Counseling of Debt??

[abk96]

Has anyone ever heard of this before?

We've been trying to sell our contract since April through the Timeshare store but haven't gotten a buy yet. Now we are having trouble making our loan payments.

I called DVC today and the women told me I could sign over my contract to Disney in what is called a Counseling of Debt.

She also mentioned something about tax time and receiving a tax paper from Disney at the end of the year.

I'm so confused. Could someone please explain this to me?

TIA

 

[FoodLover]

It sounds like they're offering to write off the debt and take back your ownership. From what I've read, when a debt is written off, the debtor (you) has to pay income taxes on the amount that was owed, since it's like getting a "gift" of money in that amount.

Or so I understand. Someone else here may know more.

If you do this, I would imagine Disney will also report it as a negative on your credit report.

Mary

 

[jlewisinsyr]

FoodLover, it sounds like you have it about right.

If you default on a loan (ie. Car, DVC, etc.) and the property is repossessed or foreclosed on the defaulter is liable for taxes on the default. The IRS considers the repossession of property for offset of a loan/debt as income because basically the debt is being absolved in exchange for property. There is more to it then that, but generally speaking.

 

[sweetdana]

Do this only if you have no equity in them. Talk to the time share store 1st and find out if lowering a few $$ will help.

 

[Dean]

It's called "deed back in lieu of foreclosure". If they turn it in to a credit service, it will put a small ding, but not a big one. Most timeshares don't turn in such actions and I don't believe DVC does. If you own enough so that you couldn't get anything out of it anyway, this is likely the best options. Just get in writing what they are offering you prior to signing anything over.

 

[Swayhoover90]

Any chance DVC meant Cancelling of Debt as opposed to Counselling of Debt?

 

[bumbershoot]

Any chance DVC meant Cancelling of Debt as opposed to Counselling of Debt?

That's what I thought, too.

 

[DenLo]

It looks like you are not alone in turning your DVC contract back to Disney in this matter. Wdrl has a ROFR thread that he mentions there were many more Warranty Deed In Lieu of Foreclosure filed with Orange county in June and July than there were ROFRs. http://www.disboards.com/showthread.php?t=2529191

As Dean stated it might cause a small ding if any response is made on your credit. But if you keep the DVC contract and continue not to make payments and not pay your annual dues you'll get a bigger ding later.

It sounds like a good option for you. Good luck and hopefully things will work out for you in the future.

 

[abk96]

Thank you for your responses. What you're all saying makes sense. I do think it maybe cancelling of debt. The women I spoke to had an accent and I couldn't understand some of the things she was saying.

This does seem like the only thing to do. I just wish Member services would have told me sooner. I've been calling since April to see if Disney would help before we couldn't pay the loan and I was always told "Disney can't help you".

I just hope this can be handled quick enough before I get to the 90 day mark which is coming up in the beginning of Sept.

Thanks again.

 

[Swayhoover90]

I am so sorry to hear that you have to give up your DVC membership. What resort do you own? How many points? What Use Year?

 

[jlewisinsyr]

I am so sorry to hear that you have to give up your DVC membership. What resort do you own? How many points? What Use Year?

I don't think the OP will be able to post all of this information based on the context of the message. It could be viewed as an attempt to sell, which is not permitted on these boards.

 

[frank808]

Disney is one of the few timeshare companies that are now still willing to take deeds back in lieu of foreclosure.

 

[deej696]

I seem to recall when we purchased my guide saying that Disney will actually buy your points back if in a pinch and need to sell. Granted, this was over 3 years ago, and I think he said it was like $55 per point or something, but I never gave it much thought. Was this ever the case, and is this not an option now for the OP?

 

[jlewisinsyr]

I seem to recall when we purchased my guide saying that Disney will actually buy your points back if in a pinch and need to sell. Granted, this was over 3 years ago, and I think he said it was like $55 per point or something, but I never gave it much thought. Was this ever the case, and is this not an option now for the OP?

I've heard this still happens from others on the board, but that means any person thinking of doing this would need to owe less then $55/point on any loan they have on the contract or be able to pay the difference. For someone who purchased in the past few years and took out the maximum loan, it is highly unlikely that will be the case.

 

[TheRustyScupper]

1) In this case, you give them the deed, and they forget the balance.
2) Disney will not "ding" your credit, if they gave your the loan.

3) This is VERY COMMON in the tinmeshare industry.
4) They get your equity, plus get to resell the points.

 

[abk96]

I seem to recall when we purchased my guide saying that Disney will actually buy your points back if in a pinch and need to sell. Granted, this was over 3 years ago, and I think he said it was like $55 per point or something, but I never gave it much thought. Was this ever the case, and is this not an option now for the OP?

I was told by MS that Disney does not buy back contracts.

I wouldn't have done this anyway if it was an option because we need $64 per point to pay off the balance of the loan.

I've had many conversations with MS since April of this year about taking the contract off our hands because it has become to much to handle right now. No one that I spoke to ever mentioned that they would take the deed back and forget the balance we owe.

I was just told the other day about Disney taking the contract back when I called after receiving a letter from DVD about being 60 days behind. I guess you have to show them you are serious about not being able to pay before they will offer to help you.

Just wish they would have told me sooner. It would have taken a lot of stress off of us.

 

[abk96]

1) In this case, you give them the deed, and they forget the balance.
2) Disney will not "ding" your credit, if they gave your the loan.

3) This is VERY COMMON in the tinmeshare industry.
4) They get your equity, plus get to resell the points.

I'm hoping this is the case.

Do you know anything about the taxes we'll have to pay at the end of the year after doing this? Is it going to kill us? How much of a tax can it be?

Does anyone know?

 

[hellerjw]

My understanding is that this would be like any other debt settlement (credit card, etc). Here is an excerpt from the SmartMoney website on the subject:

"Debt settlement is a taxable event. Any forgiven balance that exceeds $600 is taxable income. Sometimes that tax event can put people in worse shape than they were in to begin with. Consider this: If your tax rate is 15%, $5,000 of forgiven debt will carry a $750 tax liability. That's a debt that the IRS won't forgive. One exception: If you're insolvent -- namely your assets are less than your liabilities -- you can petition the IRS to waive that tax liability by filing form 982."

 

[LisaS]

I seem to recall when we purchased my guide saying that Disney will actually buy your points back if in a pinch and need to sell. Granted, this was over 3 years ago, and I think he said it was like $55 per point or something, but I never gave it much thought. Was this ever the case, and is this not an option now for the OP?

Based on posts from members who explored this option in the past, the only resort Disney was willing to buy back was BCV. The price offered was in the $50-$55 range, about $30-$40 less than what you could get for a BCV contract on the resale market at the time! Factoring in the 10% sales commission, you would have been at least $20/pt ahead selling a BCV contract on the resale market rather than selling it to Disney for $50-$55/pt.

 

[william1375]

Why not lower the price you are selling the points for? Unless you are "underwater" on them. You may also get to deduct a loss if so, rather than have it show up as a "income or gain" come tax time.