What Happens If You Stop Paying Your Timeshare? (Complete Guide to Default Consequences)
Thousands of timeshare owners consider stopping payments as an escape strategy. But what actually happens when you default? This comprehensive guide examines the real consequences of timeshare default, including credit impact, foreclosure processes, legal actions, and better alternatives to strategic default.
Important Disclaimer
This article provides educational information about timeshare default consequences. It is not legal or financial advice. Strategic default has serious consequences and should only be considered as a last resort after consulting with an attorney and financial advisor. Better legal alternatives exist for most situations.
Every month, thousands of timeshare owners facing financial hardship or buyer's remorse consider a desperate question: "What if I just stop paying?" It's an understandable thought when you're trapped in a contract you can't afford or don't want, paying escalating maintenance fees for a vacation property you never use.
The reality of timeshare default is more complex than simply walking away. While some owners successfully default with minimal consequences, others face aggressive collection efforts, credit damage, and even lawsuits. Understanding what actually happens—and the factors that determine your outcome—is crucial before making this decision.
The Default Timeline: What to Expect Month by Month
When you stop making payments on your timeshare (either mortgage payments or maintenance fees), a predictable sequence of events typically unfolds. The timeline and severity vary by company, but this represents the most common progression.
Month 1-2: Late Fees and Initial Contact
What happens: Your account is marked delinquent. Late fees are assessed (typically $25-$75). You receive automated payment reminders via email and mail. The resort's billing department may call to inquire about the missed payment.
Credit impact: None yet. Most timeshare companies don't report to credit bureaus until 60-90 days past due.
Your options: This is the easiest time to resolve the situation. If you're experiencing temporary financial hardship, contact the resort immediately to discuss payment plans or hardship programs. Many companies offer temporary relief if you communicate proactively.
Month 3-4: Escalated Collection Efforts
What happens: Additional late fees accumulate. Collection calls increase in frequency (daily or multiple times per week). You receive formal demand letters via certified mail. Your account may be assigned to the resort's internal collections department. Some companies begin reporting delinquency to credit bureaus at 90 days.
Credit impact: If reported, your credit score could drop 50-100 points from a single 90-day late payment. The impact depends on your overall credit profile—those with excellent credit suffer larger point drops.
Your options: The resort may still be willing to work with you on payment arrangements. Some owners report that companies become more flexible at this stage, potentially offering settlement options or exit programs to avoid further collection costs.
Month 5-6: Third-Party Collections
What happens: Your account is transferred to a third-party collection agency. Collection calls intensify, often from multiple agencies. You receive collection letters demanding full payment plus accumulated fees. The debt is reported to all three major credit bureaus (Equifax, Experian, TransUnion). Interest and collection fees continue to accrue.
Credit impact: Credit score drops an additional 50-100 points as the account is reported as "in collections." Total impact at this stage: 100-200 point decrease from your starting score.
Your options: Collection agencies may be willing to negotiate settlements for 40-60% of the total owed. However, settling a collection account doesn't remove it from your credit report—it will show as "settled" rather than "paid in full," which is still negative.
Month 7-12: Legal Action Consideration
What happens: The timeshare company or collection agency evaluates whether to pursue legal action. Factors include: total amount owed, your state's foreclosure laws, whether you have other assets, and the company's internal policies. You may receive a "final notice" threatening legal action. Some companies initiate foreclosure proceedings. Others write off the debt and send a 1099-C form (cancellation of debt).
Credit impact: If foreclosure begins, it's reported to credit bureaus, causing an additional 100-150 point drop. Total impact: 200-300+ points below your starting score.
Your options: At this stage, you may receive settlement offers for significantly reduced amounts. Some owners report offers of 20-30% of total owed to close the account. Alternatively, consulting with a timeshare attorney may reveal legal grounds for cancellation that could resolve the situation without payment.
| Timeline | Company Actions | Credit Score Impact | Resolution Options |
|---|---|---|---|
| Month 1-2 | Late fees, payment reminders | None | Payment plans, hardship programs |
| Month 3-4 | Collection calls, demand letters | -50 to -100 points | Catch up payments, negotiate terms |
| Month 5-6 | Third-party collections | -100 to -200 points | Settlement (40-60% of balance) |
| Month 7-12 | Foreclosure or debt write-off | -200 to -300+ points | Settlement (20-30%), legal cancellation |
Understanding Timeshare Foreclosure
Timeshare foreclosure is similar to home foreclosure but with important differences. Not all timeshare companies pursue foreclosure—the decision depends on several factors including the amount owed, state laws, and the company's policies.
Types of Timeshare Foreclosure
Judicial Foreclosure: The timeshare company files a lawsuit in court seeking permission to foreclose. You receive legal notice and have the opportunity to respond. If you don't respond or the court rules in favor of the company, a judgment is entered. The timeshare is sold at auction or taken back by the company. This process takes 6-18 months depending on the state and court backlog.
Nonjudicial Foreclosure: In states that allow it, the company can foreclose without going to court, following procedures outlined in your contract and state law. You receive notice of default and notice of sale. The timeshare is sold at a trustee's sale after a specified waiting period (typically 90-120 days). This process is faster (3-6 months) and less expensive for the company.
Maintenance Fee Foreclosure: Some states allow foreclosure for unpaid maintenance fees alone, even if you own the timeshare outright with no mortgage. This is less common but can happen, especially with deeded timeshares where the homeowners association has lien rights.
Deficiency Judgments: The Hidden Risk
One of the most dangerous aspects of timeshare foreclosure is the potential for a deficiency judgment. This occurs when the timeshare sells for less than you owe, and the company sues you for the difference.
Example scenario: You owe $15,000 on your timeshare mortgage plus $3,000 in unpaid maintenance fees (total: $18,000). The company forecloses and sells the timeshare at auction for $500 (remember, timeshares have little to no resale value). The deficiency is $17,500. The company obtains a deficiency judgment against you for $17,500 plus legal fees and interest.
Consequences of deficiency judgments: The judgment appears on your credit report for 7-10 years. The company can garnish your wages (if allowed in your state). They can place liens on other property you own. The judgment accrues interest, growing larger over time. Bankruptcy may be required to discharge the debt.
States that prohibit deficiency judgments: Some states don't allow deficiency judgments for certain types of foreclosures. However, timeshare foreclosures may not receive the same protections as primary residence foreclosures. Consult an attorney in your state to understand your specific risk.
Credit Score Impact: The Long-Term Damage
The credit consequences of timeshare default are severe and long-lasting. Understanding the full impact can help you make an informed decision about whether strategic default is worth the cost.
How Timeshare Default Affects Your Credit
Total potential credit score damage: 200-400 points. For someone with a 750 credit score, this could drop them to 350-550—from "excellent" to "very poor" credit. For someone starting at 650, they could fall to 250-450, making it nearly impossible to obtain credit.
How Long Does It Stay on Your Credit Report?
| Negative Item | Credit Report Duration | Maximum Impact Duration |
|---|---|---|
| Late Payments | 7 years from date of delinquency | 2-3 years (impact fades over time) |
| Collection Account | 7 years from original delinquency date | 3-4 years |
| Foreclosure | 7 years from foreclosure date | 4-5 years |
| Civil Judgment | 7 years from filing date | 5-7 years |
While negative items remain on your credit report for 7 years, their impact diminishes over time. The most severe damage occurs in the first 2-3 years. After 5 years, if you've rebuilt credit responsibly, the impact becomes minimal. However, you'll still face challenges during that 7-year period.
Real-World Consequences of Damaged Credit
Beyond the credit score number, timeshare default can affect your financial life in concrete ways:
When Does Strategic Default Make Sense?
Despite the serious consequences, strategic default may be the right choice in specific circumstances. The key is understanding when the benefits outweigh the costs.
Situations Where Default Might Be Appropriate
Situations Where Default Is a Bad Idea
Do NOT Default If:
- •You have good credit (700+) and plan to buy a home or car in the next 5-7 years
- •You can afford attorney fees ($3,000-$8,000) for legal cancellation
- •You owe a large mortgage balance ($15,000+) that could result in a deficiency judgment
- •You work in finance, banking, or other fields where credit checks are routine
- •You haven't explored deed-back programs, hardship programs, or legal cancellation options
- •You're considering default simply to "punish" the timeshare company—you'll only hurt yourself
Better Alternatives to Strategic Default
Before defaulting on your timeshare, explore these alternatives that can achieve the same goal (exiting the timeshare) without destroying your credit.
1. Legal Cancellation with Attorney
How it works: A timeshare attorney reviews your contract and sales documents to identify violations, misrepresentations, or other legal grounds for cancellation. They negotiate with the timeshare company to terminate your contract without credit damage.
Cost: $3,000-$8,000 in attorney fees. Success rate: 95-99% with qualified attorneys. Timeline: 6-9 months average. Credit impact: None—contract is legally cancelled, not defaulted.
Best for: Owners who can afford attorney fees and want to exit cleanly without credit damage. Those who experienced high-pressure sales tactics or misrepresentations. Anyone with good credit they want to protect.
2. Developer Deed-Back Programs
How it works: Many major timeshare companies offer programs that allow you to surrender your timeshare back to the resort. You typically need to have your mortgage paid off and maintenance fees current.
Cost: $0-$4,000 in processing fees. Success rate: 60-70% approval rate. Timeline: 3-12 months. Credit impact: None—voluntary surrender, not default.
Best for: Owners with no mortgage balance and current maintenance fees. Those experiencing genuine hardship (medical, financial, death of co-owner). Owners of major brand timeshares (Wyndham, Marriott, Hilton, Diamond).
3. Hardship Programs
How it works: Contact your resort's owner services department and explain your hardship situation. Provide documentation (medical bills, termination letters, financial statements). Request enrollment in a hardship or compassionate exit program.
Cost: Usually free, sometimes $500-$2,000 in administrative fees. Success rate: 50-60% approval rate. Timeline: 2-6 months. Credit impact: None if approved.
Best for: Owners facing medical hardship, job loss, divorce, or death of a co-owner. Those who can document genuine financial difficulties. Owners willing to be persistent—initial denials can sometimes be overturned on appeal.
4. Negotiated Settlement
How it works: Once you're several months behind, the timeshare company or collection agency may be willing to settle for a reduced amount. Negotiate a settlement for 20-50% of the total owed in exchange for contract termination.
Cost: 20-50% of outstanding balance. Success rate: Varies widely, 40-60% achieve some settlement. Timeline: 6-12 months after default begins. Credit impact: Moderate—account shows as "settled" rather than "paid in full," which is negative but better than foreclosure.
Best for: Owners who have already defaulted and are in collections. Those who can afford a lump-sum settlement payment. Situations where other exit options have failed.
If You Decide to Default: Minimizing the Damage
If you've exhausted all alternatives and decide strategic default is your only option, take these steps to minimize consequences:
Conclusion: Default Should Be Your Last Resort
Strategic default on a timeshare is a serious decision with long-lasting consequences. While some owners successfully walk away with minimal impact, others face years of credit damage, aggressive collection efforts, and even lawsuits. The outcome is unpredictable and depends on factors largely outside your control—including which company you're dealing with, state laws, and the amount you owe.
Before defaulting, exhaust every alternative: legal cancellation with an attorney, deed-back programs, hardship programs, and negotiated settlements. These options achieve the same goal (exiting the timeshare) without destroying your credit and financial future.
If you're considering default because you can't afford your timeshare, remember that you also can't afford the consequences of default—higher interest rates on future loans, denied credit applications, employment challenges, and years of financial limitations. The short-term relief of stopping payments is rarely worth the long-term cost.
Consult with a timeshare attorney to explore legal exit strategies. Most offer free consultations and can assess whether you have grounds for cancellation. Even if you think you can't afford legal help, the cost of an attorney is often less than the financial impact of damaged credit over 7 years.
Explore Legal Exit Options Before Defaulting
Don't let desperation lead you to strategic default. Our attorneys have helped thousands of owners legally cancel their timeshare contracts without credit damage. Get a free case evaluation to learn which exit strategy is best for your situation—before you make a decision you can't undo.