Deed in Lieu of Foreclosure: Avoiding a Timeshare Foreclosure

Many timeshare owners opt to keep their timeshare vacation rentals, even if they don’t need or want it, mainly due to the negative impact it would have on their credit. For one, foreclosing on your timeshare would reduce your credit score by up to 300 points. Additionally, a judgment of foreclosure would remain on your credit history for at least seven years from the date you filed for foreclosure.

Why Consider a Deed in Lieu of Foreclosure

If your timeshare seller/company or lender is threatening to foreclose your timeshare, but don’t want to deal with its negative effects, you could consider a timeshare deed in lieu of foreclosure.

This is a two-fold process that won’t impact your credit as negatively as a foreclosure would. You have to get help from an attorney experienced in timeshares, though. You’ll need to have a document known as “Agreement in Lieu Foreclosure” drawn up, then sign it and have your lender sign it as well.

You’ll be signing a deed, stating that you’re giving back legal ownership of your timeshare to your lender or timeshare company. They would have no choice but to consider that your debt has been paid, so they won’t be able to collect unpaid balances. They also can’t file a deficiency judgment if they sign the deed in lieu of foreclosure.

Are There Alternatives You Can Try?

Some timeshare companies, on the other hand, might be reluctant to enter into a deed in lieu of foreclosure agreement. This is particularly true if the owner is behind on payments. But you could attempt to sway them by highlighting the downsides of a foreclosure. You might also consider making the account current and complete a deed-back, so you’ll avoid foreclosure and be free from liability in the future. It’s vital to note, though, that there’s a chance that you still need to pay taxes on your forgiven debt. Better check if this might impact your tax obligations.

If you don’t want a timeshare foreclosure to affect your credit, but don’t have the means to make good on your payments, you could consider filing a deed in lieu of foreclosure. Doing so would rid you of any financial liability for the timeshare since you’d be deeding it back to the timeshare company. If you think this is the right route for you, consult an experienced attorney to discuss your available options.