Time Share Companies

Q: We bought a timeshare through a company in Minnesota. After buying it, my husband had a neck injury and is now disabled.

He was unable to work and we got behind on our maintenance payments. I made arrangements to get the fees caught up but just found out through the paper that the timeshare company filed bankruptcy. They notified us that this transpired but they are closed for business.

Are we obligated to continue making these payments? If we don’t make the payments, what would happen to our timeshare? We’d like to sell but have not been successful in doing because of the bankruptcy.

A: The turbulent real estate market doesn’t just affect home buyers and sellers. As you, and many others, have discovered, it can affect ancillary businesses as well – like your timeshare management company.

Nonetheless, you own an interest in a timeshare development. With that ownership interest comes certain responsibilities. One of those responsibilities is to pay your monthly maintenance expenses, real estate taxes and other fees associated with the timeshare.

While the timeshare developer or the timeshare operator might have filed for bankruptcy protection, your financial obligations will continue. If the timeshare developer is in financial trouble, you may experience problems with the overall experience of owning your timeshare. If you purchased your unit early on, and there are many units left to be sold, you may be in a precarious position.

If the building is not completed and there are units left to be finished and sold, the timeshare developer may never be able to finish the development. That would be terrible for you, unless some other timeshare developer comes in to finish the project.

But if during bankruptcy, a new developer comes in and sells out the remaining units at a fraction of what you paid, you may never get your money out of this purchase.

If the development is substantially finished, the impact of the timeshare developer’s filing for bankruptcy protection may be limited. There could be a cloud hanging over your development but that may not last long as people use the development and see that it is a good place to go and stay.

If your timeshare management company has filed for bankruptcy protection, you want to make sure that the building and its amenities are maintained and the upkeep of the building is good. You and other owners need to make sure you follow up with the management company and the bankruptcy court to insure that the standards for your building are being kept. If they’re not, you might have to band together to hire another time share management company to come in and take over the management of your building.

The trustee in the bankruptcy proceedings may try to have a replacement company buy the assets of the company now in bankruptcy and find a company willing to manage your building.

You will need to obtain more information about the bankruptcy proceedings and make sure that money owners paid for the operations and maintenance of the building will be applied to the needs of the building. You should also make sure someone is representing the interests of the owners in court.

Finally, unless there are quite unusual circumstances, the bankruptcy court should not end your ownership interest in the timeshare but you will have to continue to pay the monthly or annual expenses that you owe.

If, for some reason, your purchase of the time share interest was not papered properly or your interest is junior to other creditors, you could lose your interest in the timeshare.

Please talk to an attorney for more details.

NOTE: Ilyce R. Glink’s latest ebooks are “Credit Scoring Secrets” and “How to Find a Great Real Estate Agent,” which are available at her new, all-video website, www.expertrealestatetips.net. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com © 2008 by Ilyce R. Glink. Distributed by Tribune Media Services