Timeshare Is Foreclosed

What Happens When A Timeshare Is Foreclosed On You?

Timeshares are now a popular way to spend a vacation annually in luxury reports and apartments. By signing a timeshare contract, an individual becomes obligated to pay property taxes, maintenance fees, and other high expenses. If people own an unwanted timeshare, they will stop paying their loans, resulting in a timeshare foreclosure. This article will introduce you to what happens when a timeshare is foreclosed on you.

How does a foreclosure on a timeshare work?

When timeshare owners fail to make payments on their timeshares over a determined time or even stop paying all of them, a timeshare is likely to become foreclosed. Timeshare foreclosure means proceedings due to the breach of contract, even though this legal process varies from state to state. 

Keep in mind that state laws regulate timeshare foreclosure so that proceedings might be judicial and non-judicial. The former case demands a lender file a specific lawsuit. On the other hand, non-judicial foreclosures mainly include a default notice and forthcoming negotiation. Furthermore, an owner will get a lien on the owned timeshare if they default in payments on the vacation property.

Timeshare foreclosure consequences

The truth is that foreclosed timeshare can lead to significant changes in a financial situation, with a range of harmful consequences. Here are the most common financial side effects a timeshare owner is likely to face during foreclosure:

1. Dropped credit score

Timeshare foreclosure tends to affect a credit score negatively, resulting in losing one hundred points or more. No one wants credit scores to be dropped in one moment, as the lower the credit is, the poorer it is considered. It is worth mentioning that foreclosure will be attached to your credit report for around seven years. As a result, you might encounter multiple financial issues in the future.

2. Tax consequences

Timeshare foreclosure can result in a deficiency judgment, too. In other words, a foreclosing bank will take action to reach a personal judgment against a borrower to pay the difference between the initial timeshare price and the final debt. In addition, an individual can be required for other extra taxes while timeshare foreclosure. It relates to your taxable income with all the forgiven debts included by the IRS.

3. High-interest rates

Another consequence of a foreclosed timeshare is higher interest rates, especially when an individual will receive other loans. However, timeshare owners aren’t approved to get loans or credits for all the events. Foreclosure can make things worse in terms of obtaining credits and mortgages. Thus, avoiding foreclosures is your best bet if you plan to make a large purchase in the near seven years.

4. Problems with employment

A foreclosure remains on your credit score for seven years, making it hard to get the desired job and blemishing your reputation. Although you might be a great specialist, foreclosure might demonstrate to an employer that you can’t cope with finances correctly.