other words, if your credit score is at a healthy 700 before foreclosure, it could bring you down all the way to 600 which is considered poor. That is a lot of lost credit in one fell swoop.
In addition, a foreclosure remains on your credit report for seven years as well as any other entries about previous failed collection efforts. This means your financial future could suffer greatly after a timeshare foreclosure.
Higher Interest Rates
A timeshare foreclosure can lead to higher interest rates when attempting to obtain other loans. That is if you are approved for loans. In many cases, it will be hard to secure lines of credit, personal loans, and mortgages after foreclosure. If you are hoping to make a large loan-requiring purchase in the next seven years, you may want to reconsider foreclosure.
Timeshare foreclosure can even lead to a deficiency judgment. This means that the foreclosing bank will seek a personal judgment against the borrower for the difference between the sale price of the timeshare and the total debt. For example, if you owed $20,000 for a timeshare, but the foreclosure sale brings in only $15,000, then the bank may ask you to pay the $5,000 difference.
You may be subject to additional taxes after the foreclosure of your timeshare. The IRS requires all forgiven debt to be incorporated into your taxable income. The only caveat is if you qualify for an exception or exclusion.
As more employers are starting to check applicants’ credit scores, you may experience issues getting employed. You could be perfectly suited for a position at a potential company; however, your timeshare foreclosure may illustrate to their hiring manager that you are not able to competently handle your finances. Remember: a foreclosure can stay on your credit report for seven years. That is a long time to have an unwanted blemish on your resume.
How to Avoid Timeshare Foreclosure
Given the countless consequences of timeshare foreclosure, your best bet is to attempt to avoid it. You could try selling your timeshare, but most timeshares have very little resale value. Perhaps you could try to negotiate with your timeshare resort in order to reduce the amount you owe. However, many timeshare resorts are eager to line their pockets with your misfortune. Is there any surefire way to avoid foreclosure?
The Answer is Timeshare Legal
Our experienced team at Timeshare Legal has secured over $250 million in canceled timeshare debt since 2009. We are fully equipped to help you avoid timeshare foreclosure and ultimately save your financial future. Contact us today to free yourself from foreclosure and your unwanted timeshare.