What's Going to Happen to My Time-Share in my Chapter 7 Bankruptcy in Arizona?

As with most things, that depends.

A time share is an asset. It's also not one of the assets listed as exempt under the laws of Arizona.

But it's a funny kind of asset. Maybe it's not transferable under the terms of the contract. Maybe there's a transfer fee. Maybe the timeshare agreement is fifty pages long and nobody in their right mind wants to read it!

And one timeshare is not the same as another timeshare.

Consider a timeshare in Haiti right now, you know? Or in New Orleans right after the flood.

Some timeshares are easy to sell, and debtors often sell them prior to filing in order to buy food, fuel, and provisions prior to filing a Chapter 7; that's probably just fine, as long as they sell it for close to fair market value to a non-insider. It's not a fatal problem if they sell it, for fair market value, and receive that value, prior to filing, and spend it on food, fuel, provisions, and so on.

But any transaction with an insider (which includes but is not limited to an insider) will be subject to much more scrutiny than a transaction with a non-insider.

So what happens if the time-share can't be sold by the debtor prior to filing?

Well, the trustee will probably try to sell it at auction, as trustees do, about once a month.

Or the trustee may, in the exercise of his or her business judgment, decide that it's not worth anything at all, and may abandon it out of the estate (and back to the debtor).

The debtor, if he or she wants to keep a timeshare, will sometimes make a lowball offer to the trustee; and sometimes a lowball offer will be the winning bid at the trustees auction, and then the debtor gets to keep the beloved timeshare.

But you can never tell about auctions. There are always those pesky Other Bidders!