Ask Liz Weston

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Credit & Debt

Q&A: Unwanted timeshares granted back to developers

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Dear Liz: I successfully granted back seven timeshare properties in different locations that my father had bought over the years. In several cases, the companies were very unhelpful over the phone, but responded once I wrote a letter explaining my father’s age and inability to travel and requested to grant back the deed. It seems all of the companies have a process for doing this, but won’t reveal it over the phone. I had to pay administrative fees and some other costs ($500 to $1,000 per timeshare), but it was worth it to eliminate the yearly maintenance fees.

Answer: Thank you for sharing your experience. Far too many older people continue to pay maintenance fees long past the point where they can enjoy their timeshares because they don’t see a way out. The timeshare companies usually insist the fees must be paid “in perpetuity.” Failing to pay can lead to collection action and damage to your credit score. Desperate timeshare owners are often targeted by scam artists and unethical companies that fail to deliver on promises to get them out of their contracts.

In reality, many developers will take timeshares back under the circumstances you describe. Owners may be able to sell or give away their timeshares using sites such as Timeshare Owners Group and RedWeek. Or they can simply stop paying the fees and let the developer foreclose. Although the damage to their credit scores may be significant, the effect typically wanes over time and disappears once the collection drops off their credit reports in seven years.

Q&A: How do I get out of my timeshare?

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Dear Liz: We want to get rid of our timeshare after having it for more than 20 years.

We gave the exit company $5,000 to help us, but all they did was tell us what to do, and it was going to cost more money. Renting it would probably be a nightmare, and we don’t want to leave it to our kids, as they couldn’t afford the maintenance fees.

We are 76 now, and having to come up with those fees every year is hard. Would it be wise to just stop paying the fees and let them take it back by default? We paid off the timeshare years ago. Can they hurt our credit rating?

Answer: Probably, but that may be the best of bad options.

You’ve already discovered that there are plenty of scamsters and unethical companies willing to take advantage of people desperate to get out of their timeshares.

The information you got for $5,000 was probably available for free on sites such as the consumer advocacy site Timeshare Users Group and RedWeek, an online marketplace for timeshares.

If renting isn’t an option, consider selling your timeshare. Both TUG and RedWeek allow owners to advertise their timeshares for sale or rent. Just don’t expect to get back more than a few cents on the dollar of what you paid, if that. In fact, some sellers offer to pay the maintenance fees for a year or two as an incentive to get rid of low-value timeshares.

The reality is that most timeshares will be hard to sell. If you’re contacted by anyone promising to connect you with a buyer for a fee, that’s another scam. Carefully read the information on Timeshare Users Group about selling timeshares before you begin.

You can also try contacting the developer to see if it will take your timeshare back. Few developers have formal programs that allow owners to give up their shares, but some will do so on a case-by-case basis. If age or illness prevents you from using the timeshare, be sure to mention that.

As a last resort, you can stop paying the fees and be subject to foreclosure. Your scores may indeed plummet if the developer turns you over to a collection company, and you could be subject to a lawsuit, although timeshare expert Brian Rogers of Timeshare Users Group says few developers want to sue older people who can no longer use their timeshares.

Stay vigilant throughout this process. Criminals maintain databases of people who have fallen for scams so they can be targeted again and again.

Q&A: Bankruptcy may be best option for indebted widow

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Dear Liz: I am an 82-year-old widow with a disabled daughter in a desperate financial situation. Payments on my credit cards and a personal loan eat up half the income I get from Social Security, my late husband’s pension and my IRA. My total debt is over $100,000 and my only assets are a car worth $35,000 and the fast-dwindling IRA with just $25,000. I need advice on how best to proceed: bankruptcy or loan consolidation or something else?

Answer: Please make an appointment with a bankruptcy attorney as soon as possible.

There are other solutions for debt, including a debt management plan through a credit counselor, debt settlement or a consolidation loan. Debt management allows people to pay off what they owe over time, often at a lower interest rate. Debt settlement involves negotiating with creditors to accept less than what they’re owed. A consolidation loan replaces multiple debts with a single loan, often at a fixed interest rate.

Your situation is simply too dire for these other methods to make much sense, however. Bankruptcy could allow you to legally erase the debt and preserve what’s left of your limited funds.

Q&A: Speaking of credit cards, what if a spouse has a balance when they die?

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Dear Liz: When a spouse dies, is the surviving spouse responsible for outstanding credit card debt from a card issued only in the deceased’s name?

Answer: In community property states — including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin — debts incurred during marriage are usually considered owed by both spouses, even if only one spouse’s name is on the account. In other states, debts can be considered separate, but creditors typically are paid out of the dead person’s estate before any remaining assets go to heirs.

Q&A: Why debt settlement companies are the wrong way to deal with high credit card debt

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Dear Liz: Finance companies claim if you owe too much credit card debt that by law you need not pay it all back, but can retire some or most of this debt. They say this is not a credit card debt reduction program through balance transfers or debt consolidation loans. It sounds more like a faux semi-bankruptcy declaration. Are you familiar with these programs? They sound too good to be true.

Answer: Most likely you’re seeing advertisements for debt settlement companies. With debt settlement, the debtor stops making payments on their credit card debt, hoping that the issuers eventually will settle for less than what is owed. Results aren’t guaranteed and the process often takes a few years.

As you might expect, not making payments can lead to significant credit score damage as well as creditor lawsuits. In addition, any amounts that are forgiven in this process may be considered taxable income to the debtor. You’ll also pay fees to the debt settlement company if you hire one to handle these negotiations. The fees and taxes can significantly offset any savings achieved through the process.

Most people who struggle with credit card debt would be better off filing bankruptcy or using a credit counseling service’s debt management program.

Debt management programs enable people to pay off what they owe over three to five years, typically at reduced interest rates. Bankruptcy, meanwhile, allows credit card debt to be legally erased without triggering a tax bill. The most common form of bankruptcy, Chapter 7, usually takes just a few months, after which people can begin rebuilding their credit.