It’s a well known fact that the economy isn’t at it’s best. People are having difficulties paying their bills and keeping up with finances, and money is scarce. Timeshare ownership is at the bottom of the list of priorities for some who can barely pay for food to feed their families. And with expenses like increasing maintenance fees and mortgage costs, some timeshare owners simply cannot afford to pay for their timeshares anymore.
Owners are resorting to timeshare abandonment, which can have significant consequences and can damage an owner’s credit history profoundly. Read on to learn more about why timeshare abandonment should be avoided.
Foreclosure on a Timeshare Impacts Credit History
Surrendering a timeshare will result in a timeshare foreclosure, and will be reported on the owner’s credit history. This puts individuals at the risk of ruining their credit reputation, making it very difficult to obtain loans in the future. Prospective lenders will inspect credit history and see that a debt was not paid, which could result in the borrower paying a much higher interest rate, or being denied the loan altogether. So in essence, abandoning that timeshare could affect an individual’s ability to acquire a home or a car in the future.
IRS will be Notified of the Foreclosure
When a timeshare goes into foreclosure, the lender will report it to the IRS. For tax purposes an owner will have a non-deductible loss and a cancellation of debt income, and if the individual is not bankrupt or insolvent, the amount will be added to his income as “other income.”
There are Other Options for Unwanted Timeshares
If a timeshare owner finds that the expenses of keeping his timeshare are just too much, abandoning the timeshare should be avoided if possible. Other options may include selling the timeshare or donating it to charity. In order to donate, a timeshare loan must be paid off beforehand, but once donated, the individual will receive a tax write-off.
Selling a timeshare can be a difficult process, but is not impossible. If an owner successfully sells a timeshare, he will get more out of it than if he were to donate it. Regardless, many find the process of selling too difficult, especially in a poor economy. If an owner decides to sell, it’s important to price the timeshare realistically, and if possible, find a legitimate broker who will work hard to sell the timeshare. Be prepared for brokerage fees, however, that may cost up to 35% of the timeshare sale price.