December 2007 - by John A. Palumbo
Ten Strategies to Triumph Over Timeshares
Most bankruptcy Trustees will eventually have to dispose of a timeshare condominium. In fact, the resale of
timeshares in bankruptcy is so prevalent that a Trustee once jokingly said that it is a prerequisite for anyone
filing bankruptcy to own a timeshare, and if they didn’t already own one, they’d have to buy one before they could
At first glance, the timeshare appears as if it would be a welcome asset for a Trustee in a bankruptcy case,
however, as usual, everything is not always as it seems. Trustees typically end up with many timeshares over the
course of their appointment and these high-priced toys are extremely difficult to sell at any price. When they are
sold, they typically go for pennies on the dollar.
Administer or Abandon?
The dilemma begins when the debtor lists the timeshare on their schedules as a free and clear asset and indicates
that they paid $10,000, $20,000, $30,000, or more for the property. One would intuitively look at when
they bought the property (which was several years ago) and believe that it may have appreciated in value, thereby
creating a decent asset case with this one item.
So, how does it happen that the debtor pays thousands of dollars for these timeshares and now they are almost
impossible to sell? To appreciate this occurrence, one must have a general understanding of how timeshares are
sold. The marketers of these products, to ensure successful sales, spend thousands of dollars to market and sell
each unit. An example of a typical timeshare pitch might include receiving free tickets to Disney World if you
would take a look at the new resort property in the Orlando area. This is very enticing to consumers, especially
considering the price of Disney tickets today.
No Free Gifts
Virtually no one goes to one of these presentations with the intention of buying a timeshare condominium. Rather,
they intend to go listen to the pitch or watch the presentation for an hour, get the free tickets and head to
Disney. After spending the time in the cooker, which doesn’t appear to be heated at all, most people walk out with
ownership in one of the resorts. It is a very alluring and very expensive sales presentation; the properties are
spectacular and the presentation superb.
Almost always these presentations include free gifts, meals, show tickets, and complimentary overnight stays. They
are designed to create an obligation on the buyer’s party and cause them to conform, almost religiously, to the law
of reciprocation, in which the buyers feel compelled to purchase.
For example, if the debtor purchased a timeshare for $10,000, more than likely, the marketing and sales cost was
approximately $5,000. This portion of the overall price of the property is what is spent on the enticement process
to get the debtor to buy. Trustees don’t have the option of using these appealing types of incentives to resell
these items, and therefore, the value drops dramatically.
So, what’s a Trustee to do? If you have these types of assets, you can you increase your chances of creating money
for the estate and eliminate these properties effectively by using the following ten strategies.
1. Free & Clear
The first thing a Trustee should do, is verify that it is free and clear of any mortgage. Just because a timeshare
has a mortgage doesn’t preclude it from being sold, however, it does increase the likelihood that you will have to
abandon the asset.
2. Sell It QUICK Attitude!
If it is free and clear of any mortgage, immediately begin trying to sell the unit rather than waiting for several
months. If the Trustee can sell the unit immediately, they can eliminate additional fees being added to the bottom
line. I often see timeshares being offered for sale with 2 and 3 years of association fees being tacked on to the
bottom-line price. These additional fees make the price too prohibitive and could be avoided by being proactive. If
the Trustee moves quickly, when the asset is first received, they could eliminate this asset before the maintenance
fees begin to accrue.
3. When’s The Week?
When does the week or weeks of use occur in the year? The timeshare calendar for weekly use typically begins around
January 1 being week one and continues sequentially throughout the year. There are 52 weeks available in most
timeshare resorts. If the week has not already passed, it will spoil quickly if not acted on immediately. The fees
begin mounting and make the price too prohibitive to be sold.
4. File Notice
It’s imperative that the proper documentation is filed to ensure that the process moves as smoothly as possible. A
simple filing of “Notice of Trustee’s Interest” (at the Clerk’s Office in the county in which the timeshare is
located) is all that’s is usually necessary to protect the asset.
5. Rent The Unit
If the unit cannot be sold before the debtors’ week for the current year is going to occur, the Trustee should
immediately authorize the managing agent to rent the unit and have the proceeds from the rental to offset the
maintenance or annual fees. It is far easier to sell a timeshare with minimal debt.
6. Determine Value
You must know what the debtors paid for the unit compared to what their perceived value is. Once you know what they
actually paid for it and you know how much they believe it is worth by what they have listed on the schedule, you
are in a much better position to propose a plausible amount to begin working with.
7. The 75% Rule
As a rule of thumb, if you can sell the unit for about 75% of what it originally cost, it will ensure that you make
some money for the estate and will be reasonable enough for a consumer to consider it a good buy.
8. Target Market
Most Trustees’ mindsets are that a timeshare condominium will be hard to sell. What many Trustees may not realize
is that the timeshare is likely to hold the most value to the debtors themselves. They know what they originally
paid for the asset and there is a possibility that they would really like to keep it. If willing to take a
different approach, the Trustee could propose a sale back to the debtor with excellent terms and financing by
offering no money down and low monthly payments. The Trustee is now in an optimal position to get a higher price
for the unit.
9. The Open Market
There are a many options for selling the timeshare in the open market such as: listing them on the Internet, the
NABT Website, ads in the paper, auctions, etc. The debtor may also know of someone (a friend or family member) who
would be interested in purchasing the unit.
10. Sell The Note
As stated in the example below, the Trustee has a better chance of selling a note and mortgage than the timeshare
unit itself. Timeshares sell because they offer great financing. You as Trustee can also offer great financing.
Zero down financing is very alluring to most anyone. Combine that with selling the unit at ½ the original cost and
low monthly payments and you have leveraged yourself to sell.
Following is an example:
John and Mary Smith purchase a timeshare condominium in 1998 for $10,000. They have now filed for bankruptcy and
realize this asset must go. They spent 5 years paying off the note and the asset is free and clear. The Trustee
could propose that they keep this asset by purchasing it back from the estate. The Trustee could reasonably sell
the unit back to the debtors for no money down, no closing costs and payments of approximately $100.00 per month on
a 5-year note. At 7.5% interest, this would work out to $5,000 or ½ of the original cost of the unit.
Once the note is created for the purchase of the timeshare, the Trustee would then have the option of selling the
$5,000 note secured with a mortgage to a private investor. The note would most likely be discounted to $3,000 -
$3,500 due to the high risk.
This proposition works out as a win-win for both parties. The debtors get to keep their timeshare; the estate
receives the funds from the sale of the note to a private investor. For the Trustee, this is a far better return
than they usually receive on a timeshare transaction, which is perhaps $500.00 - $1,500, if anything at all, for
the sale of the timeshare to the open market.
These strategies, of course, will not work every time. There will be times when the debtor is not interested in
purchasing the unit back and doesn’t know anyone else who might be interested in buying it. However, by adopting
the right mindset, your debtor becomes your best target market, followed by someone they know and only after
exhausting these efforts would you move to the open market to try to sell it. I am always available to assist you
in developing a strategy to sell timeshare units or other unusual /difficult to sell assets.
John Palumbo is the principal of Bankruptcy Asset Management, based in Jacksonville, FL, and
one of the nation’s leading authorities on the evaluation and liquidation of unusual assets in bankruptcy. His
uncanny ability to recognize value in items oftentimes deemed unworthy has transformed his asset analysis into an
extraordinary art form. To speak with John personally, contact him at 904-641-2043 or