I'm an accountant who specialized in insolvency work.
Typically, in evaluating a timeshare asset in a Chapter 7 proceeding, the trustee would estimate the potential proceeds from a sale, after considering the cost of sale (broker, closing costs), taxes (if any), mortgage(s) to be paid and dues outstanding. If the asset is deemed to have value, it would be sold either via a private sale or auction. In a private sale, the purchase would be subject to higher and better offers and would require court approval. The sale would typically be subject to all contract terms, including ROFR. Hypothetically, the Debtor could purchase the asset in either scenarion, however, the source of funding would be subject to scrutiny.
If the amount projected to be realized does not exceed the costs, the trustee will abandon the asset. At that point, the asset would revert back to the Debtor subject to the outstanding liens of the mortgage and dues outstanding. To the extent the mortgage and dues remain in default, the mortgage holder / management company can foreclose on the interest as allowed under state law.
If the asset is abandoned and the Debtor is able to cure the deficiency under the existing contract terms (pay off mortgage, pay dues plus penalties and interest), they can do so as if the bankruptcy had never happened. The same scrutiny of the source of those funds would apply.
Although I'm not certain of this, it may also be possible for the Debtor to retain the asset if it is "under water" (value is less than amount owed) if the payments and dues are current, much like a home or vehicle can be retained.
Since DVC will finance as much as 90% of cost, it is very possible for an interest to worth less than its potential resale value.
An interesting sidenote is that many timeshare interests are abandoned for lack of value over mortgages and dues outstanding, however, DVC interests are less likely to be abandoned because of its high resale value.
-----
The above is not intended to be, or should be construed as professional advice. Anyone seeking advice in these matters is encouraged to seek individual counsel.
