What Happens When You Foreclose on a Timeshare?


Timeshares are a luxurious alternative to taking a traditional vacation every year. You decide to purchase your very own vacation home rather than staying in a hotel and use it during a predetermined period of time each year. If you buy a timeshare that comes with a deed, you will be granted property rights to the unit. You are responsible for the insurance, taxes, and costs associated with the upkeep of the property. If you finance the purchase, you will be responsible for paying the mortgage note in addition to the interest. The timeshare management firm has the right to reclaim the property if the monthly maintenance fee is not paid by the owner.

Foreclosure Process

In the event that your timeshare’s management firm sends many payment requests but receives no response, the business has the option of initiating the foreclosure process with the county court in the location where the property is situated. The management business applies for a Notice of Default in the state of California, which provides you a grace period of ninety days to settle any past-due bills. In the event that this is not done, a Notice of Sale will be generated. You have three weeks to settle the remaining sum on the property before the trustee puts it up for auction and sells it to the highest bidder.

Credit Score

Your credit score may be impacted as a result of the timeshare foreclosure process. Your credit report will include a notation of a foreclosure in the part labelled “Public Records” for the next seven years. You could also see entries for past-due balances and collection agency information on your report as a result of earlier attempts at collection. Your credit score might plummet by as much as 160 points only due to the foreclosure entry. If you have a foreclosure on your credit record, it may be challenging for you to receive new credit in the future, including another home loan. There is a possibility that your insurance rates may go up and that your available credit will be reduced.

Tax Implications

The Internal Revenue Service (IRS) mandates that any debt that is cancelled or forgiven be reported as taxable income. Because of the rise in your income, it’s possible that you’ll have to pay more in taxes when you submit your return. You do not qualify for the Mortgage Forgiveness Program since the property in question was a secondary one. The Debt Relief Act of 2007, which only applies to a person’s primary home, was signed into law in 2007. If you can demonstrate that you are insolvent, which implies that your liabilities are more than your assets, you may be eligible to remove the forgiven debt from your taxable income.


It is recommended that you get in touch with the timeshare management firm prior to beginning the foreclosure procedure. You may be able to avoid foreclosure by engaging in a short sale or a deed-in-lieu transaction. Your credit score will suffer if you choose any of these options, but the damage will be less severe than if you went through with a foreclosure. In the event that you are experiencing financial difficulties, the management firm may either establish a payment plan for you or amend the terms of your contract. To attempt to get part of your money back, you could also sell your timeshare on your own or rent out your week to someone else. Both of these options are available to you.