Divorce, timeshare, Means Test -- could really use some guidance!

[nceguyfromne]

My wife and I both entered our relationship with financial baggage from previous marriages. My major baggage was a house that wouldn't sell because of an uncooperative ex, and my wife's was a timeshare, jointly owned with her ex. About 3 years into our relationship I decided to get a fresh start with a Chapter 7 but she decided, after we discussed it together, not to file with me, believing she could continue to "persuade" her ex to make the timeshare payments by threatening him with court action -- he had previously agreed, in the divorce decree, to keep and pay for the timeshare. Unfortunately, that luck has finally run out. He declared Chapter 7 around the same time I did, something we knew about, but what we didn't know (and I feel stupid for not realizing all along) was that he did not reaffirm it and was simply continuing to make payments; I have now confirmed this officially. Those payments apparently stopped several months ago, and now the timeshare company wants their money: $12K and quickly growing. The collections lady she spoke to yesterday claimed that number would probably double after they tacked on all their fees.

These are the options I see:

Option 1: Bankruptcy - she has the timeshare, valued per above, and about $5,000 in credit card balances that are current.

Option 2: Find a way to make her ex pay, whether that means curing the default or suing him for contempt of the divorce decree.

Option 3: Try to cure the default ourselves and either keep or (long shot) sell the timeshare.

Here is the big problem: 2012 was really good for us financially. I got a new job with a substantial salary increase, and that has put our family income about $12K over the state median. My calculations on the Chapter 7 Means Test are showing about an $1,100/month "disposable" income. I'm sure a good lawyer could make that number go lower, but I have my doubts that it can be brought below the number needed to avoid the presumption of abuse.

On the Chapter 13 side of things, I think we might fare a little better. Nearly $900 of that $1,100 "disposable income" I mentioned above is in the form of child support payments from her ex, which if I understand correctly is not included when computing disposable income in a Chapter 13 payment plan. This would put our disposable income for repayment purposes closer to ~$200, which is less than the current minimum payments on her credit cards. What I dislike about this is option is that it basically puts our lives on hold for another 5 years.

My wife is convinced that the timeshare company has no interest in negotiating, but I'm thinking it might be worth a shot. She has already told them she does not work (which is true), we do not own any real property and both of our cars/car payments are held in my name only. There would be very little for them to come after in a judgment.

Given the options and circumstances, what would you suggest? Also, does anyone have any experience with pursuing remedies on a breached divorce decree? Is the decree even worth the paper it's written on?

[Fleischman]

First, the ex-husband's obligations to your wife may not have been eliminated in his Chapter 7 depending on how to divorce decree was worded. You're going to need to show it to a local bankruptcy lawyer to be sure, but it may be an option to drag the ex-husband into court for violation of the decree.

Second, you may or may not have means test issues depending on how the household runs financially. There's a marital adjustment that allows you to back out your income that is not used for the household upkeep, so again - check with a lawyer on that issue.

Third, perhaps the timeshare won't sue or seek to enforce the deficiency. At this juncture, you don't know.

Fourth, if the timeshare doesn't seek to collect post-foreclosure then $5,000 in credit card debt is hardly worth the bankruptcy filing given your overall financial picture.

Hope this helps.

[nceguyfromne]

First, the ex-husband's obligations to your wife may not have been eliminated in his Chapter 7 depending on how to divorce decree was worded. You're going to need to show it to a local bankruptcy lawyer to be sure, but it may be an option to drag the ex-husband into court for violation of the decree.

Second, you may or may not have means test issues depending on how the household runs financially. There's a marital adjustment that allows you to back out your income that is not used for the household upkeep, so again - check with a lawyer on that issue.

Third, perhaps the timeshare won't sue or seek to enforce the deficiency. At this juncture, you don't know.

Fourth, if the timeshare doesn't seek to collect post-foreclosure then $5,000 in credit card debt is hardly worth the bankruptcy filing given your overall financial picture.

Hope this helps.

Thanks, Fleischman. I have been investigating the divorce decree angle a little further and, in particular, the concept of the "hold harmless clause." While it appears that the filing former spouse (her ex) can still discharge his obligation to the creditor despite the divorce decree holding him responsible for it, he cannot discharge his obligation to my wife as stated in the divorce decree and ordered by the family court, which was to pay that particular debt and indemnify her obligation to it.

The exact clause pertaining to the timeshare is as follows (names changed, of course): "Timeshare ABC Resort shall be awarded to John free and clear of any interest of Jane. John shall be responsible to all costs associated with that timeshare."

Toward the end of the decree is a "Mutual Releases" section, stating: "...each party releases and agrees to defend, indemnify and hold the other harmless from any and all claims of any nature whatsoever arising out of the marriage (including any claim for alimony)."

To me, this seems to suggest that there is a case for contempt of the divorce decree. One matter I would like to clarify is: Does his obligation, as stated above (assuming, of course, a judge accepts it at face-value) mean he is not shielded from the creditor (meaning, the creditor could still pursue him directly), or would my wife be the only party able to make a claim? What remedies could my wife seek in a petition of contempt?

[bcohen]

Although you could, in theory, go after the ex, and seek to have the debt enforced despite his bankruptcy, the odds are good that you would be trying to get blood out of a turnip. Why not instead attempt to surrender the timeshare to the resort company in lieu of the back dues? In fact, I am surprised that the resort company has not placed a lien on the timeshare and initiated foreclosure proceedings by now. Usually, that is how timeshares handle nonpayment of maintenence dues.

[Fleischman]

His obligation, in a bubble, seems to mean that he is responsible for paying you back for any legal action undertaken against you that he's supposed to be paying (i.e., the timeshare).

Again, without the full agreement there's no way I or anyone else can possibly interpret this for you. This is a question for your divorce lawyer, and possible action in divorce court.

[nceguyfromne]

I am well aware of the "blood from turnip" school of thought but also know that her ex is largely a turnip by choice, not by circumstance. He has a house and a job with a paycheck just as respectable as mine. I don't relish the idea of spending the next several years chasing his assets, and I realize it may come across as personal and vindictive, but it's "us or him" taking the fall for this and as far as I can tell, my wife has the legal standing. It is certainly upsetting to have to deal with it but we are being careful to keep it objective.

The simple question is, which course of action brings the most relief and sidetracks us the least from moving forward in our lives, not to mention keeping things friendly for the sake of my stepdaughter? If pursuing him for contempt of the divorce decree is not the answer then we certainly won't do it. The main problem is, Chapter 7 for my wife may unfortunately be a stretch due to our income. Nonetheless, plans are in the works to consult with some attorneys; hopefully they see our numbers differently. If Chapter 7 proves to be an option then I think it would really be a no-brainer because it severs these ties once and for all. Otherwise, this may keep coming up when we least expect it.

[bcohen]

My advice is to first get rid of the timeshare, to stop the fees and penalties from accruing going forward. Once the timeshare is out of your name, you can then attempt to settle, ignore, go after the ex for, or discharge through BK the amounts owed.

Also, as stated above, using the divorce decree to go after the ex means that you have already taken the loss (i.e. paid the dues) and are going after him for reimbursement. This kind of litigation is not in either of your interests. Also, assuming that he is already being garnished at 25% or more for child support, you won't be able to collect your judgment by going after his wages, and if he makes himself "collection proof" you'll never see a dime, even after paying your own attorney fees, etc.

You need to cut your losses and get rid of/sign over/surrender the timeshare. Most likely, that will be the end of the matter.

[nceguyfromne]

My advice is to first get rid of the timeshare, to stop the fees and penalties from accruing going forward. Once the timeshare is out of your name, you can then attempt to settle, ignore, go after the ex for, or discharge through BK the amounts owed.

Also, as stated above, using the divorce decree to go after the ex means that you have already taken the loss (i.e. paid the dues) and are going after him for reimbursement. This kind of litigation is not in either of your interests. Also, assuming that he is already being garnished at 25% or more for child support, you won't be able to collect your judgment by going after his wages, and if he makes himself "collection proof" you'll never see a dime, even after paying your own attorney fees, etc.

You need to cut your losses and get rid of/sign over/surrender the timeshare. Most likely, that will be the end of the matter.

Perhaps I should have clarified that there is still money owed on the timeshare's mortgage and that is what comprises the majority of the $12K currently owed. If this were a simple matter of unloading a free-and-clear deed and settling the maintenance fees, that would undoubtedly be easier. That said, I'm pretty sure "surrender" is a moot point. They will be more than happy to take the timeshare back by simply foreclosing on the mortgage, leaving them to pursue the deficiency and whatever fees they tack on.

[forgotten]

Perhaps I should have clarified that there is still money owed on the timeshare's mortgage and that is what comprises the majority of the $12K currently owed. If this were a simple matter of unloading a free-and-clear deed and settling the maintenance fees, that would undoubtedly be easier. That said, I'm pretty sure "surrender" is a moot point. They will be more than happy to take the timeshare back by simply foreclosing on the mortgage, leaving them to pursue the deficiency and whatever fees they tack on.

Keep in mind the deficiency on a time share will be just about the full value of what is owed, as in general, you can't do much more than give them away.
Unfortionatly there really is no good option here. Sue him and hope you can collect, file BK, or pay it.